THE State’s flagship energy company, the National Gas Company (NGC), registered an after-tax loss of $2.1 billion for its 2020 financial year, which ended on December 31, 2020.
NGC’s financials, which are published as a newspaper advertisement today, indicate that T&T’s natural gas middle man reported profit before exceptional items, finance cost and share of associate of $1.2 billion.
But the company recorded exceptional items of $4.2 billion, which led it to report the after-tax loss of $2.13 billion, compared with restated profits of $482 million in 2019.
On the issue of NGC’s $4.2 billion in exceptional items, NGC chairman Conrad Enill, in the chairman’s report, said: “In 2020, NGC conducted a review of its current contracts and a valuation of the company’s pipeline infrastructure, the results of which resulted in exceptional charges to the profit and loss in 2020.
“A review of contracts was conducted to determine if the obligations under the contracts exceeded the economic benefits expected to be received and this resulted in
a provision of $2.1 billion for a contract that became effective in 2020.
“Additionally, a charge of $1.6 billion was recorded to profit and loss following a revaluation of pipeline infrastructure with a further $1.6 billion reduction of the previous revaluation surplus.”
NGC’s losses will impact negatively on the holding company, the National Enterprises Ltd (NEL) as well as profits and taxes paid to the State.
The 2020 losses represent a downward slide in earnings for the NGC, which first set in in 2019, when it posted profitable but reduced earnings of $482 million.
The billions in losses were foreshadowed when the NGC reported a loss of $316.2 million for the first six months of 2020.
At that time, the NGC said its margins continued to be adversely affected by the volatility in the commodity markets with prices decreasing by 33 per cent, nine per cent and 44 per cent for methanol, ammonia, and natural gas liquids, respectively, in the reporting period.
In a statement issued last year to mark the six-month losses, Enill said the decline in margins, as well as impairment provisions on assets associated with changes in market outlook, legacy issues, and non-payment for gas sales by NGC’s largest customer, has caused the overall results to be negative and contributed towards a tightening.
Despite the negative results, the NGC is moving to become an international energy company, said Enill.
“In our strategic review of the business, we have continued our focus on the emerging challenges, which include the ever-present Covid-19 that have resulted in a slowdown of activities; the global oversupply, which has resulted in lower petrochemical prices; the requirement to balance global energy demand against reduction in GHG (greenhouse gas) emissions; increasing competition in shale gas resources and our ageing plants locally competing with newer plants emerging internationally.
“We have also identified areas of the business where value leakage is present and we are working with the Government and other stakeholders to address such issues, including the Trinidad and Tobago Electricity Commission (T&TEC) matter,” Enill said.
Towards a more sustainable future
The NGC chairman said: “Our goal as we embark on the new normal is to achieve our objective of being an integrated international energy company, the results of which we believe will achieve for Trinidad and Tobago, integration across the natural gas value chain, sustainability of the business and transition to the green energy agenda. The difficult conditions of 2020 have spurred the Group to accelerate several transformation initiatives for a more sustainable future.”
He said the company is bolstered by:
• The development of the Ruby Field in which NGC has a 31.54 per cent interest
• The completion of the acquisition of Twin Eagle Liquids Marketing LLC, USA by Phoenix Park Gas Processors Limited (PPGPL)
• Advancement of digital transformation initiatives within several areas of operations throughout the Group
• Live launch of National Energy’s ttEngage Online Investor Platform – a fully digital solution for business development in the energy-based downstream sector in Trinidad and Tobago
• Integration of the Green Agenda in support of the Paris Agreement and national climate action targets through strategic partnerships with academia and industry, education initiatives and support/exploration of renewable energy projects
• Progression of NGC’s MOU with Ghana through the execution of a contract to design, build and commission a Pressure Regulator Skid in Takoradi, Western Ghana.
“These signal that the group is not just reinforcing its operational foundations but is acting decisively to grow both its business and broader developmental impact. They also frame the trajectory of the Group’s strategic objectives for 2021 and beyond,” Enill said.
“The pandemic and the move from fossil fuels to renewables represented two significant changes to which the company responded. Innovation enabled by technology has played a major role in redefining the success models that we are building. We have noted changes that we must respond to in order to continue to add value in the new global energy market. Our analysis tells us that in the drive to reduce carbon emissions, there is a global move from fossil fuels as the primary energy source to cleaner fuel sources, including gas. Our new focus, therefore, includes being market-driven instead of production-driven, moving from fossil fuel energy to a focus on clean energy, renewables and energy efficiency, and reducing levels of greenhouse gas emissions to a future carbon neutral world,” he said.
In an interview with the Sunday Express in October 2020, NGC president Mark Loquan said: “It is clear that NGC cannot simply rely on margins in buying and selling gas in its aggregator role, which is still an important role to balance disturbances in both upstream and downstream and ensure stability and power to the country. If there is one thing that NGC has learnt well from 45 years in the energy business, it is how to weather cycles of change. In fact, we have found that in times of challenge, there are more opportunities for growth. Over the last few years, market conditions have compelled our company to revamp our business model and seek alternative income streams to remain profitable. Strategies for growing our business in new directions - across the value chain and in international markets are already being implemented and are showing great promise. We at NGC have confidence that the work being executed is returning the organisation to a path of sustainable growth, and we expect to continue delivering exceptional value to country for many years to come.”
Loquan said moving forward, there were “fundamental” matters to address to ensure such sustainability.
“It is no secret that the era of abundant cheap gas is behind us. Increasing the Group’s profitability remains a priority and it rests on ensuring that T&T’s precious molecules yield maximum economic returns. The actions are clear—reduce the demand for natural gas for electricity generation and improve the efficiency of gas utilisation to release gas for higher value-added applications, while working on value optimisation internally, across the Group and across the entire value chain. NGC is now playing a leading role in energy efficiency policy and action in Trinidad and Tobago.”