Much has been made of the “non tax” revenue raised in fiscal 2016. As always, one has to drill deep behind any data to get the true picture.
The Review of the Economy (ROTE) reveals that in 2016, the Ministry of Finance collected $15.75 billion in non tax revenue and capital revenue.
This was broken down into $11.83 billion in non-tax revenue and $3.91 billion in capital revenue.
The question is what was behind these large numbers in 2016. The largest contributor to non-tax revenue are profits from State Enterprises. This accounted for $5.16 billion or 44 per cent of all non-tax revenue. This includes dividends arising out of the August/September 2015 Initial Public Offering (IPO) of TTNGL.
This IPO had its genesis in the August 2013 acquisition by the NGC of Conoco Phillips’ 39 per cent of Phoenix Park Gas Processors Limited.
On the day, the acquisition was announced, I said that all or part of the 39 per cent would be made available to the public. It was a vision born of the need to see the link between the financial and energy sectors strengthened.
It was a vision grounded in the desire to see the paradigm of ownership in the energy sector changed.
Against all the odds and in the face of criticism galore the TTNGL IPO happened. History will record that it was roundly condemned by the PNM in Opposition who described it as a “fire sale.”
Almost two years later the critics and naysayers are silent. There is silence too around the FCB APO which seems to be a damp squib.
The TTNGL IPO would go on to raise about $1.5 billion for the NGC. This would have been paid as a dividend to the Government and would thus constitute non-tax revenue that was recognised in fiscal 2016.
So, the wonderful non tax figure in fiscal 2016 contains monies related to the TTNGL IPO.
Another significant contributor to non-tax revenue in 2016 was “repayment from past lending.” This figure is $2.68 billion or 22 per cent of non-tax revenue.
This would include monies repaid by Trinidad Generation Unlimited (TGU) to the Government. In February 2016, the Minister of Finance, in response to a question, informed the Senate that TGU had repaid the Government US$300 million and had another US$251 million outstanding.
In January of this year, Chairman of TGU David D’Andrade said “TGU has repaid its ultimate shareholder, GoRTT, all the advances incurred as debt for the construction of the power facility totalling US$554 million or $3.8 billion Trinidad and Tobago dollars via a series of short-term loan facilities.”
It was reported that TGU later borrowed US$600 million to retire two short-term secured loan facilities and to complete the repayment of the advances made by the Government.
Work on all this started under the former Government.
This brings me to another point that must now be clarified. A matter which has been raised on several occasions is the $1.8 billion T&TEC loan where the Minister of Finance has stated, inter alia, that the former Government burdened the Treasury with short term loans.
The facts are that the Government had called on TGU to repay part of the US$740 million loaned to it by the Government for the construction of the 720 megawatt power plant at Union Industrial Estate in La Brea.
TGU could not raise money to repay the Government as it was carrying a huge “accounts receivable” (representing funds owed to it by T&TEC) on its balance sheet.
T&TEC therefore had to pay off TGU. To do that T&TEC took a loan from Republic Bank Limited (RBL).
This loan paved the way for TGU to borrow to pay back the Government and by extension boost non tax revenue in fiscal 2016.
Without this loan, a substantial part of the non tax revenue which came in to the Government in 2016 would not have been possible.
The loan which T&TEC raised was originally structured as a long-term US dollar loan.
The lender, through no fault of their own, needed more time to raise the funds on a long term basis in US dollars.
It was agreed that they would therefore provide a short-term TT$ loan for the equivalent amount and when the long term US$ loan was raised, the proceeds would be sold to the Central Bank, which would have increased US$ reserves and the TT$ proceeds would have been used to pay off the short term TT$ loan. This arrangement was reported in the Business Guardian on Sunday August 23, 2015.
Therefore, the figure reported as non tax revenue collected in 2016 is made up of two significant items related to the energy sector—TTNGL and TGU.
Moving forward, in his last budget speech, the Minister of Finance has promised to divest 20 per cent of TGU to pension funds. He told us that he expected to raise $600 million from that divestment.
We are at the midpoint of the 2017 financial year and we are yet to hear about this initiative.
I agree with the editor of the Business Guardian that the Minister can only go on extracting between $14 and $16 billion in non-tax and capital revenues for so long. The reality is that a point will soon arrive when this is no longer possible.
