Being on the right side of the deal

Okay, we admit that we do more writing than arithmetic, so we are reaching out to the people in the know to help us, and the public, understand the creative financing surrounding the West Indies Oil Company (WIOC). If the politicians are shy on the matter, maybe the company’s CEO, Gregory Georges, or the Chairman of the Board, Mr Hilroy Humphreys, can enlighten us on who owns what and who owes what.

As far as we understand, the Government of Antigua & Barbuda (GoAB) owns 51%, the Venezuelans own 25% and a wealthy Chinese investor by the name of Xiao Jianhua owns 24%. That is simple enough to understand.

Prior to this arrangement, the government owned 25 percent of the shares and the remaining 75 percent were being offered by National Petroleum Limited (NPL) for US$30 million.

Based on the information provided by Foreign Affairs Minister Charles “Max” Fernandez, in February, the investor, who he described as “a very, very wealthy individual,” was providing $30 million in bridging loans to be used towards the purchase of WIOC.

We later learned that the very, very wealthy individual injected US$15 million in WIOC and bought 120 passports for the bargain basement rate of US$15 million. By paying up front, for 75 passports, he got a bonus of 45 passports; resulting in a near instant upside of US$9 million and an average purchase price of only US$125,000 per passport. We are not sure it that price includes families, but rest assured that all applicants will be vetted by the CIP unit as per normal.

We have been trying to figure out a valuation on the company and it is proving somewhat difficult. In the case of Mr. Xiao Jianhua, he seems to have paid US$15 million for 24 percent leading to a valuation of about US$60 million. A great deal because he also secured 24% share of the EC$150 – EC$200 million of prime lands that were part of WIOC assets. Not bad. No wonder this guy is a billionaire.

The Venezuelans did not fare too badly either. Again, according to Minister Fernandez, they were originally going to contribute a US$24 million loan to the project, but instead, the South American country was granted the value of their money in shares.   That looks like US$24 million for 25% and that leads to an almost US$100 million valuation. On the surface, it is not as good as deal had by Mr Xiao Jianhua, but Venezuela does not have the same profit motive as our Chinese capitalist investor.

They are banking on the upgraded facility becoming a major petroleum distribution hub for … Venezuelan petroleum.   And it does not hurt that they own 24 percent of WIOC and all of that prime land and share in the future profits. Sweet!

We are now hearing of some more creative financing emanating from the Government and WIOC. It relates to Wadadli Power Plant (WPP) debt swap deal and it seems to come with severe criticism of APUA. According to Prime Minister Browne, “we are of the firm view that the problem at Wadadli is a management issue”. As far as we know, management of WPP is none other than APUA.   Ouch!

While listing the critical illnesses related to the plant, the government is convinced that if APUA is removed from their roles as management, and becomes predominantly a client, then WPP will thrive and benefit everyone, including the two foreign shareholders of WIOC. We are eager to hear the very patriotic Minister of Public Utilities, Robin Yearwood, on this plan.

The vague details of the deal has already raised an ants’ nest of questions. And while we do not have the answers, we will seek to explain the basics (as we understand them).

APUA owns WPP and the debt for building the plant (north of US$50 million we hear with US$46 million to the Chinese). APUA owes WIOC for petroleum products used at the plant as well as the products used at other plants and the Hadeed owned and run, Antigua Power Company (APC). Yes, the deal with APC calls for APUA to provide the fuel.

The APUA debt at WIOC has accumulated to over EC$50 million. So APUA’s sole shareholder, the government, has decided to kill two birds with one stone. Liquidate the debt by swapping shares in WPP and at the same time, remove APUA as management by transferring that function to WIOC.

What does this mean in dollars and cents? Well, if the plant is valued at $100 million and APUA owes WIOC $50 million then WIOC gets 50% of the plant in the debt swap. If the plant is valued for more, the percentage of ownership swapped will be less. If valued less, then the percentage of ownership swapped will be more.

We are unsure how the WPP debt will be allocated but at this point, it seems like that will be separated and will continue to be an APUA debt; unless the generous Chinese government decides to forgive the loan or part thereof.

From our vantage point, what appears is going to happen is that a significant ownership percentage of the now 100 percent locally owned WPP will transfer to WIOC. When that happens, the ownership is no longer 100 local because near half of WIOC is foreign owned.

So, if 50% of WPP is transferred in the swap deal then approximately 25% of WPP will be beneficially owned by the foreign investors at WIOC. Minister Yearwood? Comments?

No, we are not xenophobic. We are simply laying out the facts. And one of those facts is that the current administration was completely against privatization of any of APUA to anyone; let alone foreigners.

As much as we have been asked to comment or criticize the WIOC deals, we cannot because we simply do not have the full details of the deals done. What we can do is educate everyone on the information that we have at hand and hope that there will be enough interest and pressure that someone will come forward and enlighten us, and the inquiring public, of these creative financing deals.

In the meantime, we can only hope that we are on the right side of any deal done on behalf of the nation and that we do not have to revert to asking “whey de money gorn?”