By Dennise Williams, Staff ReporterLAST WEEK, Wednesday Business reported that the Petroleum Company of Jamaica (Petcom) was close to being divested. The Minister of Commerce, Industry and Technology, Phillip Paulwell has confirmed this report.
Minister Paulwell revealed that he has had several offers from private individuals, including senior managers of Petcom and is even considering a proposal to list Petcom on the Jamaica Stock Exchange (JSE). States Minister Paulwell, "Our timeline will in the month of May to provide Cabinet with a proposal for divestment."
Sources close to Government tell Wednesday Business that if the firm is not listed on the JSE, but sold to the private sector, offers of less than $500 million will not be considered. States Minister Paulwell, "The truth is that the Government has decided to sell its holdings in Petcom." As revealed by the National Investment Bank of Jamaica (NIBJ), the Government is the holder of 100 per cent of the shares in Petcom. The Minister continues, "We have been approached by a number of interested groups including multinational firms and a group of local persons who have experience in the industry. Additionally, we have received an offer from individuals who are working with the existing operators of Petcom and offers from senior staff members of Pet-com. I have asked the board of Pet-com to make a recommendation for me to take to Cabinet."
While the Minister stated that Cabinet would take a decision on the best way to divest Petcom, "There are fundamental principles of divestment that will be adhered to. We do not want to minimise the level of competition." Specifically, Minister Paulwell warned that offers containing plans for the closure of Petcom stations will not be considered.
However, another idea on the table would be to allow the Jamaican investing public to become owners of Petcom. States Minister Paulwell, "One of the options we are looking at is listing the company on the JSE. I have asked the board to look at that option." But would the investing public want to buy Petcom shares? The experts think so.
Leo Williams, managing director of Jamaica Money Market Brokers (JMMB) securities, says yes, within certain parameters. States Mr. Williams, "I think that the brokerage company that sells the shares for the Government would have to really tell the story of how a petroleum company is run so that the public will understand what they are really getting into. The consumer has to understand that oil is a commodity affected by outside forces like OPEC, interest rates, and the capital requirements needed to distribute oil." The management of Petcom also has to be considered."
PUBLIC SCRUTINY
Mr. Williams asks, "Is the company in a position to go public? Is the management ready to work with the public? A Government entity that has not had to answer to external queries might have a difficult transition to public scrutiny. They would need to ramp up in their ability to interact with investors large and small." However, Mr. Williams believes that the Petcom stock would be more attractive to institution investors and pension funds that would have the time to properly analyse the firm.
Keith Collister, business development manager at First Global Financial Services believes that once the economy remains on track and interest rates stay low, "That this year will be the year of Initial Public Offerings. People will want to invest in a new company and this creates a good environment for Petcom to list."
And Minister Paulwell agrees. "With the confidence in the Jamaican economy shown by the growth of the JSE and the expansion in economy, I think it might be useful to get ordinary Jamaicans to purchase into the company through the stock exchange. Petcom was formed in the 1970s by the Government to protect consumers. Minister Paulwell states that the Government has not abandoned this idea. Minister Paulwell states, "Petcom was originally formed to prevent price gouging. That was a feature at the time by the multinationals operating in Jamaica and so the Government stepped in to assist in moderating of the price increases at the time. In that period the multinationals were oligopolies. Now we have seven petroleum-marketing firms, up from the previous three. We also now have the Fair Competition Act to prevent price fixing."
