Important lessons to be learnt from Nutrien stand-off

Yesterday’s reports of a resolution to the conflict between Canadian petrochemical giant Nutrien and the National Gas Company (NGC) is good news for T&T, both companies and the 600 employees of the ammonia/urea producer.

At the heart of the disagreement was Nutrien’s assertion that National Energy, a wholly owned subsidiary of NGC, was demanding over US$4 million in retroactive port service fees.

Discussions between the parties broke down when National Energy threatened to restrict Nutrien’s access to port facilities. That would have effectively stopped production at the company’s plants on the Point Lisas Industrial Estate, as most of its output is destined for global markets.

Nutrien Trinidad’s chief executive told staff in an internal memorandum on Tuesday that the port access restriction left the multinational company with no choice but to begin a controlled temporary shutdown of operations.

The negotiations yesterday averted the shutdown, which no doubt would have affected the employees, who were facing short-term layoffs, and impacted the revenues of both Nutrien and NEC.

But Point Lisas and T&T stood to lose the most, as the closure of the plants would have seriously damaged the country’s reputation. That is because the success of the Point Lisas estate was built on the concept of the sanctity of contracts that subsist beyond changes of government.

That is what S&P Global Rating meant when it stated, in reference to the maintenance of T&T’s BBB- ratings, albeit with a negative outlook, that “the ratings reflect the country’s long-established democracy with smooth changes in government and broad continuity in key economic policies….”

Foreign investors crave policy predictability and take it for granted that a country like T&T, which has been in the petrochemicals business for decades, will not change the rules of the game whimsically and without prior negotiations.

More shocking was the statement by Minister of Energy and Energy Industries, Dr Roodal Moonilal, that the previous administration “failed, in over four years, to negotiate new contractual arrangements with several of the downstream operators.”

For the current administration’s minister in charge of the energy sector to attempt to justify a retroactive demand for more money from one of our multinational investors, is a dangerous and intolerable attack on T&T’s reputation for policy predictability. That is not how civilised, sensible countries or companies conduct their business, as retroactive demands for increased fees are a clear breach of most contracts. It is not surprising, therefore, that Nutrien sought an injunction on Tuesday to protect its interests.

Had good sense not prevailed in this matter, other Point Lisas tenants may have reconsidered their positions on the industrial estate. Current policymakers should be aware that the combination of policy uncertainty with “the lack of a reliable and economic natural gas supply,” as Nutrien put it on Tuesday, is likely to result in the end of the Point Lisas Industrial Estate as we know it.

The estate’s tenants would also have taken note of the Government’s proposal to introduce an electricity surcharge of $0.05 per kilowatt/hour for the T&T Electricity Commission’s commercial and industrial customers. That is yet another additional cost industrial customers would not have budgeted for.

The occupants of the estate make a considerable contribution to T&T’s tax revenues and its foreign exchange earnings and should be treated with the respect that their positions dictate.