'Building
his empire the Julien way'
Trinidad Express
Port
Spain
Petroleumworldtt.com
12 10 06
His
critics say he built an empire by doing things the
Ken Julien way -energy, divestment deals in the
utilities sector and now education. His supporters
argue that it is the only way to get things done.
But as this Sunday Express review of projects shows,
the Julien way of doing business comes at a price-lack
of public accountability.
Brighton,
La Brea Industrial Estate-1992 to 1995
Prof
Ken Julien played a pivotal role in the aborted
Brighton/La Brea project. The then chairman of the
State-owned National Gas Company (NGC) and Atlantic
LNG, Julien pushed ahead with a US$1 billion liquefied
natural gas (LNG) plant in Brighton on the sole
basis of a preliminary geotechnical study done by
his old firm, Trintoplan Consultants.
He
committed taxpayers to a $256 million bill on infrastructure
works despite early warnings from the World Bank
that the project was headed for an expensive false
start. The World Bank wrote to the Manning administration
in July 1993, with a request for "a more detailed
geotechnical analysis of the site".
The
then government and State gas company instead pushed
ahead with site preparations, spending millions
of dollars more in upgrading and paving roads, re-plugging
leaking oil wells and staying with the schedule
of infrastructural works on the shifting and unstable
asphaltic sub-soil of the La Brea terrain.
But
the Manning administration-Julien vision of turning
the arid, depressed south-western region into a
heavy gas-based industrial estate would darken in
September 1995 when international oil giant, Amoco
pulled out following receipt of a secretly-commissioned
study by a crack-team of company experts from Houston.
The
Amoco study provided the hard evidence that heavy
industrial investment in La Brea could be very risky
business, financially and at the risk of endangering
lives. The report was mindful of the difficulty
of making the area, the location of disused oil
and gas wells, free of hydrocarbons. Amoco was warned
against even continuing well-remediation works at
La Brea.
The
report was firm that leaking wells and natural oil
seeps will continue to be a constant source of pollution
for any development in La Brea. The Amoco report
which gave the site the thumbs down was quietly
shelved. And when Farmland MissChem pulled up stakes
on the original preferred 400-acre site, weeks after
the Atlantic LNG pull-out, NGC offered the company
a US$3.5 million inducement to stay in La Brea.
Farmland would finally quit La Brea in April 1996,
but after it had ripped up a prized 100-acre, nine-hole
Brighton golf course.
The
political blow-out was immense. A nine-member probe
team appointed by the new Basdeo Panday administration,
lay heavy blame on Julien and former Prime Minister
Patrick Manning. The December 1996 report of the
Imtiaz Hosein team of investigators, found that
Julien ignored the warnings and reservations of
several independent bodies, among them, the World
Bank, Trintoc, Amoco and British Gas.
The
report said it found Julien's statement that maximum
government expenditure was anticipated on Brighton
"without any attempt at quantification to be
disturbing". Julien refused the committee's
formal request for a meeting, responding that "he
was occupied at the time". In noting the enormous
trust placed by the Manning administration in "the
NGC chairman" the Hosein report said it was
both "dangerous and strategically wrong to
repose that level of confidence in any single individual
or company".
It
was also sharply critical of the Trintoplan study.
The firm which Prof. Julien once chaired gave La
Brea the all clear in November 1992, citing the
deep water harbor as a major advantage. But the
World Bank found the preliminary study, which the
Manning administration relied on completely when
it took a December 1994 cabinet decision to go into
La Brea, was less than adequate. Trintoplan is the
firm which Dr Lenny Saith quit as managing director
to take up the job of Planning Minister in the Manning
Cabinet after the 1991 election.
Severn Trent and WASA-1994
to 1995
There were early questions over the selection process
of the State-owned water company's preferred partner,
Severn Trent.
A
nasty pollution incident in Britain landed the company
in hot water, in the UK, where it was hauled before
the courts, and in Trinidad, where the issue of
competence became a public relations exercise in
damage control.
Severn
Trent was ordered to pay well over TT$1 million
in fines and costs in what was then described as
Britain's worst water pollution incident in a decade.
The company was fined on three charges of supplying
contaminated water to customers in Worcester.
The
waters would get murkier yet with the opening of
a third envelope in the bid evaluation process which
gave Severn Trent the lead over rivals bidding to
partner up with a cash-poor, inefficient Water and
Sewerage Company (WASA).
Up
until the third envelope, the French firm, Lyonnaise
Des Eau (LDe E) was the first ranked company. Lyonnaise
was way ahead on the technical proposal and was
trailing Severn Trent by a marginal .6 on the financial
restructuring of the cash-strapped utility when
the evaluation team opted to go for the third envelope-a
supplementary proposal dealing with the supply of
industrial water, in the main, to the proposed La
Brea development project.That third envelope, according
to the evaluation team, gave Severn Trent the edge.
But objectors would point to a link between WASA's
privatization and the proposed US$1 billion LNG
plant at La Brea in which British Gas was a major
player. It turned out that Severn Trent and British
Gas shared a common director in the person of Roger
Boissier. More questions were raised about the evaluation
process of bids for the lucrative management contract
at WASA.
But
the man leading a six-member Cabinet-appointed due
diligence team, Prof Ken Julien, gave WASA's preferred
partner an upbeat rating in every category of performance.
Julien, the then Water Task Force chairman and chairman
of the negotiating team led the probe team on a
mission to Birmingham to investigate Severn Trent's
operations.
The
Julien-led government probers, produced a 60-page
trip report on its June 18 to 30, 1995 examination
of Severn Trent's operations. The probe team reported
that: "Severn Trent has the required systems,
experience and personnel which, if made available
(with the necessary level of funding), can lead
to a dramatic improvement in the water and waste
treatment facilities of Trinidad and Tobago."
The report also noted that "the team used the
opportunity to move the negotiations forward."
In
the end, Severn Trent got the management contract
short days before the 1995 general elections but
failed to deliver on the major objectives.
T&TEC and the sale of generation
assets-1994
The divestment was sold by the Manning administration
as a bail-out deal that would fix all of T&TEC's
financial troubles. Instead, it made the utility
poor and PowerGen very rich.
Manning
backers assured the country that the sale of 49
per cent of T&TEC's generating assets would
take the struggling electric company out of a black
hole, but in 1997, when T&TEC applied for a
rate increase, it made public the fact that it was
still saddled with accumulated losses of $729.6
million and unable to pay its gas bill.
Desperately
seeking a 22.7 per cent rate hike from industrial
customers, T&TEC made public the dismal state
of its accounts -an outstanding $189 million debt
owed to the National Gas Company and consistent
post-privatisation losses. "T&TEC is financially
strapped," was how the utility's then general
manager Stanley Ottley put it.
The
generating assets were hived off in December 1994
for $625 million to a joint venture consortium comprising
Southern International Electric (SEI) and Amoco.
It was the last and second year that T&TEC made
a profit, according to the information filed in
the Ottley bid to get a rate increase. In 1993,
the utility had made a small profit of $6 million.
That figure rose to a respectable $26 million in
1994.
But
a year later, T&TEC made a dismal $110.7 million
loss inclusive of its 51 per cent share of PowerGen's
profits or $56.2 million worth of dividends, PowerGen,
however, made an after-tax profit of $112 million
in 1995. In 1996, T&TEC lost another $91.8 million
inclusive of its $95.2 million dividend income from
PowerGen, which raked in a before-tax profit of
$270 million.
The
electric company is contractually bound to provide
free natural gas to PowerGen but has been forced
to pay more for the electricity it purchases from
the multinational company. In 1995 T&TEC paid
PowerGen $629.3 million for electricty. A year later,
that cost went up to $679.2 million. The gas purchase
arrangement was criticized by the unions as "obscene."
Amoco Trinidad, a principal supplier of natural
gas to the NGC (of which Julien was chairman at
the time), is a joint venture partner in PowerGen.
Southern Electric, the other joint venture partner,
was commissioned by Prof. Ken Julien in the 80s
to review T&TEC's operations.
Julien
would later emerge as head of a government-appointed
task force (by the Manning administration - 1991
to 1995) to examine the generation requirement of
T&TEC to the year 2000. The task force recommended
divestment.
The Iscott divestment-1994
Ken Julien is the man who pushed through government's
vision (Dr Eric Williams administration) to build
a $460 million iron and steel plant in Point Lisas
in the late 70s. The Iron and Steel Co of Trinidad
and Tobago Ltd (ISCOTT) started operations in 1980
with the promise of fat returns. But it was a promise
that turned sour. The government never made a penny
in the steel-making deal which gobbled taxpayers
dollars faster than the Ministry of Finance could
find and or release it.
Julien
was chairman from the plant's inception in 1977
to 1986, until the PNM's defeat at the polls by
the National Alliance for Reconstruction (NAR).
The plant was sold on the cheap to Lakshmi Mittal,
who built a steel empire by picking up financially
troubled state-run steel mills from auction blocks
around the world.
He
got his first bite into ISCOTT in 1988 in a lease
arrangement deal signed by then Trade Minister Ken
Gordon. Mittal got a 10 year lease at US$11 million
a year with a buy-out option after five years. The
State would sink more than TT$2.7 billion into the
loss making steel plant to cover debt repayment
obligations. At the end of 1988, the company's accumalated
loss stood at $2.2 billion.
When
the Indian steelmaker went into Pt Lisas, Ispat
found a limping white elephant with underperforming
mills losing about TT$1 million a day. In the first
year of operations, the Ispat-run steel mill made
its first profit. Mittal bought out ISCOTT's operations
in December 1994 for US$70.05 million. The Manning
government had stripped all of the debt giving Mittal
a clean balance sheet. Ispat has been making money
since.
Trinidad
Express
Sunday, December 10th 2006
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