TTNGL: Is It A Fair Deal?

28 August 2015

150828 TTNGL Valuation - Logo







Note to reader: Throughout this analysis, you can click on the images to enlarge them.

Trinidad and Tobago NGL Limited (TTNGL) was incorporated on September 13, 2013. At present TTNGL is wholly owned by the National Gas Company of Trinidad & Tobago Limited (NGC).

TTNGL’s primary purpose is to hold NGC’s 39% shareholding in Phoenix Park Gas Processors Limited (PPGPL) acquired from ConocoPhillips T&T Holdings Inc in August 2013. As per the Government of the Republic of Trinidad & Tobago (GORTT) mandate to expand public investment opportunities via the stock exchange NGC is proposing an Initial Public Offering (IPO) for 49% of the company’s share capital.

Securities being offered

NGC is offering 75,852,000 Class B shares in TTNGL to the public at a price of TT$20.00 per share. In total TTNGL has in issue 38,700,000 Class A shares and 116,100,000 Class B shares. The Class A and B shares are subject to the same rights, privileges, restrictions, and conditions except for the right to appoint the Company’s Directors.

Post IPO the ownership structure of TTNGL and the underlying asset PPGPL would show as per figure 1:-

Figure 1 – Ownership Structure of TTNGL & PPGPL Post IPO

150828 TTNGL Valuation Discussion Figure 1






As seen above the driver of TTNGL’s value is its investment in PPGPL.

PPGPL Analysis

PPGPL’s core business consists of natural gas processing and exporting natural gas liquids (NGLs). It is the largest producer and marketer of propane, mixed butane, isobutene and natural gasoline in T&T. PPGPL’s three (3) major revenue streams include:-

  1. The processing of wet gas supplied by NGC and Petrotrin
  2. The fractionation of NGLs purchased from Atlantic LNG (ALNG)
  3. The provision of processing capacity to ALNG and Petrotrin

Effectively PPGPL is owned by four (4) state entities as shown in Table 1 below:-

Table 1 – PPGPL Share Ownership Structure

150828 TTNGL Valuation Discussion Table 1




Key PPGPL Risk Factors Read more…

TTNGL DIVIDENDS: Now you see them, then you…won’t?

27 August 2015

I want to tell you a story…

On the 24th March 2014 a small recently formed company with big aspirations made an investment in a gas processing plant located in the Republic of Trinidad and Tobago.

The company – Trinidad and Tobago NGL Limited (TTNGL) – through a complex transaction beyond the scope of this blog entry acquired a 39% ownership interest in the shares of Phoenix Park Gas Processors Limited (PPGPL) for $3,870,000 (all figures in this blog entry are rounded to the nearest thousand Trinidad and Tobago dollars).

TTNGL recorded the investment in PPGPL in its balance sheet at a value of $3,870,000 treating it as a joint venture.

Everything seemed to be going well…or was it?

Things can get a little technical – try not to lose the plot!

This is a complex story, and to understand it fully you have to have a basic understanding of how joint ventures are accounted for in accordance with International Financial Reporting Standards (IFRS and sometimes also referred to as IAS). It also helps if you have some understanding of Trinidad and Tobago’s Companies Act.

Don’t worry. As we go through the story we will try to explain what you need to know.

How TTNGL accounts for dividend income from PPGPL

Anyone who makes an investment (or at least a good investment) expects something in return. For TTNGL that return (hopefully) comes in the form of regular dividends paid by PPGPL.

For the purposes of our story let us assume that TTNGL’s share of PPGPL’s dividend for the year ended 31st December 2014 was $336,191.

When PPGPL declares a dividend TTNGL reflects that dividend in its accounts through the following double entry:

Debit:     Dividend receivable 336,191 (creates debtor in balance sheet)

Credit:   Investment in joint venture 336,191 (dividend deducted from cost of original investment in balance sheet)

Both of these entries are recorded in the balance sheet of TTNGL.

When PPGPL pays a dividend then TTNGL has to reflect the receipt of the cash in its accounts through the following double entry:

Debit:   Cash 336,191 (recording receipt of cash to the bank account)

Credit: Dividend receivable 336,191 (cancelling the debtor in the balance sheet)

Both of these entries are also in the balance sheet. In other words we have not accounted for any of the dividend income in the profit and loss of TTNGL.

So far so good? Are you keeping up? Read more…


20 August 2015

Who are TTNGL?

Trinidad and Tobago NGL Limited (TTNGL) was incorporated in the Republic of Trinidad and Tobago on the 13th September 2013 and acts as an investment holding company following its acquisition of 39% of the share capital of Phoenix Park Gas Processors Limited (PPGPL) in the form of class B shares.
The PPGPL shares that were acquired by TTNGL were previously held by Trinidad and Tobago Holdings LLC, the sole shareholder of which was the National Gas Company of Trinidad and Tobago Limited (NGC).
TTNGL is currently a wholly owned subsidiary of NGC which is itself owned by the Government of the Republic of Trinidad and Tobago (GORTT).
Pursuant to a mandate issued by GORTT, NGC is on the verge of offering 49% of its total 39% ownership in PPGPL to investors in Trinidad and Tobago through a public offering of class B shares in TTNGL.
As at 31st December 2014 TTNGL’s investment in PPGPL represented 93% of the total net assets of TTNGL.
TTNGL prepare its accounts annually expressed in Trinidad and Tobago dollars.

Who are PPGPL?

PPGPL was incorporated in the Republic of Trinidad and Tobago in May 1989 and operates one of the largest gas processing facilities in the Americas.
From its plant located in the heart of Trinidad and Tobago’s petrochemical sector at Point Lisas PPGPL provides clean  natural gas of a high quality to its customers by processing wet natural gas.
Processing involves the extraction of natural gas liquids (NGL’s). Processed natural gas is delivered by PPGPL’s customers to downstream facilities that use it as a feedstock.
PPGPL  fractionates the extracted NGL’s into propane, butane, and natural gasoline. Both the propane and the butane are marketed in the Caribbean and Central America principally via Trafigura, and the natural gasoline is marketed internationally via Glencore.
PPGPL prepare its accounts annually expressed in United States dollars.

How TTNGL accounts for its investment in PPGPL

TTNGL has a 39% investment in PPGPL and accounts for this investment as a joint venture.
Effectively a joint venture is a joint arrangement whereby the parties involved in the venture have rights to the net assets of the joint arrangement depending upon the size of their shareholding relative to the total share capital issued and the size of the other shareholdings within the venture.
Since TTNGL does not exercise control over PPGPL (a shareholding of greater than 50% would be required to achieve control) TTNGL accounts for its investment in PPGPL using the equity method of accounting.

What is the equity method of accounting?

Under the equity method TTNGL begins as a baseline with the cost of its original investment in the PPGPL. Then in subsequent accounting periods TTNGL will recognise its share of the earnings or losses of PPGPL.
TTNGL recognises its share of PPGPL’s profits or losses as an adjustment to the value of its original investment as recorded on its balance sheet, and also in the in its income and expenditure account.
The share of the PPGPL’s earnings that TTNGL recognises is calculated based on TTNGL’s ownership percentage (39%) of the PPGPL’s ordinary shares.
When TTNGL calculates its share of the PPGPL’s earnings it has to take account of the dividends that it has already received from PPGPL. The dividends received are deducted from the carrying amount of TTNGL’s investment in PPGPL as recorded in the accounts of TTNGL.
The value of the investment in PPGPL recorded in the balance sheet of TTNGL has to be tested annually for impairment. Read more…


17 August 2015

In the week since the prospectus for TTNGL has been released, there has been intense discussion regarding the initial public offering, ranging from valuation concerns to questions about revenue and profitability, among others.

All of these concerns and questions are valid, and must be carefully considered by investors before arriving at an investment decision.

Firstline made a recommendation that TTNGL is an appealing investment for investors with capital allocated to take on additional moderate (and by extension, higher) risk, and who are prepared to weather some short term volatility and temporary downside in exchange for attractive dividends relative to other available options.

Therefore, if you have set aside $100 to invest in PPGPL under the assumption that it is a “safe” investment inoculated from global commodities prices fluctuations, then it may well be time to revisit the amount of money you initially planned to allocate and invest. The new amount might be $20 or $ 50 as opposed to $100. In other words:  the amount you allocate directly correlates with your risk tolerance, time horizon, existing portfolio composition and exposure, and ability to absorb any short term volatility.

Additionally, we are unlikely to see the immediate sharp pop up in values that we saw with FIRST. Nevertheless, this does not take away from some of the positives of TTNGL, which must also be considered along with the risks.

Profitability Outlook

MB Average 2014 and 2015 prices

Like most other energy related commodities, LPG (propane and butane) and gasoline have taken a beating in 2014 and 2015.
At Firstline we were only able to obtain market prices for PPGPL’s commodities from late February 2014 through August 14th 2015. Based on the average 2014 prices from the dataset, and the average 2015 prices year to date, there have been declines of between 42% and 52% in the prices of PPGPL commodities. Read more…


11 August 2015

Last June, based on publicly available information, we conducted a basic analysis and valuation of Phoenix Park Gas Processors Limited (“PPGPL”), which was slated to offer shares to the public later in the year. Over a year later, the initial public offering is officially underway as of 11:00 a.m. today, August 10th, 2015.

Now that we have a prospectus and financials in hand, we can conduct a quick but informed valuation of Trinidad and Tobago NGL Ltd (“TTNGL”), the vehicle which is being listed on the TTSE.

The phrase “What a difference a year makes” has never been more appropriate. In the interceding period, West Texas Intermediate crude oil prices have collapsed from over USD 100 per barrel, to USD 43.75 per barrel (as of August 7th, 2015). The same has largely held true for propane, butane and natural gasoline, which are the three commodities that PPGPL produces using natural gas as its feedstock. But what impact has it had on PPGPL? How much does it actually decrease the attractiveness or increase the risk of the investment in TTNGL? In short, what difference does a year make?

Read more…