Thursday 22nd December 2005


Financing still problem for local energy company

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Dr Jim Lee Young

Photo: Keith Matthews


After four years of being the voice of the South Chamber, Dr Jim Lee Young seemed to have dropped out of the public eye.

While he still moves around in energy circles and frequents conferences, these days his time is divided between fixing up his new boat and propelling his new company, Ten Degrees North Energy Ltd (TDN).

The former chamber president says both enterprises have been challenging this year. But, while his boat still has some issues to be worked out, he has managed to get his company off the ground.

A far cry from the frequent media appearances he was expected to make as chamber president, Lee Young says he was always expected to have the answers at his fingertips and be on call for the media’s many questions.

“It’s quite relaxing now,” he admits, “It’s great. Nobody is harassing me. I’ve just faded into the woodwork and am enjoying it.”

He says there were some challenges but his most significant accomplishment as chamber president was, “giving it the new focus and direction. I think the chamber lost its way and direction and the new council managed to give it that new start and started delivering value to our members.”

Time has slowed for Lee Young, who pointed out that he travelled to the UK nine times last year compared to just once this year.

These days, his spare time is spent on his new boat where Lee Young, with his two sons in tow, hit the water on a regular basis.

“I do water sports: diving, windsurfing, deep-sea fishing, water-skiing. I just love being in the water,” he says.

“I’ve always grown up near the sea and when I came back to Trinidad in 1999, the opportunity was there to get back into boating,” he says.

Lee Young, 42, grew up in Point Fortin. He was awarded a Trintoc scholarship to study civil engineering at Imperial College in England which he followed by finishing his PhD in coastal engineering at Cambridge University.

“It’s different challenges; the boat tends to be a lot more physical and the company more mental, intellectual,” he says.

Representing TDN, he delivered a presentation titled, “Local private sector: Upstream and Other Opportunities,” at the Energy Caribbean conference held at Crowne Plaza last week.

He said that would be one of his last public appearances as his focus was now on the company and making it a success.

TDN was formed when Venture Production, the Scotland-based company, agreed to sell 60 per cent of its local operations to its former T&T general manager, Lee Young, and Bruce Dingwall, a founder and former chief executive of Venture.

Venture Production received US$11 million, US$10 million in convertible sub-ordinated notes and 9,000 shares for its 40 per cent stake in TDN.

Forming a energy company in resource-rich Trinidad should have been easy, but it wasn’t.

Lee Young admits that if he had to repeat the process, he would have traversed a different route.

Small companies face significant challenges—access to capital, existing asset base has limited growth opportunities, rising cost base, access to skilled labour, access to technology and a poor reputation.

At the start, he recalled, financial institutions were very interested. That soon dissolved.

Energy funds were set up, but few were willing to take the plunge, he says.

“Things are improving, but banks are still failing in their understanding of the sector,” he notes.

He said he had secured the capital of three financial institutions. Two bailed at the last minute, which left Guardian Holdings Ltd.

Lee Young, TDN’s chief executive and Dingwall own 35.6 per cent of the new company, while local financial services giant, Guardian Holdings and other local private investors, own 24.4 per cent with the remaining 40 per cent of the company held by Venture Production.

He said access to capital is a problem often experienced by indigenous energy service companies and independents and he was disappointed by the outcome.

“For a long time, the Government and financial institutions have talked about greater participation in the local

energy sector, but they aren’t willing to take risks,” he says.

He notes that historically there has not been a lot of investment in the local upstream sector and while there is significant liquidity, there are too few local investment opportunities.

“Local capital markets are still very undeveloped. There is a very poor understanding of risks versus reward,” he states.

Lee Young said local independents usually looked to foreign stock exchanges, such as Toronto, to raise equity because the investing public in North America and London is far more sophisticated and recognises the high returns that are possible with investments in the upstream sector.

“All that’s changed is the name and the ownership, but the Venture assets remain the same,” says Lee Young.

When the company was first announced in 2004, Lee Young had said the acquisition represented a tremendous opportunity for participation in the upstream energy sector.

“The assets that TDN are acquiring have significant remaining potential and we believe that a local T&T-funded and managed company will be best placed to unlock this potential.

“In addition, we believe that TDN will be optimally placed in the local marketplace to access new opportunities with local and international partners,” he said at the time.

Lee Young said he welcomed the fact that Venture will continue to be a significant shareholder “as this demonstrates confidence in the underlying strategy, the management team and in the assets to deliver significant value to all our shareholders.”

He explained to the Business Guardian that Venture does not have any direct operational involvement in TDN’s operations as its focus is on expanding its United Kingdom continental shelf business.

“TDN is about creating value for its shareholders,” he says.

The company’s daily average net production of oil equivalent for 2005 is expected to be 1,300 barrels a day.

It has proven and probable reserves of 8.2 million barrels of oil equivalent, almost entirely oil, more than 70 per cent of which are underdeveloped.

He said while the company is small, there are significantly lower overheads than the larger companies so they can easily recognise a profit.

He said TDN wouldn’t sit on its laurels. It’s looking at bidding, in partnership with other companies, at two new blocks in the deep Atlantic, which would be auctioned off to begin exploration at the end of the first quarter of 2006.




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