Sat | Oct 31, 2020

Massy eyeing LNG market in Ja - Aims to manage substitution threat to gas business

Published:Friday | January 24, 2020 | 12:00 AMSteven Jackson - Business Reporter
A Gaspro truck parked at a terminal. Massy Holdings wants to become a reseller of LNG in Jamaica in order to manage the substitution threat to its LPG brand.
Gaspro cooking gas cylinders are displayed. Massy Holdings wants to become a reseller of LNG in Jamaica in order to manage the subsitution threat to its LPG brand.
In this July 14, 2014 Gleaner photo, CEO of Massy Holdings Limited Gervase Warner addresses the Massy rebranding event at Jamaica Pegaus hotel in New Kingston. Massy wants to become a reseller of natural gas in Jamaica
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Trinidadian conglomerate Massy Holdings Limited wants to distribute liquefied natural gas, LNG, in Jamaica to complement its cooking gas operation, a strategy that appears designed to contain any likely business fallout from the switch to cheaper fuels in the industrial sector.

New Fortress Energy is currently the sole supplier of natural gas to Jamaica. However, Massy’s entry strategy appears to be one of partnership rather than rivalry.

The conglomerate, which has various holdings in Jamaica, says there is a developing “substitution threat” from LNG for bulk LPG sales to smaller industrial customers.

The company, headed by CEO Gervase Warner, said it would seek to resell LNG from an entity it described as an importer and supplier of LNG to a power plant close to Montego Bay. No names were mentioned, but New Fortress is the only LNG supplier to the only power plant just outside of Montego Bay, at Bogue.

“Product substitution is an important commercial risk in Jamaica. The on-island presence of LNG has, in a few situations, displaced LPG where natural gas is a cost advantaged fuel replacement for small diesel engine-driven electrical power generation. Solutions being considered include reselling LNG from the LNG importer and developing competitive LPG offers that discourage industrial consumers from switching to LNG,” stated Massy in its annual report released this week.

”We are working to be a distributor of LNG in Jamaica,” added Massy in its annual report.

Efforts at comment from Massy Trinidad were unsuccessful. Warner was said to be in meetings, and email queries were unanswered. Peter Graham, who headed up the Jamaican operations, told the Financial Gleaner he resigned as country manager late last year.

Massy, through its Gaspro brand which it acquired from marketing company Shell in 2006, is a major supplier in Jamaica of liquefied petroleum gas, or LPG.

Consumers and businesses use LPG for cooking, but it is also evolving as a fuel source for motor vehicles.

Industrial businesses use LPG to generate power for heating or power furnaces, and for generating power for engines such as turbines or forklifts.

New Fortress, an American company, supplies natural gas to power utility Jamaica Public Service Company and a growing list of business clients, including beer maker Red Stripe Jamaica. New Fortress is also about to deepen its market operation as an investor in an LNG-fuelled power plant being developed in Clarendon to supply Jamalco and JPS, which means it will become an off-taker of its own gas.

The LNG company was not reached in time for comment on the status of talks, if any, with either Massy or any other potential reseller.

Massy stated that its gas volume sales in Jamaica have grown 6.8 per cent year on year. In the consumer segment, it expects to grow its local market share despite acknowledging increased competition and aggressive pricing.

Massy gas is also contending with changing consumer preferences, and the continuing trend towards purchasing “prepared meals” rather than cooking at home.

“To counter these challenges, we have introduced a lower-cost ‘fighter’ brand to compete more effectively on price; and we have increased our promotional activities, and are working with our dealers to provide targeted incentives for them to sell Massy LPG more aggressively,” the company said.

At year ending September 2019, Massy Jamaica’s gas took in revenue of TT$280 million or $5.6 billion in local currency. This represented a 9.0 per cent fall in revenue from the TT$308 million in 2018, according to the previous year’s annual report.

The Jamaica operations on a whole, which includes gas, IT and other services, earned TT$683 million ($13.7 billion) in revenue in 2019. Revenue was flat year on year but net earnings at TT$77 million ($1.5 billion) reflected growth of 11 per cent at the bottom line.

Revenue for Massy Holdings was flat at TT$11.95 billion. The group earns 40 per cent of its revenue from Trinidad & Tobago, 33 per cent from Barbados and the Eastern Caribbean, 12 per cent from Colombia, 8.0 per cent from Guyana, 6.0 per cent from Jamaica, and 1.0 per cent from other regions.

The group’s gas division earned TT$1.2 billion in annual revenue and TT$241 million in profit before tax in 2019.

steven.jackson@gleanerjm.com