It is still not saying whether it is willing to go ahead with the planned purchase of the Barbados National Terminal Company Ltd (BNTCL) or whether Government’s asking price of US$100 million would be met.
However, in a statement today, the Kyffin Simpson-led Sol group remained adamant that the multi-million dollar deal would be of benefit to the entire country, and it would not place Sol’s competitors at a disadvantage.
The Fair Trading Commission (FTC) ruled last week that the proposed acquisition of BNTCL by Sol could only go forward if certain conditions were met.
In handing down its decision, the FTC stipulated that there could be no 15-year moratorium on the construction of new terminal facilities.
The regulatory body also rejected Sol’s call for a 32 per cent pre-sale increase in throughput fees at the Fairy Valley storage site, on the basis that it could impinge on the provisions of the Fair Competition Act, which prohibits post-merger increases in prices. With the controversial deal, there were also concerns that costs would likely be passed onto consumers and that Sol could end up with an energy monopoly.
However, in a press statement released today, Sol’s Regional Manager Roger Bryan argued that the monopoly concerns of the FTC could be addressed through regulation and Government oversight.
“From the outset of this bidding process, Sol has strongly advocated for the regulation of the throughput rate. We have pushed and will continue to push for this because we believe it to be in the best interest of the public, as well as any of our competitors,” he said, while suggesting that the appointment of a Government regulator would significantly alleviate concerns pertaining to any perceived dominant market position.
“We completely understand the FTC’s position on the ruling because, simply put, the Barbados Government needs to create the necessary legislative framework that would support the privatization of BNTCL, which would include, amongst other things, the appointment of a regulating entity or body over BNTCL post-merger,” he said.
Addressing allegations that the planned BNTCL sale could potentially force competitors out of business, Bryan assured that this would not be the case and that Sol had no desire to do so.
“The terminal’s profit affords the minimum acceptable economic return, and it is unlikely that any company would be able to use these profits to force a competitor out of the market, particularly one with significant financial backing,” Bryan said.
He also pointed out that Government, through its continued ownership of BNTCL’s parent company, Barbados National Oil Company Ltd (BNOCL), would continue to control importation rights of petroleum products in Barbados, and by extension, continue to regulate the price at the pump.
“The BNTCL is a separate entity to the BNOCL, which controls the price, thus eliminating Sol’s ability to benefit from any perceived vertical integration,” the Sol official explained.
He also argued that the proposed 32 per cent increase in the throughput rate was necessary since the terminal’s expenses had continued to increase in line with inflation rates while BNTCL had not changed its throughput rates since its inception in 2006, resulting in sub-optimal economic performance.
While he did not explicitly state whether or not Sol would accept the FTC’s terms of the sale, Bryan maintained that the deal was in the best interest of Barbados, given the country’s plummeting foreign reserves which fell below $600 million at the end of September, well below the 12-week benchmark recommended by the Central Bank of Barbados.
Sol also asserted that the US$100 million offered for the purchase of BNTCL would inject some well-needed foreign exchange into the Barbados economy, which desperately needs the boost.
However, Sol’s main competitor, Rubis West Indies Limited, has hailed the FTC’s decision as a major victory for the preservation of fair competition in the Barbados fuel market.
“Yesterday we received from the FTC a copy of the press release with their decision not to approve the sale of BNTCL to Sol,” the company said, adding that it was “very pleased to see that the FTC conducted an independent and detailed review of the transaction and considered all of the possible consequences to the competitive landscape as well as to consumers to reach their decision.
“In Rubis’ view, the decision by the FTC preserves a competitive fuels marketplace and protects individuals and enterprises that consume fuel. Furthermore, the decision by the FTC reinforces Rubis’ commitment to remain a strong, innovative, and vibrant fuel supplier in Barbados,” the company’s Chief Executive Officer Mauricio Nicholls said.