FINDING OPPORTUNITY IN TIMES OF TURBULENCE
Finding Opportunity in Times of Turbulence sector where layoffs are easier to effect. This further restricts a state enterprise’s ability to react to adverse revenue declines. Divestment is a solution that brings with it many opportunities for the right investors. These investors can improve the enterprises’ efficiency and productivity, which would result in a more profitable share to the government and a rewarding financial investment for the private sector. Whilst this was not clearly identified in the Budget Speech, it is certainly one solution for the State-run energy companies. Government has identified a number of companies for which it is seeking joint ventures or divestment. These include: • Industrial estates under the remit of Evolving Tecknologies Enterprise Development Company Ltd (eTecK). This will be an opportunity for any real estate development company or possibly a Real Estate Investment Trust (REIT) structure. • Trinidad Generation Unlimited – this definitely offers returns to a financial investor. It is well-known for its already efficient operations. • Strategic partners for Lake Asphalt, National Helicopters and others that have not attained their true potential. Most of these state enterprises can be restructured under the right ownership. They can be profitable and contribute through Value Added Tax (VAT) and corporation taxes without being a burden on the public purse. Public Private Partnership Opportunities Divestment of minority equity holdings through Additional Public Offerings is a start, but larger divestment of state enterprises or Public Private Partnerships are essential to fund the government’s deficit, which has been increasing. A major new tax incentive opens up exciting PPP possibilities in the agricultural sector. The Honourable Minister of Finance noted in his Budget presentation that the Government hoped to stimulate
40 • Business Trinidad & Tobago
Divestment Possibilities: The State’s portfolio comprises of 47 wholly-owned state enterprises, seven majority-owned and five minority positions for a total of 59 companies. the expansion of the agro-processing industry, especially in the coconut and cocoa industries, by introducing a tax free incentive whereby all approved agro-processing operations would be tax free, once at least 75 per cent of the ingredients and the processing of the agricultural products originated locally. Given the global demand for our cocoa, this industry will not only earn foreign exchange, but the tax free incentives provide a stronger business case for investment. Government will further facilitate the growth of the sector through a more efficient registry and approval process that would encourage the private sector to bring the capital to fund new projects. Significant PPP opportunities also lie in finishing and operationalising the Couva Children’s Hospital, and the financing and construction of government housing programmes and schools. Using the PPP model would enable government to get its capital and infrastructure programmes completed but partly financed and operated by the private sector. Corporate Opportunities A recessionary period also brings with it private opportunities. In difficult economic times, there is financial fallout for companies that are highly leveraged or cannot withstand the revenue declines. This results in the companies going into receivership. Receiverships provide assets only or operating companies without the liabilities, which offers a value purchase.
Given our work in the Restructuring and Receivership sector, we have seen the opportunities for local entrepreneurs to benefit from the value opportunities sometimes presented through a restructuring or receivership programme. For example, Roof Systems Ltd recently purchased the assets of GGI Ltd (in receivership) to increase its market share in the roofing and window manufacturing sector. Many successful companies have begun from receivership opportunities. In fact, the World Entrepreneur of the Year Winner 2015, Mohed Altrad, started his business with a nearly bankrupt company that now earns approximately US$1 billion in sales. It is all about finding the right opportunity and making it profitable. In tough economic times, companies are more willing to form strategic alliances and joint venture arrangements to assist with cost sharing and capital investments. When the recovery takes place, the restructured companies are stronger and more cost efficient. This gives rise to greater profitability and higher returns on investment for the investor who took the risk at a difficult time. In every doom and gloom situation there is a light of opportunity. It is up to investors to have the vision and determination to make it profitable. There is an abundance of opportunities and worthwhile profits awaiting the right investors in Trinidad and Tobago. www.ey.com/tt