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Rubis does away with cheques, bank guarantees

Published:Friday | May 8, 2015 | 12:01 AMCamilo Thame

Rubis Energy Jamaica will no longer require its dealers to upfront collateral to guarantee that they will pay for fuel supplied by the marketing firm.

Instead, the company will deliver the first load of gasolene to service stations on credit - through a load-over-load credit facility - provided that dealers pay for that load by electronic funds transfer, rather than by cheque, before they receive the next delivery. This will also be done for all future supplies.

"We have agreed to modify certain commercial terms and conditions governing our business relationship with our dealers," Rubis Retail Manager Raymond Samuels told the Financial Gleaner. "These amended terms and conditions have been incorporated in our 2015 dealer contract, and will be fully implemented at the site level upon execution of contract by each dealer."

The marketing firm was pressing its retailers to provide guarantees in order to make payments by cheque, but Rubis said dealers already had "the option of paying for fuel on a cash-on-delivery basis without the need for guarantees".

Getting bank guarantees require substantial amounts of assets, given that the petrol business is a $100-billion-a-year industry in Jamaica. Rubis controls approximately 36 per cent of the local gasolene trade.

Over 50 retailers are anticipating the new contracts to be executed, but they are currently reviewing the terms and conditions laid out to them.

"We just received their (Rubis') letter and we expect to respond to them by Monday after next," said Leonard Green, president of the Jamaica Gasolene Retailers Association (JGRA).

However, Green finds the new payment terms to be convenient and acceptable, even though dealers will pay a little more for electronic transfers.

"It costs more, but the convenience, reduced risk and increased safety for our dealers should supersede the financial cost," said the JGRA president. "We understand that this is the way the world is going and we promote the use of technology."

At an emergency meeting held on Monday, JGRA members decided to make the matter public, and stated in a press release that Rubis had reneged on an agreement to eliminate the bank guarantee requirement.

Yesterday, Green commended Rubis on its responsiveness and its efforts to avert further action

"We need to embrace this in the trade, where we can move forward with dialogue," he told the Financial Gleaner. "We hope that they keep up their end of the deal, and, on our side, we will ensure that dealers meet their obligations."

Rubis did not address the JGRA's other main complaint coming out of the meeting - the long-standing issue of margins being charged by marketing companies, including Total and Gulfstream Petroleum (Texaco).

The gas retailers accused all three multinationals of tacking on additional margins on to Petrojam's weekly price increases.

"This practice by the multinationals has resulted in driving up prices at the pumps," said Green. "Multinationals are carrying up to two times the margin that the retailers are getting."

Petrojam sells its gasolene to marketing companies at $113-$115 per litre, depending on the grade of fuel, while retailers sell with up to a 21 per cent markup. That means that marketing companies are taking up to 14 per cent for themselves in some instances, according to JGRA.

Gulfstream CEO Mauricio Pulido said that his company keeps 40 per cent of the margin, on average, leaving the remaining 60 per cent to the retailers, although it varies by location.

"Every component of the chain has the right to establish the price they believe is competitive," said Pulido.

camilo.thame@gleanerjm.com