Sat | Jun 15, 2019

Lime Hall holding out for Petrojam deal with PDV Caribe

Published:Friday | February 15, 2019 | 12:16 AM
The Petrojam oil refinery in Kingston.

Despite the tabling of a bill by the Jamaican Government for the hostile takeover of Venezuela’s minority holdings in the Petrojam refinery, the principals in A & A Lime Hall Development Company are still optimistic about reaching an agreement with PDV Caribe, saying their offer price is nearly twice as high.

The Montego Bay-based company says it has made an offer of US$100 million for 49 per cent of Petrojam, a price that values the refinery at around US$200 million.

The Jamaican Government’s offer is unknown but it has been speculated to be around US$50 million.

Financial Gleaner sources said in January that PDVSA values its own shares at just under US$90 million, a valuation that includes the price paid at acquisition, unpaid dividends and retained earnings.

“As regards completion of a sale, we are optimistic that we will conclude a contract,” Arlene Gaynor, shareholder and attorney for Lime Hall, said Wednesday, a day after the compulsory acquisition bill was tabled in Parliament.

“Now that the Government has opted to pursue the route of public acquisition, one can reasonably conclude that negotiations between themselves and PDV Caribe have broken down irretrievably.”

Gaynor said the president of PDV Caribe was not in Venezuela currently, but that Lime Hall expected to finalise the contract for the Petrojam shares “before the end of February.”

Petrojam is controlled 51 per cent by the Jamaican Government through the Petroleum Corporation of Jamaica.

In a January 4 letter addressed to Petrojam Chairman Russell Hadeed and the permanent secretary in the Ministry of Science, Energy and Technology, PDVSA said it had been encouraging the potential vendor to make a similar offer to the Jamaican Government for its stake in the refinery.

PDVSA has been an investor in Petrojam since 2006. Over time, the Jamaican Government has tried to sell control to its Venezuelan partner, in exchange for cash to upgrade the refinery, but a deal remained elusive as Caracas waffled. And that was before Venezuela’s current economic crisis.

There were subsequent reports that Jamaica had began considering other investors, including the Chinese, but the outreach was said to be exploratory.

“I believe the refinery would be better off in the hands of private capital, who history has shown to manage resources more efficiently,” Gaynor said on Wednesday.

Constitutional challenge

Back in January, the attorney told the Financial Gleaner that Lime Hall intended to mount a constitutional challenge against legislation by the Government to forcibly acquire Petrojam’s minority holdings. She said the legal challenge would be mounted on the premise that the proposed legislation would be in breach of the fundamental charter of freedoms of the Constitution dealing with property rights.

Now that the Government has tabled the bill, Gaynor said the company would wait for the legislative process to play itself out – a process that includes debate and passage in the lower and upper chambers of Parliament, the governor general’s assent and the gazetting of the law.

The company’s more immediate focus is on sealing a deal with Venezuela, she said.

“We will have to finalise an agreement with PDV Caribe,” said the attorney. “We are currently pursuing, number one, [closing off the deal] with the sellers, and then we await the completion of the legislative process,” Gaynor said.