Ainsley Gill

Ainsley Gill, founder, CEO and majority shareholder of NiQuan Energy.

SHAKEN by the April 7 explosion at its plant on the Pointe-a-Pierre refinery complex, NiQuan Energy has postponed raising US$175 million in new debt that is meant to refinance its existing US$120 million debt facility.

The explosion and delay in new funding leaves NiQuan scrambling to start commercial production of zero-suphur diesel and naphtha, which is crucial to the project’s ability to repay its heavy debt load. Commercial start-up of the plant is also important to NiQuan maintaining its current debt ratings, which would allow it access to the international capital markets when it gets the green light to resume commissioning of the gas-to-liquids facility.

Responding to questions on Sunday morning on the status of the US$175 million refinancing, NiQuan’s vice president of corporate affairs, Malcolm Wells said: “The recent incident at the plant has caused us to revisit the timing of our original funding plan. We have adapted that timing and engaged with our financial stakeholders and we have full confidence in our revised schedule. The details are company confidential.”

But many details of NiQuan’s financial status before the incident, are available in a slick, graphics-filled presentation the company made to potential investors in its US$175 million note, after it received a preliminary ‘B’ rating on March 10 from S&P Global Ratings.

The NiQuan presentation discloses that the gas-to-liquids company had US$400,000 in cash and cash equivalents on its balance sheet at the end of December 2020.

In the appendix of the presentation, NiQuan reveals that its salaries and benefits costs are expected to average US$511,333 a month for 2021. The company’s total general and administrative costs are expected to average US$1.31 million a month for this year.

On Sunday, Express Business asked Wells how does a company expect to survive with US$400,000 in cash at the end of December 2020, no income earned between January 1 and April 7, 2021, and monthly expenses estimated at US$1.31 million?

The response from the NiQuan spokesman was: “Thank you for the follow-up, but I’ve nothing to add to yesterday’s response.”

Efforts to get clarity on NiQuan’s financial state on Monday from its founder and CEO, Ainsley Gill, and chairman, John Andrews, were referred back to Wells, the company’s spokesman. A representative of JMMB Securities, which is the co-bookrunner of the proposed US$175 million issue, also referred questions on NiQuan’s financial situation to Wells, who lives in Britain.

The proposed new debt of US$175 million is critical to NiQuan as it seeks to start up the project, whose commissioning has been delayed on several occasions.

Among the uses of the US$175 million, NiQuan proposed to:

• Repay the US$120 million bridge loan, which had ballooned to US$126.1 million by March 2021;

• Repay a Petrotrin Note of US$14.7 million

• Redeem Government’s US$12.5 million in preference shares at a cost of US$14.7 million

• Pay a promissory note of US$4.5 million, which is an amount due to related parties, recognised as indebtedness;

• Fund a debt reserve account to the tune of US$8.2 million

• Provide cash for the balance sheet of the company of US$1.5 million

• Pay transaction fees of US$5.3 million.

Last month’s postponed attempt to raise US$175 million was not the first time Niquan has tapped the debt markets to raise funds.

In June 2018, Republic Bank Ltd arranged and underwrote a one-year, bridge loan of US$24.5 million for NiQuan to complete Phase 1A of the project. Phase 1A of the project involved a thorough technical inspection of the plant and draw up a detailed scope of works to bring the plant to full production.

The one-year bridge loan was at a fixed interest rate of a three-month LIBOR plus 15 per cent, which averaged 16.67 per cent over the period.

The bridge loan was subsequently replaced by a US$87.8 million facility in July 2019, also arranged by Republic Bank.

That second loan was for 18 months and was due in January 2021.

Financial sources close to the funding process told Express Business that in February 2020, Republic Bank was replaced as arranger by JMMB Securities, which also arranged the refinancing of the US$87.8 million facility and raised an additional US$32.2 million. That brought NiQuan’s total debt to US$120 million. Those funds were also due in January 2021.

Ratings

In March 2021, S&P Global Rating assigned a ‘B’ rating to the NiQuan project.

Caribbean rating agency, CariCRIS, reaffirmed the assigned corporate credit ratings of CariA+ (Foreign and Local Currency Ratings) on the regional rating scale and ttA+ on the T&T national scale in December 2020.

CariCRIS outlined four factors that could lead to the lowering of its rating on NiQuan are:

• A fall in the interest cover to below 2.5 times and/or a drop in the Effective Debt Service Coverage Ratio to below 1.3 times;

• Absence of a functioning offtake agreement with either the existing contracted offtaker or an alternate offtaker at the time of plant start up

• Unsuccessful start-up of full commercial operations in January 2021 and/or production falling below 2,400 bpd

• Failure to refinance the 18-month note by February 2021.

NiQuan has failed to start full commercial operations in January 2021 and it has been unable to refinance the US$120 million note in February 2021.

On April 9, following the incident two days earlier, CariCRIS placed NiQuan on Rating Watch-Developing, which is imposed “when events occur that may affect the credit quality of the issuer/issue”.

In that action, CariCRIS said it was “concerned that this incident may pose a further delay in the company ramping up to full-scale commercial production. This, in turn, could adversely impact the company’s ability to effectively conclude the refinancing of its existing US$120 million debt facility”.

Government terms

The NiQuan presentation to investors states the company’s natural gas price is fixed at US$3.60 per MMBTU until 2024, with a price escalator of 2.5 per cent thereafter. The S&P Global Ratings analysis of the company indicated NiQuan could pay as much as US$5.50 per MMBTU if the six-month average Brent oil price is above US$65 a barrel.

Footnote 7 of the news release issued by CariCRIS in December 2020 states NiQuan “is currently renegotiating the pricing terms and conditions of its natural gas feedstock”.

The term of NiQuan’s natural gas supply—which is from a wholly State-owned company called T&T Upstream Downstream Energy—is for 25 years (15 years with two five-year renewal periods).

NiQuan has a similar 25-year (15 years with two renewal periods) offtake agreement with Petrotrin, through which the company agrees to take-or-pay 100 per cent of the output of the facility “at the highest market price” and “adjusted for inflation”. The plant is optimised to produce 2,640 barrels of product a day with 80 per cent of the output being zero-sulphur diesel and 20 per cent naphtha.

The NiQuan presentation describes Petrotrin as its “key long-term partner” as the provider of the offtake agreement, owner of the property on which the gas-to-liquids plant is located and as party to an interconnection agreement and an electricity supply agreement. It is quite interesting that NiQuan has “full confidence” in its ability “to revisit the timing of our original funding plan,” for the US$175 million the company proposed to raise in March.

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