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West Texas Intermediate (WTI) dropped to its lowest in nearly six years, ending within close range of the US$45 on which the national budget is pegged.
Early in the day prices initially rallied after Opec Secretary-General Abdullah al-Badri said oil may have hit a floor and could move higher very soon.
However, thiose gains proved fleeting as Brent crude fell 1.3 per cent to US$48.16 and WTI, which trades within the range of the light sweet crudes produced in T&T, dropped almost 1 per cent, eventually settling at US$45.15.
The Brent/WTI spread narrowed to US$3.01 after going as wide as US$3.41 on Friday, its widest in three weeks.
In his address at the opening of the T&T Energy Conference 2015 yesterday, Finance Minister Larry Howai said while her would not rule out a “recalibrating” of the national budget, revision is not on the front burner.
Prime Minister Kamla Persad-Bissessar yesterday suggested that a US$1 billion Caribbean Energy Thematic Fund be established to deal with regional energy security.
Speaking at the First Caribbean Energy Security Summit in Washington, D.C., said the T&T Government’s is committed to working with the United States and other Caribbean countries to achieve a “cleaner, more sustainable energy future” in the region.
“Energy is at the heart of efforts to build resilience through improved competitiveness and stronger energy security,” she said.
Persad-Bissessar said resilience can be built by transforming the energy matrix in the Caribbean, which requires a three-pronged approach:
• Improving conservation and energy efficiency,
• Maximizing the use of renewable energy sources
• Converting to Liquefied Natural Gas fuelled electricity generation for the base load capacity.
She said the cost of this solution is not supportable for countries with high debt and minimal fiscal space, and it is therefore necessary to engender co-operation for building resilience through energy security.
Persad-Bissessar proposed a methodology to work with the Inter-American Development Bank (IADB), the Caribbean Development Bank (CDB), the World Bank, the IMF and other international donors, friends of the Caribbean and the private sector to provide the method and means of achieving energy security in a manner that is efficient and sustainable.
She said the T&T Government has been working in close collaboration with the IDB over the last 18 months to design a new initiative that is home-grown in the Caribbean.
“After rigorous economic analysis and technical feasibility studies and a thorough assessment of these, we have agreed as a government on the creation of a Caribbean Energy Thematic Fund for Caricom member states,” she said.
Persad-Bissessar proposed working with traditional donors and countries with a strategic interest in the region and the private sector to provide the necessary financial and technical support for transformation of the energy sector, maximizing public private partnerships.
“We must look past short term fluctuations in oil prices to focus on the long term strategic interests of the region,”she said.
In a joint statement issued at the end of yesterday’s summit, participating countries said their agreed to “comprehensive, planning-based and research-driven approaches to energy transition, including implementation of pilot and demonstration projects, based on successful models so that individual clean energy projects are part of a fully integrated, climate-resilient energy transition plan toward clean sustainable energy for all.”
They also agreed to specific reforms, including adoption of recommendations from the 2013 Caricom Energy Policy afor introduction of new technologies favouring sustainable and clean energ.
In addition, where “technically and commercially feasible” the objective will be lower carbon electricity generation through wind, solar, geothermal power, hydropower, bioenergy, ocean energy, energy recovery from waste, and other clean energies.
First Citizens has entered into partnership with Point Lisas Industrial Port Development Corporation Ltd (Plipdec) for a $201 million credit facility which will mature on December 18, 2024.
The facility is to be used for the refinancing of previously existing loan arrangements, upgrading of infrastructure and procurement of new port equipment.
The signing ceremony was attended by First Citizens executive chairman Anthony Isidore Smart; deputy CEO, Corporate Administration Sharon Christopher; assistant general manager, Corporate Banking Unit, Angela Hordatt; Plipdec chairman Ian Atherly, its president Ashley Taylor and other key members of its management team.
Plopdec is a publicly traded company which focuses on industrial real estate management and port management and operations. The Port of Point Lisas, which is the second major port in T&T, consists of six general cargo and container berths.
Overall market activity resulted from trading in 15 securities of which three advanced, five declined and seven traded firm.
Trading activity on the First Tier Market registered a volume of 503,782 shares crossing the floor of the Exchange valued at $13,013,681.47. First Citizens Bank Ltd was the volume leader with 300,000 shares changing hands for a value of $10,918,605.38, followed by Jamaica Money Market Brokers Ltd with a volume of 70,073 shares being traded for $28,029.20. One Caribbean Media Ltd contributed 36,963 shares with a value of $885,214.24, while Angostura Holdings Ltd added 36,856 shares valued at $589,666.
Angostura Holdings Ltd enjoyed the day’s largest gain, increasing $0.50 to end the day at $16. Conversely, First Citizens Bank Ltd suffered the day’s greatest loss, falling $0.08 to close at $36.40.
Clico Investment Fund was the only active security on the Mutual Fund Market, posting a volume of 2,670 shares valued at $62,570.80. It declined by $0.02 to end at $23.43.
No decision has been made on whether prices of super and diesel fuel will be decreased. So said Finance and the Economy Minister Larry Howai who did not rule out the possibility that that government might consider a reduction.
“No discussion has taken place as far as that is concerned. The only discussion is as far as the premium prices are concerned,” he said in response to questions from reporters during the coffee break at the 2015 T&T Energy Conference
He said Ministry of Energy was looking into the possibility of a reduction in the fuel prices but needs to analyse the figures first.
“I did ask last year as soon as prices started to come down for the Ministry of Energy to do an evaluation of that for me and to give me the results of the computations. They did give me a first pass at it, when it (the price) was at about US$65 now that it has come down to about US$45, I told them let’s see where it lands because we don’t want to be changing prices on an ongoing basis.
“Let’s determine how to proceed from there. I expect when the Ministry of Energy comes back, he will probably give me some feedback. I expect that’s toward the end of this week and then we will make some determination as to how we will proceed from there.”
There are no guarantees major projects in the energy sector will continue given fluctuating oil prices, Vincent Pereira, chairman of the Energy Chamber and president of BHP Billiton T&T said yesterday.
He told delegates at the T&T Energy Conference 2015, which opened yesterday at the Hyatt Regency in Port-of-Spain, that the external environment in which energy companies operate was challenging. He said major global oil and gas companies were cutting their capital investment budgets and cancelling major projects.
“So far, the major projects in T&T have not been impacted but with expenditure constantly under review there is no guarantee that this will remain the case,” Pereira said.
“While we have seen high level of investment over the last couple of years, it is vital for our economy that we see these levels being sustained each and every year over the long term. Only sustained investment in upstream gas delivery every year, will allow us to deliver the 4 billion cubic feet of gas per day that is required to keep Atlantic and Point Lisas operating at capacity.”
Pereira said investments were also required to increase oil production in a sustainable manner. Referring to regulation of the sector, he said there was need for awareness of how “inefficiency in the regulatory environment can have a negative effect on T&T’s competitiveness, the ways in which regulatory approvals add cost to projects and in the long-run mean lower returns to companies, the Government and to the people of T&T.”
He said gas shortages had “undeniably been a major strain on the industry, negatively affecting company profitability and hence government revenue, having negative implication for reputation and asset integrity.
“Total gas production in 2014, was down six per cent on 2010, which was the peak year for production. Of course during that time, ammonia and methanol were all receiving relatively good prices.”
Pereira called for the gas master plan to be implemented and said he was pleased Government recognised energy services as one of the key sectors for diversification of T&T’s economy.
A committee is to be appointed to look at ways to maintain and improve the sustainability of the energy sector. Composition and ministerial participation in the committee is to be decided by Cabinet. This was one of the things agreed to on Wednesday evening when Prime Minister Kamla Persad-Bissessar met with representatives of 26 energy companies.
A second Cabinet-appointed committee will look at ways to improve the efficiency of the regulatory approval process, with the objective of clearing log jams.
In a release from the Office of the Prime Minister stated that talks centred on the challenges facing the sector, and energy company representatives put forward suggestions to improve efficiency, and further expand and develop the sector which contributes 45 per cent of gross domestic product (GDP), and approximately half of Government revenue.
According to the release, Persad-Bissessar stressed the need to strengthen and maintain the competitive advantage held by the energy sector.
“Stakeholders reaffirmed their commitment to maintain current levels of investment, and welcomed the Government’s commissioning of a Natural Gas Master Plan which will guide the planning of the natural gas industry over the next decade. The Prime Minister gave her commitment to fast-tracking the completion and implementation of this plan,” the release said.
Commenting on the outcome of the meeting, Energy Minister Kevin Ramnarine said despite some bureaucratic challenges, energy companies are here to stay. “The energy sector has basically said to the Government that their investments programme continues and that the fiscal incentives that the Government provided in the last four years have worked,” he said.
“They have also given us some idea of some of the challenges which they have right now which the Government has committed to work with them on. One of those challenges was getting certain regulatory approvals for projects and the Prime Minister and the ministers who were there committed to the establishment, very quickly, of two committees to treat with some of these concerns that were raised.”
Today, Persad-Bissessr will join heads of government from the Dominican Republic, Jamaica and Grenada at the First Caribbean Energy Security Summit hosted by United States Vice President Joseph R Biden, Jr. The summit will focus on promoting sustainable energy in the region, including access to financing. T&T has lead responsibility in Caricom on energy matters, and the Prime Minister will take the lead in responding to the impact of falling oil prices on countries in the region.
Bring on the competition. This was the reaction from direcTV’s general manager Bernard Pantin to the prospect that Cable and Wireless Communications (CWC) will get approval to acquire Columbus International. Earlier this month, Jamaica’s Science, Technology, Energy and Mining Minister Phillip Paulwell announced that Jamaica has approved the acquisition.
Pantin, commenting on that development, said: “We welcome competition once it is fair. To us, the most important point in the conduct of this review by TATT is transparency. The uneven playing field already exists.” He is calling for practises by certain providers to be sorted out since this creates an unlevel playing field since that situation could worsen and direcTV is concerned about such activities in the T&T market.
Pantin said for the local market to accommodate a third mobile provider requires improved regulation and the Telecommunications Authority of T&T (TATT) needs to be stricter when it comes to clamping down on violations of concessions. “We therefore cannot see how TATT can approve this acquisition while the law continues to be broken,” he said.
Last week, an inter-ministerial group met to discuss the implications of the proposed acquisition and the possibility of third entrant into the mobile market. Pantin said TATT needs to disclose to the population which provider was selected.
“The first thing that TATT needs to do is publicly announce whom they have recommended for the third mobile license in the interest of transparency. Flow and Cable and Wireless bid separately before this acquisition was announced. There have been rumours that Flow was recommended for the licence. “It is important as a first step, that TATT makes a public statement. We believe that the process has to be fully reviewed and re-started,” he said.
Pantin added: “While there are two strong mobile providers, maybe the T&T market will be able to sustain a third. If the acquisition goes through in T&T, the combined C&W and Flow would have a very strong case for the third licence and would beat the favourite, even if the process was re-started. “It would make for very interesting competition with bmobile, Digicel and C&W/Flow competing. Actually the consumer might benefit significantly.”
The Association of Caribbean States recently held a meeting with local tourism stakeholders co-operation on sustainable tourism development. Julio Orozco, director of Sustainable Tourism of the ACS, reinforced the importance of cooperation activities and the sharing of achievements ito strengthen the countries of the Greater Caribbean.
The work programmes of tourism authorities—the Ministry of Tourism, Tobago House of Assembly (THA) and the Tourism Development Company (TDC)—were presented with the aim of identifying cross-cutting areas for co-operation. Donna Ferraz, permanent secretary of the Ministry of Tourism, who represented Minister Gerald Hadeed at the meeting, said the minister and his staff recognise the importance of the discussions, and by extension, the dialogue on sustainable tourism.
Orozco and Amanda Charles, sustainable tourism adviser of the ACS, emphasized the priority of the Sustainable Tourism Zone of the Caribbean (STZC), the first of its kind in the region. The STZC incorporates the principles of sustainable development in integrated tourism planning and offers a unique tool to co-ordinate regional efforts in tourism development.
Selection of T&T’s STZC destinations will be prioritized. A number of activities were identified for joint implementation and it was agreed that a representative from the ACS and national tourism agencies will be appointed to work towards formalisation of these proposals.
Although he cannot predict how energy prices will evolve, Norman Christie, regional resident of bpTT, says T&T should not expect oil prices to rise any time soon. “I will not attempt to predict a precise price but I can predict what our CEO has said which I endorse and that is, it is very likely that we will be in a season of low oil prices for a little while. Exactly where that price will be I cannot say. It is a dynamic situation.
“For planning purposes we should be thinking about a longer downturn rather than a short term downturn. In summary do not expect to be bailed out by oil prices getting back to previous levels soon,” he said. Christie was speaking at a workshop hosted by the American Chamber of Commerce of T&T (AmchamTT) at the Radisson Hotel, Port-of-Spain. He said oil and gas are not the only commodities that are falling—methanol and ammonia prices are also moving down ward.
“We should also be watching these as they too are experiencing downturns in prices,” he advised.
He, who called for the country to be more competitive, added: “We should never let a good downturn go to waste. If we are really clear about the circumstance we find ourselves in then we must focus on what we should do to make the best of it. We should not lose focus or get distracted because if we do the world is very competitive and they will be taking steps to be competitive. In a broad sense what we should be looking at is how competitive can we get in the circumstances.”
Christie urged the private sector and country not to panic saying this is not the first time in his career in the energy industry has experienced a downturn in prices. “I started in 1986 and I have seen four of these and this probably happens once a decade. We should not panic and take what could be a crisis and make the best out of it. So we must look at productivity and efficiency. We must make the best of the environment that we are in,” he said.
BEIJING—Chinese police said they’ve arrested five people in connection with a phony bank that used bogus offices and tellers to bilk depositors out of US$32 million. More than 200 customers were caught up in the scam based in the eastern city of Nanjing, according to a statement on the local police’s microblog. Most were business owners from the surrounding province of Jiangsu attracted by promises of high interest rates on deposits, the statement said.
Police said the scammers filled their offices with all the accoutrements of a real state-owned bank, including uniformed staff. The scam’s mastermind, identified by his surname Liu, and four assistants were in custody, including one woman who had fled to the gambling enclave of Macau with the depositors’ funds, the statement said.
The scam was uncovered after an investor who had deposited US$2 million complained to police when he was unable to collect interest or withdraw his funds.
As the Carnival season progresses, the Sunday BG brings readers the Business of Carnival series where business intersects with the law.
Entertainment attorney, Carla Parris will bring vital answers on how the artistes and promoters can protect themselves, maximise their income, stay within the law with regard to copyright and intellectual property issues and turn Carnival into a one of this country’s major economic mainstays.
Partying comes naturally to Trinbagonians. Perhaps a little too naturally. Some of the most successful parties—more popularly known as fetes in T&T—started with a group of friends getting together to “buss a lime,” another uniquely Trinbagonian concept. Often, the event grows in scale and profitability well beyond the original organisers’ ability to handle the surrounding issues such as security, safety, business contracts and the like.
Entertainment attorney Carla Parris says there are decided drawbacks to this approach, since in a time of budget deficits, unstable oil prices and calls for diversification, Carnival could become a major long-term money spinner for the economy and not just a seasonal one.
“In 2011, I participated in a study conducted by Dr Vanus James, an economist, and that particular study was titled, The economic contribution of copyright-based industries in Trinidad and Tobago.” It concluded that copyright accounted for 4.8 per cent of GDP, 5.0 per cent in terms of employment and it generated $4 billion.”
“The point is, if we look at it in terms of Carnival alone and really start investing in all the different aspects that Carnival entails, we really can be looking at a source of revenue that is really untapped.”
One source of this untapped revenue Parris said is merchandising.
If you go to festival, fairs, open-air concerts overseas, you will note that apart from the whole concept of the artist performing, there are booths where you can buy branded paraphernalia for most of the acts: branded cups, branded T-shirts, branded anything, that will give that long-term association with your artists. It is also another form of generating income from the artistes on top of performances.”
Parris uses Machel Montano as an example of an artiste who understands the merchandising concept.
“He has recently teamed up with Solar—a natural foods company—to sell chocolate. He’s partnered with an international brand, New Era, a global lifestyles brand to launch five exclusive branded caps that will be sold during Carnival.”
She said opportunities abound in this area for enterprising local manufacturers to team up with artistes and develop their own product lines injecting much needed capital into the economy.
The Caribbean diaspora is another viable market for this merchandise and other Carnival-related products, said Parris.
“Caribbean nationals, in general, become so much more patriotic overseas. They are very much hungry for that association with the culture of their national homelands.”
Trademark and brands
Whether a member of the diaspora, or native, Trinbagonians have their favourite fetes and are very loyal to them. Part of their allegiance lies with what has become the brand of that particular event. Parris said what many fete organisers and promoters have not yet come to terms with is that their brand is essentially a trademark.
“A trademark is a very valuable intellectual property asset that can actually increase the intangible value of your company. Let’s say you have the name of a fete. It’s generated goodwill and you want to attract investors to your company. The fact that your company owns this well-known trademark or brand means that the value of your company has increased exponentially.”
Because of the informal nature of the origin of many of Carnival’s biggest fetes, many organisers never think to register the name of their fete as a trademark with the intellectual property office, presenting many problems when the event acquires a following.
“If your company disbands, or everyone goes their separate ways, what happens to the name of the fete? These are things that need to be discussed from the outset.
“Is it that the fete name is owned by a company, or is it that it is going to be owned by a particular committee member alone in his personal capacity and, if that is the case, then no one else should be able to use the name in the country to then push forward and promote and develop their own event because that would be a diminution of the value of your trademark.”
Parris said another thing fete organisers and committees need to understand was that trademarks were jurisdictional. Registering at the intellectual property office in Port-of-Spain she said protects a trademark for a ten years. But, if the event is popular up the islands, they may want to consider registering the event in those countries.
“You need to register that trademark in each country you want to protect that trademark in. So you go to the Jamaica intellectual property office. The same thing for the Barbados intellectual property office and protect it there. Because if not, promoters over there can use the exact name and it will not be an infringement.
“If someone decides to use the identical name, and you have not registered it as a brand and you don’t have that certificate of registration, it is so much more difficult to prove that the registration came from you as opposed to somebody else and there the fight begins.”
The brand of the event is not the only thing that should be protected.
According to Parris, fete organisers must also guard the quality of their events.
The fete market is very competitive and is almost saturated. Patrons now are demanding a different type of experience. They want to know they have paid to come to an event and in the middle of enjoying the live act on stage, the equipment is not going to breakdown and you find yourself in a situation on stage with an act who looks very bemused or very angry and, in many cases, we have all had that experience of being in a fete and overhearing an act shouting at the sound engineer.”
Parris said contracts are a way of minimising this, by formalising the equipment requirements for an event and making the companies providing ancillary services liable for what they promise to do but do not.
Contracts also protect the artistes. The entertainment lawyer said artistes are also becoming more sophisticated and are no longer relying on oral arrangements made with organisers and promoters. This gives the artiste greater protection, particularly if the fete does not make money. He or she can also specify equipment needs and can hold a promoter liable if these are not met.
“This is now how you raise the standard and you elevate the standard of the industry, by having this written documentation which says that if you do not do x,y, z, you are now in breach thereof,” said Parris.
Sharing profits, sharing losses
But contracts also protect fete organisers and committee members if a venture is a loss, or can settle any disputes about how profits are to be shared.
“In a written contact, between committee members, you would see what percentage each person gets from the profits that have been generated from the sale of profits. If the fete doesn’t generate the ticket sales, who has to dip into pocket and what percentage of the loss is each particular person bearing, because ancillary services and the artistes still have to be paid.”
Parris said each element of the fete circle, organiser, artiste, ancillary services all have their part to play in creating an environment where Carnival fetes thrive, not only as the cultural preserve where most Trinbagonians jealously guard their right to have a good time, but also as a business that earns much needed revenue.
There are few terms that cause more confusion than “financial adviser.” To some people, it may simply be the well intentioned advice from friends, family or an acquaintance who just happens to have a hot tip or the next big thing in business for you to invest in. Given that the road to many a troublesome place has been paved with the best intentions, it may be best to stick with advice from the professionals.
But, who are the professionals?
When a decision is made to get one’s financial house in order, to whom does one turn?
“The default position for many people is that they go to their banker, because they don’t have a personal accountant as an individual,” said Winston Williams, a Pan American agency head and financial adviser.
Most people, he said, end up at their banker as the first port of call when they want to purchase big ticket items.
When many people reach this point, Williams said, it is usually the first time they are putting their financial lives into perspective.
“At the bank, what you do is something called a PFS—a personal financial statement—and that very often, is our first introduction into this whole idea of what is our financial position. But, in terms of a financial plan which tends to look at short-, medium- and long-term goals, people often have zero information on how they go about doing that.”
As implied by the above, the financial plan plots financial achievement along a timeline and puts a dollar amount to these outlined goals. The person who helps you do this therefore becomes a focal point of your financial life.
“Depending on that relationship, invariably as I see it, it grows to become a relationship that is more than just money,” said Williams.
This is because the financial adviser’s job, according to Williams, is to help people actualise their dreams and, to do this, his job is to ask questions and help people arrive at the answers.
But first, those looking for a financial adviser need to ask some questions of their own.
Carlyle Fletcher, a lifetime member of the Million Dollar Round Table, financial adviser, sales trainer and public speaker, said the financial services market in this country is like many others, done by referral, with those seeking advice asking friends and relatives.
“How do you find a hairdresser?
“Who do you use as your hairdresser?
“How do you find a seamstress?
“It is the same approach. It is the same things that we do in our business. Who do you know?”
Or even more likely, a financial adviser may find you.
Fletcher said many advisers are referred to new clients by someone who already uses their services, or may approach you based upon observation.
“We look to see whether someone is building a house, a business place is going up, we can stop by and find out who the owner is. Some agents who are brave enough will do what we call cold calling or unplanned sales calls where they just walk up to you and we say: my name is Carlyle Fletcher. I have some ideas and I would like to share them with you.”
Fletcher’s use of the word “agent” hints at an important fact about this market: most financial advisers are tied to insurance companies.
Williams estimated this was true in at least in 99 per cent of cases, but said this was not necessarily a downside.
“Invariably, there is always the question or the suspicion that the final discussion will result in the sale of the product from the companies for which they work. It is not unusual to find that happening, but the reality is that many financial issues we have can be solved by insurance products.”
So, in this vast field, how does one pick an adviser?
Williams said: “I would look to people who are qualified in financial planning.Those are people who have the designation CFP, Certified Financial Planner, or people who have the CLU, Chartered Life Underwriter and you also have the CHFC, the Chartered Financial Consultant. These are people who have some sort of certification in terms of understanding the financial planning process.”
Then come further questions.
Williams said the potential client may want to ask about the adviser’s background.
“Once you’ve identified people with the relevant financial planning certification, you then question them. How long have you been in the business? Do you work for commissions, or fees, or a blend of commission and fees? Is your recommendation going to be simply limited to the proprietary products of the companies to whom you are contracted?”
After being satisfied with the financial adviser’s credentials and experience, there is the actual financial planning process to undergo.
Williams said that on the first meeting the adviser and his potential client will want to establish the scope of the service required and clarify the financial goals to be met. This is the first step of the process. The second is to gather data.
Fletcher gave an idea of what this might entail.
“We look at the person’s personal information. We look at family information. Are you married? What’s your spouse’s name, occupation and income? If they have children, you would want to know the children’s names and ages. Then you want to know if the person has any insurance in force and the details about it. Other than that, then we go onto some financial information, which would look at what the person owns. The accountants would call that your assets.”
The financial adviser then analyses the data, develops a plan from it, which the client then implements to achieve his goals. In the final step, the plan is then monitored and reviewed and may be adjusted according to the client’s circumstances.
“Life changes. You and I can sit down today, and I can say let’s build out this plan and then you say, well I am thinking of something different,” said Williams.
“Let us say, for example, you are going to make education your next priority. Or you got married or found out that you were pregnant, as soon as things change, you have to pick up the phone and say a couple of things are happening.”
Williams said if the potential client didn’t get a sense that these steps were being followed, then they may not want to give the financial adviser their business.
Fletcher said that advisers, as a best practice, also had fiduciary responsibility toward their clients.
“We are supposed to put the interest of our clients and our policyholders above and beyond our own and carefully ensure that any advice we tender them will be without regard for our own personal advantage.”
“You may find some practitioners just selling products, meaning that we have this product, it’s good, that kind of thing. But what I am thinking, is that we have a responsibility, you and I, to educate the public. So that even without a practitioner they can look at their financial situation and say, ‘listen, these are the things I need’ and then they can call in a practitioner to help them figure out the best way to solve the problem.” said Fletcher.
Expanding this point, Williams said: “That’s the perspective a financial planner will give you. It has nothing to do with products. Products are the last thing we talk about. The only thing that will consume 90 per cent of our time are the dreams, that we now want to convert into goals. We compile all of this information into what is the best road and then what are the best products that will allow us to get there.”
Williams also said a financial adviser does not act alone, but is at the centre of a group of individuals with relevant skills helping the client to realise their dreams.
“True financial planners are never individuals who have all the answers. True financial planners have a network of people with whom they work to develop and deliver something that allows you to achieve the goals you have set for yourself. If you came to me, I would have a banker that I deal with to help you with things you need, because I am not a banker. I will have an attorney to help you build a will, or establish a trust because I am not an attorney. I will have an investment broker to help you develop a portfolio of investments that will help you satisfy one or more goals at different times and in different amounts.”
Good financial planners also continuously improve themselves.
Fletcher said, in addition to obtaining their initial license, financial advisers must obtain “education credits” every two years to keep it.
“We want to make sure that someone doesn’t get a licence 40 years ago and never does anything, doesn’t keep up to date. This is what will ensure that the practitioners can meet the required standard of the public.”
There is a significant amount of self regulation within the financial advisory sector. In the event that a member of the public has a complaint to make against a financial advisor, there are internal systems to treat with issues that arise.
“Each company will have there own what we call things like ethics committees, whereby this matter can be dealt with,” said Fletcher.
Beyond that, there is the financial ombudsman, which operates as part of the Central Bank.
“Members of the public who feel they have been prejudiced, have that opportunity. First and foremost however the company will do their own investigation, because it is in their own best interest to do so. It is in our own best interest to weed out people who would give this industry a bad name.”
Williams also had a warning about financial advisers who promised guarantees of high returns.
“You want to run very far from anybody who can give you a guarantee of a much better rate because in the real world, the market decides the price and nobody can give you any guarantee whatsoever of any return.”
He said while there were investment instruments that performed consistently well, potential clients should always pay attention to what Williams termed the risk/return trade-off. The higher the return, the higher the risk.
Ultimately, a relationship and trust developed over time between the client and financial adviser is the aim.
Williams, for example, spoke of clients who were now sending their adult children to see him to have financial plans drawn up for them.
“I think the financial planner should be the centre of your financial life.”
In this space on Thursday, in a commentary headlined “Will product prices affect Phoenix Park IPO?” it was demonstrated that the prices of the propane, butane and natural gasoline sold by Phoenix Park Gas Processors had declined by over 50 per cent between January 2014 and this month.
For most companies, an average 50 per cent decline in product prices is likely to mean a commensurate decline in their revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and net profits as well as associated margins.
Because Phoenix Park only produces propane, butane and natural gasoline (in output splits of 35 per cent, 25 per cent and 40 per cent) it seems likely that the company’s revenue, EBITDA and profits at least for the first few months of 2015 will be substantially lower than in 2013.
But the point needs to be made that Phoenix Park will still be a very profitable company.
The CariCris analysis of Phoenix Park, published last month, states that the company generated US$202.6 million ($1.3 billion) in 2013, but that its profit after tax had fallen an average of 19.5 per cent over the previous two years.
According to CariCris: “Notwithstanding the fall in profit after tax, Phoenix Park’s margins remained healthy and largely unchanged from the previous year with profit after tax, gross profit (GP) and earnings before interest, tax, depreciation and amortization (EBITDA) margins of 25.1 per cent, 42.7 per cent and 39.4 per cent in 2013, compared to margins of 25.2 per cent, 42 per cent and 43.7 per cent respectively in 2012.”
The rating agency also said that it expected the volatility in the natural gas liquids (NGL) prices would continue into 2015, which it expected to be another profitable year for Phoenix Park.
“Even under CariCris’ stressed scenario, the company is expected to generate a profit of the order of US$97.3 million (in 2015). Interest cover and DSCR should remain comfortable, although falling to 25.5 times and 6.2 times respectively,” the rating agency stated. DSCR is the debt service coverage ratio (DSCR), also known as "debt coverage ratio," which is a measurement of the amount of cash that a company has to make its interest, principal and lease payments. A DSCR of 6.2 means that even if it generates less than half of the 2013 after-tax profit of US$202.6 million in 2015, Phoenix Park would still be able to generate cash that would be more than six times its debt payments.
Part of the reason for its inherent profitability, according to CariCris, is the fact that Phoenix Park buys nearly 100 per cent of its natural gas from its parent, NGC, under a gas processing agreement in which Phoenix Park pays NGC for the British Thermal Unit (BTU), or heat content, it removes from the natural gas stream in the form of natural gas liquids.
CariCris stated: “The price (per million BTUs) is 50 per cent indexed to the average Mont Belvieu (MB) price. As the company also sells its NGLs at prices based on MB prices, the indexation of the cost of natural gas supplied by NGC provides a partial hedge against commodity price risk ensuring a positive operating margin.”
This means that the lower the price for its propane, butane and natural gasoline it sells on the regional and international markets, the less it pays NGC for its natural gas feedstock.
In other words, if Phoenix Park sold its propane at the Mont Belvieu price of US$1.50 in January 2014, it paid NGC US$0.75 and it had US$0.75 to pay all of its operating expenses such as its employees, taxes, the interest on its debt and dividends. But if propane was sold at a Mont Belvieu price of US$0.45 in January 2015, Phoenix Park would have to pay NGC US$0.225 and it would have US$0.225 to meet all of its commitments.
This is not an entirely happy picture.
But the NGC president Indar Maharaj said he does not expect T&T’s 100 per cent state-owned natural gas distribution and marketing company to issue shares in the Initial Public Offering for “at a price lower than we paid for the asset.”
As NGC is selling 49 per cent of the shares in Phoenix Park that it acquired from US energy giant ConocoPhillips for US$600 million in August 2013, this means the expectation is that NGC would generate US$294 million ($1.88 billion) from the initial offering.
According to Mr Maharaj: “The valuation is based on a 15-year forecast in which it was anticipated there will be some amount of volatility and cyclical market behaviour.
“We did not use 'moment in time' prices. These market behaviours would have been built into our valuation model. I must say that we were very conservative in forecasting the product prices.
“Therefore, I do not see any significant impact on the valuation, at this time.”
Options for IPO pricing
Now, if NGC is insistent that it wants to generate $1.88 billion from the IPO, and if the price per share at the offering is $25 per share, NGC would need to issue 75.2 million shares. It could achieve the same result (generating $1.88 billion from the IPO), by issuing 94 million shares at $20 per share.
But if NGC decided to issue 75.2 million shares at $25 a share (thereby rasing $1.88 billion), there is a good chance the IPO would be undersubscribed and the price of the share could fall to $22 or less in the medium term.
This option would suit the Government, which has said that it views the sale of Phoenix Park as a means of raising revenue to partly fund the $7.4 billion shortfall that it expects from the decline in energy taxes, that has followed the sharp decline in the global prices of T&T’s main exports.
But a strong argument can be made, I think, that the option of NGC seeking to recover exactly what it paid for 49 per cent of the Phoenix Park shares it acquired from ConocoPhillips would not be in the interest of T&T’s institutional and individual investors or in the larger national interest.
Government’s preferred approach for the Phoenix Park stake would not be in the interest of local investors because they would be buying a share in which there may be little chance of either short or medium term profit taking. And, unless I am terribly mistaken, the basis of the philosophy of the Government’s divestment programme is an intention to share the wealth of the nation with the widest possible cross section of the T&T population.
Also, apart from the distribution of wealth, the Phoenix Park IPO can be viewed as a means of diverting money into shares that would otherwise be used by individuals to purchase expensive imported items.
The IPO, therefore, can be seen as a means of reversing the capital flight that has been evident recently. Also, while some individuals may seek short-term profit from the Phoenix Park IPO, some of the more financially savvy individuals and the financial institutions of the country will seek to hold this stock for the medium to long term because of its extraordinary dividend-producing ability.
There is another option for the NGC and for the Government: the shares could be sold to the investing public so that NGC takes a small loss at the issue. If NGC, for example, were to sell 75.2 million shares to the public at $20 a share (which would raise $1.5 billion), there is a good chance that even if Phoenix Park’s product prices are low at this point that the IPO would be oversubscribed.
As was clear from the First Citizens example, an oversubscribed IPO will lead to sharp increases in the share price in the secondary market. First Citizens closed last week at $36.48, which means that the share price is 66 per cent higher than the IPO price of $22.
And, nearly 16 months after First Citizens shares began trading on the local stock market, a higher price in the secondary market means that the value of the State’s remaining stake in First Citizens would be 66 per cent higher than the IPO price.
All of this means that raising $1.88 billion from the Phoenix Park IPO may suit the Government’s short-term political need to raise funds to replace revenue lost from lower taxes. But such a move would not be in the interest of local investors or of the Government/NGC.
Prime Minister Kamla Persad-Bissessar said past mistakes will not be repeated in managing the T&T economy through falling oil prices. Noting that the people of this country are no strangers to change, she said the public sector will take the spotlight as the beacon of change.
Speaking at Wednesday’s launch of the T&T Diamond Standard Brand, a project of the Ministry of Public Administration (MPA), at Queen’s Hall in St Ann’s, Persad-Bissessar said: “We have enjoyed the heights of boom and held each other’s hands as we navigated the depths of bust. We have felt the joy of confidence in our stability as a nation and we stood fearlessly in the time when our liberty was threatened.
“These are the very experiences that make a country into a nation; that make individuals into a unified society. And, with centuries of history and over half a century of Independence, we stand today, stronger, together.” She told public servants the positive strides they made prepared the country for the challenges now being faced.
“You will all know of the turbulence in the global energy sector and the impact it has had on prices and the revenue we earn as a nation. It is not something new. Quite the contrary! We have been down this road before. “But today, there is a difference—the mistakes of the past are etched as relentless memories for some of us, and as guidepost for knowing and doing better for us all; this is why our approach to managing challenges is different from any other time in the past,” she said. Persad-Bissessar added:
“Today, it is not simply about reducing spending and finding new channels for revenue. Today, we appreciate the value of good service, of efficient and productivity. We can see and measure how good and efficient service can impact on expenditure and with your work over the past two years, we know it is possible. The spotlight therefore shines on the public service. As we make adjustments and return to the old adage of value for money, it is in your name that my Government has promised to put people and country first.”
When projects for the national benefit are initiated, she said, it was the public servants who held the key to its successful completion and when people need urgent help, public officers were the ones they relied on to receive help in the quickest possible time.
“You are the ones who hold the influence to make it easier for support to reach people, for business to achieve efficiency, for young professionals to grow and indeed, for our desire for growth and development to be achieved. Your successes to date prove that change is not only possible, but that it is a process in motion.”
In the feature address, Public Administration Minister Carolyn Seepersad-Bachan said in the first phase of the programme Diamond Standard Certificate have been awarded to 11 public sector agencies and 45 more have registered for the next round. This is a standard which these organisations have worked hard towards, and met, and in some cases, even exceeded. Their certificates will be valid for three years, after which, they will be required to re-apply for re-certification.
“Awardees are encouraged to continue seeking new heights in service excellence; even re-engineer their processes to ensure they remain dynamic and responsive,” she said.
The Diamond Standard Programme seeks to achieve greater customer satisfaction; greater commitment to providing quality service; enhanced accountability, efficiency and effectiveness in service provision; improved public image for investors locally, regionally and internationally; and improved rankings for ease of doing business and global competitiveness.
The T&T Manufactuer’s Association (TTMA) said it continues to have confidence in the economy even though there has been a continuous decline in the oil prices and now is the most opportune time for energy companies to invest.
“I have confidence in T&T’s economy for many different reasons. Our macro economic indicators are as strong as ever, unemployment remains at 3.6 per cent, inflation is in the single digits, the exchange rate is stable with over 14 months of import cover,” TTMA president Nichiolas Lok Jack said in the feature address at the launch of the 16th Trade and Investment Convention (TIC).
Lok Jack said in December Standard and Poor’s had reaffirmed T&T’s ‘A’ rating as an investment grade country. He added that the country should not “rest on its laurels,” and a “course must be charted for T&T to continue improving on its economic success and beyond.” He said the manufacturing sector must be recognised as one of the key components in building the economy as a contributor to other sectors.
“The dynamic manufacturing industry contributes nine per cent of GDP. It is the country’s second largest direct employer after the Government of T&T. It contributes significantly to the preservation of foreign exchange through import substitution and companies that generate net foreign exchange,” Lok Jack said.
He said the TIC, which has as its theme this year, Building Bridges, Connecting the World, will continue to serve as conduit for business interaction and growth The Guardian group is the newest sponsor to TIC, joining TSTT, First Citizens and the Ministry of Trade.
The Tobago House Assembly (THA) is committed to adjusting its expenditure due to the expected impact of falling oil prices but will continue its focus on community-based projects, Chief Secretary Orville London said at a post Executive Council media briefing. He said central government has not indicated whether it will decrease the island’s 2014-2015 budgetary allotment of $3.7 billion. Government has been revisiting the national budget since oil prices began to fall last year.
The THA held a retreat on January 16 to discuss Tobago’s economic plans in the wake of T&T’s economic challenges. London said representatives had “analysed the situation” for each division, electoral district and community to determine their “priority deliverables.” The recurrent theme during discussions, he sad, was prudent management.
“We decided that what we needed to do is determine our priorities—these are things that must be done regardless of the situation. We’ve got to minimise social distress, we’ve got to tighten measures that will ensure more value for money and continuing that process, sensitise all sectors to their responsibility during the period.”
London said the THA will complete ongoing projects and focus on projects that facilitate meaningful employment and stimulate the economy. It also will continue to pursue public-private-partnerships in housing development.
“We are in a very fortunate positon in that most of our major projects have in fact been completed over the last five years or so. We have the hospital and over 20 health centres. Within a month’s time the cultural complex will be delivered. There have been a number of community centres and Y-zones delivered over the years.” Some projects, such as the Shirvan Road Roundabout, expansion of Store Bay Local Road and the new Scarborough Market, will be temporarily shelved.
London asked Tobagonians to play their part in understanding “the importance of giving a fair day’s work for a fair day’s pay.”
Overall market activity resulted from trading in ten securities of which four advanced, one declined and five traded firm.
Trading activity on the First Tier Market registered a volume of 91,248 shares crossing the floor of the Exchange valued at $1,115,743.46. National Commercial Bank Jca was the volume leader with 63,300 shares with a value of $74,061 followed by Sagicor Financial Corp with a volume of 11,026 shares being traded for $60,643. Ansa McAL Ltd contributed 5,000 shares with a value of $332,600. Scotiabank T&T Limited climbed $0.01 to end the day at $62.01.
Trade Minister Vasant Bharath said yesterday that there is enough US currency in the system and distribution will become more efficient as a result of talks with the Central Bank this week. “Based on conversations with the Central Bank this week, I believe what will be put in place and a closer management of the system will allow everyone who requires US dollars to pay foreign suppliers when they have access to it,” he said.
“I do not agree that the lack of foreign exchange has caused discomfort or a situation where people believe there is a shortage and therefore when it is available they purchase more than they require. The situation with the foreign exchange has been a bug bear for the last few months. I believe we have found the formula that will ease the tensions in the market so that on a weekly basis there is enough foreign exchange.”
Bharath, who spoke at a workshop held by the American Chamber of Commerce of T&T (AmChamTT) at the Radisson Hotel, Port-of-Spain, said there approximately US$3.5 billion in foreign currency in the country at present. “So there is a significant amount of US dollars in the economy. Because of this, there will not arise a lack of confidence in the system,” he said. He admitted that credit card transactions have been responsible for the increased demand use of US dollars.
The minister said credit card transactions account for more than US$500 million of foreign currency expenditure in the country. AmchamTT president Hugh Howard said the group met with Central Bank Governor Jwala Rambarran on Thursday to discuss the foreign exchange situation.
“The Central Bank Governor’s position has been very clear, that the Central Bank does not dictate to the commercial banks to whom they should give foreign exchange. One of the assurances that the Governor gave was that the Central Bank will be injecting foreign exchange on a more frequent and proactive basis so that when people go to the banks there should not be that lapse between the time the Central Bank injects addition foreign exchange,” he said.
Howard said the Governor also indicated that Central Bank injects about 25 percent of the foreign exchange that exists in the system. “About 75 per cent of the foreign exchange is provided by the commercial banks, so proper dialogue is needed between the Central Bank, private sector and probably the Ministry of Finance,” he said.
RBC economist Marla Dukharan, who also spoke at the workshop, was challenged by Bharath over her claim that US dollar deposits in the financial system have been declining over time. “Compare this to TT dollar deposits, which have grown since 2011,” she said.
WASHINGTON—MasterCard on Friday became the first major credit card company to say it will start handling US card transactions in Cuba. Citing new guidance from the US Department of Treasury, MasterCard said it would begin processing swipes by US card holders in Cuba beginning March 1.
The announcement comes one month after President Barack Obama said the US would work to restore normal diplomatic relations for the first time in more than 50 years with the communist-run island. The move affects Americans who travel to Cuba to visit relatives or for a handful of other authorized purposes, including educational visits. General tourism to Cuba is still prohibited by the half-century old trade embargo, and it would take an act of Congress to lift the ban.
New regulations announced earlier this month lifted a ban on US banks and credit card companies from doing business in Cuba. A spokeswoman for American Express said the card provider is evaluating the new regulations released by Treasury’s Office of Foreign Assets Control “to better understand what is permissible and how we would operate if we choose to do so.”
Visa did not immediately respond to a request for comment. MasterCard Inc., which is based in Purchase, New York, said in a statement cardholders should contact their bank before visiting Cuba to make sure their card will function on the island.