Prime Minister Freundel Stuart seems to have brushed aside a recommendation by the recently established Fiscal Deficit Committee to sell the Barbados National Oil Company Limited (BNOCL) and the National Petroleum Corporation (NPC).
Instead, Government will proceed with the planned merger of the two state-owned entities (SOEs).
Opening debate on the National Petroleum Corporation Amendment Bill in the House of Assembly Friday morning, the Prime Minister made no mention of the recommendation contained in the 30-page report submitted by the tripartite committee.
However, he reminded Parliament that a decision had already been taken by his administration “to effect efficiencies and economies by amalgamating” the two entities.
It was back in March 2014 that the merger was first announced by BNOCL General Manager Winton Gibbs to employees during an emergency staff meeting at the Woodbourne, St Philip office, called to clarify media reports and soothe tensions over the future of the parent company.
Back then, no date was set for the merger, but Gibbs had reported that representatives of the two entities were actively engaged in talks about the amalgamation, while promising to keep staff abreast of the situation.
At the same time, Gibbs had also warned of possible displacement resulting from the planned sale of the Barbados National Terminal Company Limited (BNTCL), a subsidiary of BNOCL.
With the sale of BNTCL to the Sir Kyffin Simpson-led Sol Group currently the subject of litigation, as well a Fair Trading Commission investigation, the Stuart-appointed Fiscal Deficit Committee has proposed that the Stuart administration bites the bullet and push forward with an all out divestment of the three state-owned energy companies.
The recommendation is based on the need for Government to urgently realize savings, including on subventions and transfers in the amount of $250 million.
In its report handed to the prime minister last month, the committee strongly endorsed the recommendations of a recent PriceWaterhouseCoopers study on SOEs and suggested immediate implementation of its approach to reform of 54 other state agencies as well.
However, analysts say the move would hold significant implications for Government, which is seemingly devoid of any appetite for any large-scale divestment of its assets at this stage, particularly those relating to the energy sector, which could affect future pricing and regulation.
Leading off debate Friday morning of the bill, which specifically deals with NPC’s management of the distribution of the country’s natural gas supply, Stuart revealed that in addition to a promised natural gas rate hike, Government would be getting a US$34 million loan from the Inter-American Development Bank (IDB) in a bid to make the NPC more viable.
He did not give details of the loan, nor did he say how it would affect Government’s ability to service its already high debt of over 100 per cent of gross domestic product that requires servicing to the tune of over $300 million annually.
However, the Prime Minister said once the undisclosed conditions of the loan were satisfied, Government should get the “first disbursement” about three months’ later.
“The whole purpose of this loan . . . is to deal with the issue of institutional strengthening and capacity building as we try to merge these two institutions and of course deal with the company that will result from the merger of the two institutions. The loan is also supposed to deal with the issue of a system upgrade . . . It is also intended to deal with energy security,” said Stuart.
“In addition to looking at amalgamation and the securing of loans, the issue of rates also have to be looked at, and that is what this amendment is about. Rates have to continue to be at a concessional level, we are not talking about the imposition of market rates,” he added.
Stuart gave the assurance that once financing was secured Government would be able to deal more effectively with replacement of the necessary infrastructure, systems upgrade, and keep to a minimum, the volume of unaccounted for gas as a result of the current state of the infrastructure, which was in place since the early 1950s.
He said it was the intention of the NPC to increase the access of natural gas to domestic customers by an average of about 850 per year, instead of the current 350, while expressing concern that natural gas was only reaching about 25 per cent of the domestic market and was not available in the rural parishes of St Lucy, St Joseph and St John.