NGC reports $191m profit after $2.1b loss
THE National Gas Company (NGC) Group of Companies has reported an unaudited after-tax profit of $191 million for the first quarter of this year. NGC chairman Conrad Enill made this statement in his report that accompanied the NGC’s summary consolidated financial statements for the three months ended March 31, 2021.
The turnaround comes after NGC reported a $2.1 billion loss for 2020, last week.
Enill said this unaudited after-tax profit is higher than the $31 million which was reported by the NGC Group for the same period last year.
“Group revenues of $4.5 billion were $1.3 billion greater than revenues of $3.2 billion for the comparative period 2020.
He said the rebound in commodity prices positively impacted revenues and profit. Enill said the group’s parent company NGC executed a new gas supply contract with Tringen while negotiations continued with Methanol Holdings (Trinidad) Ltd towards execution of a long-term gas-sales contract.
He said the Ruby field, in which NGC holds a 31.5 per cent interest, began production in May, six months ahead of schedule. Enill observed this “would certainly support stabilisation of supply over the next few years.”
This year, Enill continued, the NGC Group continued its focus on the core objective of ensuring sustainability over the long term. “The sustainability plan is anchored in the following key deliverables securing our current business, transforming the organisation for the changing future, growing the business locally and internationally and strengthening our national contribution.”
Enill said between 2016 and 2020, NGC built a solid foundation in areas such as safety, governance, project management and people development, with a strategic focus on value leakage and value creation “supported with strategies in technology, growth, human resources and sustainable development.”
In terms of balancing global demands for increasing energy from existing sources and an increasing mix of clean energy, Enill said NGC and its subsidiaries are implementing projects that support these objectives.
He listed green hydrogen production, use of solar power and electric car-charging stations at its Preysal flagship CNG station and the use of drone, satellite and infra-red technology to detect methane emissions as some of these projects.
Enill also said NGC has been accepted to the Oil Methane and Gas Partnership (OMGP), a comprehensive, measurement-based methane reporting framework that standardises rigorous and transparent emissions accounting practices. He said NGC will continue to seek opportunities to derive value along the gas value chain where natural gas can be used as a bridging fuel and where renewables and energy efficiency, will play a greater role.
Enill said the NGC is positioned as an integrated energy company, which will seek to obtain greater value along the gas value chain, is also seeking synergies within the group and forging partnerships in the local, regional and international energy arena.
During the covid19 pandemic, Enill said NGC has been able to successfully transition to work from home arrangements in accordance with the public health regulations. He said most of NGC’s employees have been working from home while its operations’ employees “continue to adapt to new conditions with changes in shift crews.”
Enill praised NGC workers for their resilience and adaptability during the pandemic “in not only keeping the business running but working innovatively and virtually under unusual circumstances.
In last week’s report, the NGC identified contracts, infrastructure and claims among the exceptional charges which contributed to its recording the $2.1 billion loss for 2020.
In a response issued on Friday to questions from Newsday, NGC said the loss represented a $2.6 billion charge from a restated profit of $0.5 billion for the 2019 financial year.
The company said its group’s financial performance last year was adversely affected by exceptional charges of $4.2 billion arising from onerous contracts ($2.1 billion), impairment of infrastructure ($1.6 billion) and claims ($0.5 billion).
With respect to contracts, the NGC said, “A charge of $2.1 billion was recorded in 2020 for a gas supply contract in which the cost of fulfilling the contract is greater than the returns to be derived.” NGC added it has a provision of $4.5 billion for onerous contracts.
NGC said it reviewed its gas supply infrastructure and identified significant capacity under-utilisation, which is not expected to change based on the the current outlook.
“Consequently gas infrastructure was impaired by $3.2 billion of which $1.6 billion was charged to profit and loss account for economic obsolescence.”
NGC said last year it received several claims from customers due to gas curtailment issues.
“The expected cost to settle claims was reassessed in 2020 and arising from this assessment, the company increased its provision by $0.5 billion with a total expected liability of $1.2 billion now recorded in balance sheet.”
NGC also said it continues to subsidise natural gas to the Trinidad and Tobago Electricity Commission (T&TEC) for the provision of electricity. “For 2020, this amounted to $0.5 billion whilst receiving no payments.” The company said at the end of last year, the receivables it got from T&TEC totalled $2 billion, “with a further $3.7 billion in loans outstanding.”
Last week, former minister in the ministry of finance Vasant Bharath blamed the Government for the $2.1 billion loss. He said the Government has “continually ignored the advice to re-look at the gas value chain as cheaper shale became more available, the US became net exporters of natural gas, prices paid by NGC (negotiated by the PM and his team) to the upstreamers were higher and unworkable and curtailment issues by local producers.
Former government ministers Kevin Ramnarine and Mariano Browne were also not surprised about the loss.
Ramnarine said, “Market conditions in 2020 were not favourable to the NGC.”He said low ammonia and methanol prices in the sub US$200 per tonne range prevailed for most of last year “and would have impacted the price it (NGC) realises, for most of the natural gas it sells is indexed to ammonia and methanol prices.” Apart from that, Ramnarine said, “I expect that the quantum of natural gas sales would have fallen. So they had less gas to sell and that gas realised a lower price.
Ramnarine was optimistic that with increased natural gas production in 2022, NGC’s overall sales volumes will increase. He recalled in 2013 efforts were made to widen the NGC’s asset and revenue base with the acquisition of Total’s shares in Blocks 2c and Block 3a. Ramnarine was happy to see the NGC continues to benefit from that decision.
Browne said, “It just simply points out that the difficulty in the energy sector are not simply related to covid. There are other issues which are not yet dealt with.” One of those issues, he continued, is the price of gas sold to NGC by upstream producers and the price of gas that NGC supplies to the petrochemical sector. He also said petrochemical plants that were closed during the pandemic would also have affected NGC’S revenue.
But he said, “NGC will continue to be a stable entity, in so far as approximately 60 per cent of gas still goes towards LNG (liquefied natural gas) and they have long-term contracts in that regard.”
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