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T&T banks to raise US$250m for AUM project

Thursday, March 17, 2011

A consortium of local banks will be able to finance the estimated US$250 million that could be made available to the local banks as part of the recently approved US$1.9 billion ammonia urea melamine (AUM) complex that is being promoted by Methanol Holdings (Trinidad) Ltd, a 56.4 per cent subsidiary of financially-troubled Clico. Richard Young, vice-president of the Bankers Association of T&T, told the Business Guardian that local banks were very excited about the prospect of part financing a major project in the local energy sector. 

He warned, though, that the terms and conditions of the loan will be crucial to determine if there will be any local takers. “The answer is yes, but, of course, it will be subject to due diligence and the conditions of the loan. I don’t know what the arrangements will be like, if, for instance, KFW will raise the US$1.9 billion and then allocate US$250 million to the local banks,” said Young, who is the managing director of Scotiabank, which is majority owned by the Bank of Nova Scotia of Canada.

Young said the decision by local banks to participate in this project will also be dependent on the pricing of the loan. He explained that local banks had many ways it could raise the US$250 million. The banks could take it from their deposits but, that would mean the length of the project would become important. “You see, the money we have, the deposits, are on call and, if the project is, say, for ten years before the loan is repaid, then we could have a challenge. So, the period of the loan will also be important.” 

He said some of the banks, like Scotiabank, that might be part of an international bank, may be able to access international money at cheaper rates and, it depends on what kind of pricing the project comes in at, and, if makes sense to use foreign exchange deposited in T&T or raise it through lines of financing with international or connected banks. The important thing, Young insisted, is that banks must be able to make some money on the transaction.

“We have not yet specified the amount we would want the local banks to participate in but we feel that the figure will be in the order of US$250 million.” Rampersad Motilal, general manager of MHTL, explained that the final figure that will be offered to the local financial institutions has not been settled because “the Government only recently signed off on the project,” which would see MHTL constructing its second ammonia urea melamine plant, referred to as MHTL AUM 2 project.

Motilal said the plan was to make available US$250 million to the local banking sector but, that is being worked out with German bankers, KFW. He said it was all part of trying to get more and more local involvement in the energy sector. “We have put in local equity in the past but, we have not in the past explored US-dollar financing from local banks. We feel there is more capacity in the market. In the past, we have tried to have local participation in terms of local content but, the idea is to ensure you have maximum of local involvement at all levels of the project,” said Motilal. 

The project entails the construction of world-scale facilities, with nine separate plants with a projected investment of US$1.9 billion. The complex will produce 1,850 tonnes per day of ammonia, which will be used to produce:

• 3,000 tonnes a day of urea

• 90 tonnes a day of melamine

• 750 tonnes per day of ammonium sulphate (used for fertilisers and insecticides)

• 30 tonnes per day of melamine urea formaldehyde resin (MUF)

Young said there had been a build-up of foreign deposits in local banks as people used TT dollars to buy US currency and then leave it in the local banks. He said there were other positive signs with Atlantic coming to the local market to raise US$100 million and the plan to raise a further US$250 million.


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