10 REPORT OF THE2019/02/07 · o LASCO Bituminous Black Paint; Cationic Bitumen Emulsions; iii. Before the cessation of operations of the Petrotrin refinery, approximately eighty

10th Report, JSC State Enterprises – Lake Asphalt

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10th REPORT OF THE

on

An inquiry into the operations of Lake Asphalt

of Trinidad and Tobago (1978) Limited, and to

determine its effectiveness at fulfilling its

mandate.

July, 2019


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An electronic copy of this report can be found on the Parliament website:

www.ttparliament.org

The Joint Select Committee on State Enterprises Contact the Committees Unit Telephone: 624-7275 Extensions 2828/2309/2283, Fax: 625-4672 Email: [email protected]

mailto:[email protected]


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Joint Select Committee on State Enterprises

An inquiry into the operations of Lake Asphalt of

Trinidad and Tobago (1978) Limited, and to

determine its effectiveness at fulfilling its

mandate.

Tenth Report 2018/2019 Session, Eleventh Parliament

Report, together with Minutes

Ordered to be printed

Published on July 02, 2019

Date Laid

H.o.R: July 03, 2019

Date Laid

Senate: July 02, 2019


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The Joint Select Committee on State Enterprises

Establishment

1. The Joint Select Committee on State Enterprises was appointed pursuant to the directive

encapsulated at section 66A of the Constitution of the Republic of Trinidad and Tobago. The

House of Representatives and the Senate on Friday November 13, 2015 and Tuesday November

17, 2015, respectively agreed to a motion, which among other things, established this

Committee to inquire into and report to Parliament on State Enterprises falling under its

purview with regard to:

their administration;

the manner of exercise of their powers;

their methods of functioning; and

any criteria adopted by them in the exercise of their powers and functions.

Current Membership

2. The following Members were appointed to serve on the Committee:

Mr. Anthony Vieira

Dr. Lester Henry

Mrs. Cherrie-Ann Crichlow-Cockburn

Mr. Wade Mark

Mr. Fazal Karim

Brig. Gen. (Ret.) Ancil Antoine

Mr. Adrian Leonce

Mr. Garvin Simonette


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Powers

3. The Committee is one of the Departmental Select Committees, the powers of which are

set out principally in Senate Standing Orders 91 and 101, and HOR Standing Orders 101 and

111. These are available on the Internet via www.ttparliament.org.

Secretarial Support

4. Secretarial support was provided by Mr. Brian Caesar, Clerk of the Senate, who served

as Secretary to the Committee, Ms. Sheranne Samuel, Assistant Secretary, Mrs. Krystle Gittens,

Graduate Research Assistant and Ms. Safiyyah Shah, Graduate Research Assistant Intern.

Contacts

5. All correspondence should be addressed to the Secretary to the Joint Select Committee

on State Enterprises, Level 3, Tower D, Port of Spain International Waterfront Centre, 1A

Wrightson Road, Port of Spain. The telephone number for general enquiries is 624-7275; the

Committee’s email address is [email protected].

http://www.ttparliament.org/

mailto:[email protected]


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Table of Contents

GENERAL FINDINGS ......................................................................................................................... 6

SUMMARY OF RECOMMENDATIONS ...................................................................................... 11

REPORT SUMMARY ......................................................................................................................... 14

CHAPTER 1 .......................................................................................................................................... 15

1 INTRODUCTION ........................................................................................................................ 15

LITERATURE REVIEW AND BACKGROUND ......................................................................................................................... 15 ENTITY PROFILE .............................................................................................................................................................. 15

MISSION: ...................................................................................................................................................................... 17 VISION: ......................................................................................................................................................................... 17

PREVIOUS INQUIRIES INTO LAKE ASPHALT ......................................................................................................................... 17 SUGGESTED RATIONALE FOR THE INQUIRY ........................................................................................................................ 18 OBJECTIVES OF THE INQUIRY ........................................................................................................................................... 19 CONDUCT OF THE INQUIRY ............................................................................................................................................ 19

CHAPTER 2........................................................................................................................................... 21

2 KEY ISSUES, FINDINGS AND RECOMMENDATIONS .................................................. 21

3 CONCLUSION ............................................................................................................................... 30

APPENDICES........................................................................................................................................ 34

FRAMEWORK FOR STATE ENTERPRISE OPERATIONS ........................................................ 35

MINUTES OF PROCEEDINGS.......................................................................................................... 45

VERBATIM NOTES............................................................................................................................. 51

ATTENDANCE REGISTER ............................................................................................................... 91


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General Findings

During the inquiry, the Committee made the following findings:

i. The primary role of Lake Asphalt is to monetize the asphalt from the Pitch Lake

through the extraction, refining, processing and marketing of Trinidad Lake

Asphalt (TLA), asphalt cement and asphalt derivatives;

ii. Lake Asphalt’s products include:

60 / 70 Refinery Bitumen;

TLA;

The LASCO range of products:

o LASCO Auto Underbody Coat;

o LASCO Pipe Guard;

o LASCO Sealant;

o LASCO Bituminous Black Paint;

Cationic Bitumen Emulsions;

iii. Before the cessation of operations of the Petrotrin refinery, approximately eighty

(80%) percent of Lake Asphalt’s revenue was derived from the sale of bitumen;

iv. With the closure of Petrotrin, Lake Asphalt was forced to establish an alternative

arrangement for the supply of Bitumen;

As at the time of this Report, arrangements had been made to import

bitumen from Barbados;

However, the arrangement with Barbados would only benefits Lake

Asphalt with a Common External Tariff (CET) that makes market participation

by other international players uncompetitive;

A lowered CET exposes Lake Asphalt to the threat of market penetration

that international competitors may pose;

v. Nonetheless, despite the opening of the market to allow private contractors to

import bitumen, Lake Asphalt currently maintains the competitive advantage due

to its storage capacity;

vi. There are no established standards for bitumen used in Trinidad and Tobago;


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Lake Asphalt intends to develop a laboratory that will be used to assess

the performance grade of bitumen used for paving;

It is expected that the imported bitumen will be of a good quality;

vii. China is Lake Asphalt’s biggest client for TLA;

There is an existing distributorship relationship with Beijing Construction

Engineering Group Company Limited;

viii. Lake Asphalt’s current marketing strategies target China, Nigeria, and Ghana;

Establishment of distributors in the Middle East;

ix. The only roads in Trinidad and Tobago that are required to be paved using TLA

are highways and airports;

There is no paving standard set for other roads;

x. The advantages of using TLA:

Increased life cycle of the pavement to approximately 25 years (2.5 times

over regular bitumen);

The unique mineral component adds non-skid properties;

Increased stability and resistance to permanent deformation;

Decreased rate of aging;

Improved surface friction;

High resistance to cracks;

Ease of pigmentation;

Greater durability and better full-life cost performance;

Improved pavement load carrying;

A light coloured, safer surface;

Provides structural and durability improvements which lead to extended

pavement life;

xi. Challenges faced by Lake Asphalt include:

Loss of preferential access to bitumen (most recent challenge);

Low TLA sales due to a shift in global market preference to more

economical, synthetic modifiers;


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High operating costs;

Old plant and machinery;

Retention of key members of staff;

xii. Lake Asphalt’s TLA is currently priced at US$375-US$400 per metric tonne, which

only creates US$50 in profit;

Synthetic modifiers sell at US$275 per metric tonne and are currently

preferred by the market;

xiii. Lake Asphalt’s identified strategic pillars are:

Financial stability and sustainability;

Market development;

Operational efficiency;

Plant modernisation;

Organisational restructuring and culture change; and

Stakeholder engagement;

xiv. Current strategic objectives include:

Zero time lost due to accidents at the plant when compared with the

previous years;

Implementation of a Cold Milled TLA Plant;

o Over the years nothing has been done to make TLA marketable;

o Pellets were developed but are not suitable for storage in high heat as

they melt and coalesce;

o Powdered form of TLA has been developed and is currently being

patented;

o Powdered TLA will remove the challenges with storage of TLA for

shipment, as well as reduce the steps in the process for adding TLA as a

modifier to bitumen;

o An investment proposal for the Ministry of Energy and Energy

Industries is currently being drafted;


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o The proof of process for the Cold Milled TLA Plant has been developed

and plans for the plant have been completed;

o It is possible to have Cold Milled TLA available for the market by first

(1st) quarter next year (2020);

o Cold Milled TLA will give Lake Asphalt the market advantage, even

over producers of synthetic modifiers;

o Research and development is also being conducted to develop a

polymerized version;

xv. Lake Asphalt is moving towards a more mechanized organisation;

Excess labour that results from the mechanisation will be diverted to

production of the LASCO range of products;

The plant for production of the LASCO range of products requires upscaling

to meet market demand for the products;

Currently LASCO products are not marketed internationally;

Labour will also be used to ensure that the mill is running 24hrs a day;

xvi. Lake Asphalt’s future will require higher skilled individuals who are instrumental

in the creation of asphalt products for export, rather than just packaging the raw

extract;

xvii. There is an MOU in place between the University of the West Indies (UWI) and

Lake Asphalt to market two products developed by UWI, a vertical seam sealer,

and an anti-corrosive paint;

Apart from the involvement of the UWI, St Augustine campus in research

and development of asphalt products, no other tertiary level education

institutions have been involved in developing programmes that focus on the

development of the asphalt industry;

xviii. Lake Asphalt’s three to five (3-5) year plan will include partnerships with smaller

plants to boost output as demand for products increases;

xix. The Government’s investments in dry docking and ship repairs will benefit Lake

Asphalt;


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xx. Currently Lake Asphalt does not focus on developing and marketing for tourism

as that is not a part of its mandate, and therefore, tours to its facilities/plants are

organised by other organisations;

However, in the strategic plan, the consideration is to convert the current

Lake Asphalt plant into a museum when the Cold Milled TLA plant comes

into operation;

xxi. Lake Asphalt has outstanding Audited Financial Statements for the years 2014,

2015, and 2016, and is aiming to present them in 2019.

xxii. Over 80% of Lake Asphalt’s employees reside in La Brea and environs;

xxiii. A Systems Audit conducted by Corporation Sole in November 2016 found that

Lake Asphalt’s internal controls were weak and a recommendation was made for

a Forensic Audit;

Lake Asphalt’s factory operations

xxiv. Wagons are loaded onsite at the Pitch Lake:

There 10 wagons per rail;

Asphalt is extracted by ripping and shaving and loaded unto wagons;

There is one (1) metric tonne of asphalt per wagon;

xxv. Wagons are pulled directly to factory for distillation using a pulley system;

xxvi. Processing of raw asphalt takes sixteen (16) hours:

Melting;

Strained twice; and

Made into asphalt cement or packaged.

xxvii. Each drum of asphalt is one quarter (¼) tonne;

xxviii. As at February 18, 2019, Lake Asphalt had approximately twelve million (TT$12

million) dollars in inventory.


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Summary of Recommendations The following is a summary of the recommendations proposed by the Committee:

i. Lake Asphalt has untapped potential as a result of its unique operations and resources.

The company should conduct an Intellectual Property Audit to see what it has, what can

be exploited (for example: industrial designs and geographical indications) and where

there is potential for fruitful research and development.

ii. As TLA is unique to the Pitch Lake in La Brea, an application for a Geographical

Indication form of Intellectual Property Rights should be made. A Geographical

Indication will carry with it an assurance to consumers the any product labeled “TLA”

will have certain unique attributes.

iii. While the Committee is aware that Lake Asphalt is wary of overstepping its mandate by

engaging in activities that may compete with the tour operations conducted by

representatives of the Ministry of Tourism, it would be worthwhile to consider

establishing a museum and gift shop where visitors can get an informed tour (from

knowledgeable guides) of the sections of the Pitch Lake that are used for TLA extraction,

and the Lake Asphalt plant facilities.

iv. An additional consideration may be developing an area on the Lake Asphalt compound

that will function as a plaza with shops offering suitable refreshments and interesting

souvenirs (books, tee shirts, caps, and themed decorations and mementos), as well as

clean restrooms. This is standard fare in many factories all over the world and would

yield streams of income, while giving the place status and meaning, and most

importantly would offer self-sustainable employment for persons in and around La

Brea.

v. The development of such facilities may even have positive spillover effects for the

economy, for instance an astute tour operator could probably develop a number of


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different tour options, for example: just the Pitch Lake or one where the Pitch Lake is

part of a wider tour of interesting geographical sites such as the Devils Woodyard.

vi. In light of the limitations faced in developing new products and markets, a Research and

Development Unit should be formed and operationalised. This Unit should:

Be comprised of University Graduates who have demonstrated the ability to create

innovative and viable products;

Partner with local Universities to encourage students at the Graduate level to

engage in research relating to Bitumen; and

Seek to remain current with the latest technology in the field, to ensure that

profitability is improved and maintained.

vii. Lake Asphalt should conduct cost/benefit analyses to ensure that all products and

initiatives, old and new, are economically viable and tailored to current and potential

future market preferences, so as to maximise profits.

viii. In light of the opening of the market to the importation of bitumen by private

contractors, Lake Asphalt should amplify its competitive advantage by establishing a

laboratory that, perhaps twinned with a research facility like CARIRI, will be used to

test the performance grade of bitumen used for paving.

ix. An additional suggestion of the Committee is that in light of the impact that a lowered

CET poses to the viability of Lake Asphalt, consideration should be given by the

Minister of Energy and Energy Industries to engage in discussion with the Minister of

Trade and Industry concerning the possibility of the CARICOM Council for Trade and

Economic Development (COTED) to revisit the decision to lower the CET level for

bituminous products.


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x. In order to create stronger ties with tertiary level institutions, Lake Asphalt should

work along with its line Ministry to develop a scholarship programme that supports

product and systems research and development.

xi. In order to boost the skill level of current employees, Lake Asphalt should allow staff

to access incentives that encourage the improvement of knowledge/skills bases that

will benefit the company.

Robust policies for knowledge transfer and succession planning must also be

developed and implemented to undergird the sustainability of the company.

xii. Collaboration geared towards the optimal operation of the Cold Milled TLA plant

must be a key area of emphasis to ensure that the asset begins to provide a reasonable

and steady return on the significant investment made in its establishment.


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Report Summary

This report examines the operations of Lake Asphalt of Trinidad and Tobago (1978) Limited

(Lake Asphalt) with the objective of determining its effectiveness at:

i. fulfilling its mandate to provide superior quality asphalt and bituminous

products to the world in a socially and environmentally responsible manner; and

ii. supporting the policy objectives of the Ministry of Energy and Energy Industries.

The Committee finds that though Lake Asphalt at a first glance is achieving its mandate, certain

prevalent operational inefficiencies, combined with unsuitable product offerings, pose a

significant challenge to its future viability.

Recommendations proposed by the Joint Select Committee on State Enterprises are intended to

improve the efficiency and effectiveness of the operations of Lake Asphalt in order to drive the

company towards optimal profitability and sustainability.


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CHAPTER 1

1 Introduction

Literature Review and Background

1.1. The State Enterprises Performance Monitoring Manual outlines the framework within

which State Enterprises and the Minister of Finance (Corporation Sole) interact. It

defines:

i. the roles of the major interacting agencies involved in monitoring the State

Enterprise Sector;

ii. the Monitoring Mechanism;

iii. the Performance Monitoring Indicators applicable to the Sector;

iv. Compliance as well as the inputs for generating synergies within the Sector.

1.2. The rationale for this document is to facilitate the Government of the Republic of

Trinidad and Tobago (GORTT) thrust to enhance efficiency and effectiveness in the

State Enterprise sector.

1.3. This five-part manual is the result of extensive consultation with stakeholders and the

collaborative effort of officials of the State Enterprises and the Ministries1.

1.4. The Framework for State Enterprises Operations is attached at Appendix I.

Entity profile

1.5. Lake Asphalt is a fully State-Owned Company (100% GORTT) established by the

Companies Act, Chapter 81:01.

1 State Enterprises Performance Monitoring Manual, 2011: http://www.finance.gov.tt/wp-content/uploads/2013/11/State-Enterprise-

Performance-Monitoring-Manual-2011.pdf

http://www.finance.gov.tt/wp-content/uploads/2013/11/State-Enterprise-Performance-Monitoring-Manual-2011.pdf



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1.6. Trinidad Lake Asphalt (TLA) was used as a paving material from as early as 1815 when

it was used to pave the streets of Port of Spain. The intense commercialisation of the

product did not occur until 1888 when Trinidad Lake Asphalt Company was founded by

a group of American and British businessmen. From that time on, the used of TLA

increased rapidly, becoming the road surfacing material of choice.

1.7. Amidst the February Revolution or the Black Panther Movement, the movement of shares

of Trinidad Lake Asphalt Company came into local hands and a Board of Directors was

reconstituted.

1.8. In 1977, the Company’s bankers – Barclays Bank discontinued the Company’s credit line

thinking that TLA was no longer a viable business. Consequently the Company went into

receivership and was subsequently acquired by the Government.

1.9. In 1978, Lake Asphalt of Trinidad and Tobago was born and became a subsidiary of

TRINTOC. In 2002, Lake Asphalt became an independently vested State enterprise.

1.10. The primary role of Lake Asphalt is to monetize the asphalt from the Pitch Lake in La

Brea. The company is therefore involved in the extraction, refining, processing and

marketing of dried asphalt, cement and asphalt derivatives, and is also responsible for

managing of the Pitch Lake.

1.11. TLA, the company’s flagship product is recognised around the world as the superior

modifier for refinery bitumen and has been used on every continent in the world over the

past century in a number of applications including the paving of some of the largest

roadways, highways, bridge decks, racetracks and airport runways across the globe.

1.12. Lake Asphalt, with just over 200 employees, is one of largest earners of foreign exchange

in the twin island state of Trinidad and Tobago. 90% of the revenue from sales of its core

product, Trinidad Lake Asphalt (TLA) comes from export.


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1.13. In addition to TLA, the company manufactures a range of bitumen emulsions through a

State of the Art Bitumen Emulsion Plant, a line of asphalt based coating – the LASCO

range of products and refinery bitumen which it purchases from one of the country’s

leading petroleum companies.

Mission:

1.14. To provide superior quality asphalt and bituminous products to the world in a socially

and environmentally responsible manner.

Vision:

1.15. To maximize the value from our Natural Asphalt for Company, Community, and

Country.

Previous Inquiries into Lake Asphalt

1.16. During the Third Session of the Ninth Parliament of the Republic of Trinidad and Tobago,

the Public Accounts (Enterprises) Committee established to inquire into and report on

State bodies’ financial management of their resources, conducted an inquiry into Lake

Asphalt.

1.17. The following Key Recommendations were reported:

i. To establish a performance appraisal system aimed at properly assessing and evaluating

the performance of staff.

ii. To urgently introduce modern technologies aimed at generating greater levels of

efficiencies as well as facilitate a concomitant increase in productivity.

iii. To urgently reduce the number of creditors on the international market in order to

lower the accounts receivable.

iv. To urgently employ an Auditor who should be given the responsibility for auditing its

operations.


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v. To pursue a proper evaluation and assessment of Lake Asphalt (as soon as possible or

before the next five years), owing to a rapidly changing global environment.

vi. To develop an appropriate mechanism which would link the payment and reward of

bonuses to a system of productivity and efficiency.

1.18. No Ministerial Response to the abovementioned recommendations was laid.

Suggested Rationale for the Inquiry

1.19. Given the foregoing and taking into account the following:

i. The company is 100% State-owned;

ii. It is an opportune time to verify that Lake Asphalt is adhering to the framework

for operations as outlined in the State Enterprises Performance Monitoring

Manual;

iii. It is unclear whether Lake Asphalt is able to meet the demand for its

bituminous products; and

iv. It is unclear to what extent Lake Asphalt is achieving its mandate.

An inquiry into this entity seemed appropriate.


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Objectives of the Inquiry

i. To determine whether Lake Asphalt is adhering to the framework for operations

as outlined in the State Enterprises Performance Monitoring Manual;

ii. To determine whether Lake Asphalt is able to meet the demand for its bituminous products; and

iii. To determine whether Lake Asphalt is achieving its mandate as a State Enterprise.

Conduct of the Inquiry

1.20. At its 31st Meeting held on Monday October 29, 2018 the Committee agreed to conduct

an inquiry into Lake Asphalt.

1.21. On December 17, 2018 a public hearing was held with representatives of the Lake

Asphalt, Ministry of Energy and Energy Industries (MEEI), and the Ministry of

Finance- Investments Division, at which time the Committee questioned the officials

on the various matters in connection with the inquiry objectives set out.

Table 1

Persons who appeared and provided oral evidence

Name of Official Portfolio Organization

Public Hearing Held on December 17, 2018

Mr. Christopher John-Williams Chairman Lake Asphalt

Mr. Christopher Hagley Vice-Chairman Lake Asphalt

Ms. Claire Gomez-Miller Director Lake Asphalt

Mr. Stephen Mc Clashie Director Lake Asphalt

Mr. Roger Wiggins Chief Executive Officer Lake Asphalt


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1.22. Prior to the public hearing, a request for information on the general objectives of the

inquiry was sent to Lake Asphalt on October 31, 2018, and in response, written

submissions were received dated November 09 and 12, 2018. These responses

provided a frame of reference for the questions posed during the hearing.

1.23. During the public hearing the Committee proffered supplementary questions for

written response. These responses were received from the Lake Asphalt on January

23, 2019.

1.24. The Minutes of the Meeting during which the public hearing was held are attached as

Appendix I and the Verbatim Notes as Appendix II.

1.25. The Committee agreed that a Site Visit would aim in gaining an understanding of the

operations of Lake Asphalt of Trinidad and Tobago and as such, Members visited on

Monday February 18, 2019.

Ms. Ayanna Sylvester Corporate Secretary Lake Asphalt

Ms. Michelle Durham-Kissoon Permanent Secretary (Ag.)

Ministry of Finance,

Investments Division

Ms. Seeta Beedasie Business Analyst (Ag.) Ministry of Finance,


Mr. Inshan Mohammed Senior Audit Analyst (Contract) Ministry of Finance,


Mrs. Penelope Bradshaw-Niles Permanent Secretary (Ag.) Ministry of Energy and

Energy Industries

Mr. Sheldon Butcher Director, Downstream Petroleum

Ministry of Energy and

Energy Industries

Ms. Pamela Ragbir Senior Planning Officer (Ag.) Ministry of Energy and

Energy Industries


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CHAPTER 2

2 Key Issues, Findings and Recommendations

Objective 1: To determine whether Lake Asphalt is adhering to the framework for operations

as outlined in the State Enterprises Performance Monitoring Manual.

2.1 Lake Asphalt has struggled to remain current with the requirement to submit audited

financial statements and is in the process of addressing the outstanding financial

statements:

In 2016, Lake Asphalt presented audited financial statements for the year

ending 2010 at its Annual General Meeting (AGM) held in April 2016.

In 2017, Lake Asphalt completed Financial Statements for the years ending

September 2011, 2012 and 2013. These were audited in 2016/2017 and

presented at the AGM held in November 2017.

In 2018, Lake Asphalt completed preparation of its 2014 and 2015 Financial

Statements, and is currently awaiting the Draft Audit Reports from PKF.

2.2 Issues flagged in Lake Asphalt’s most recent Audit Reports (i.e. for the Financial Years

2011, 2012 and 2013) included insufficient evidence to substantiate the existence,

completeness, valuation and ownership of:

cash in hand and at bank;

accounts receivable;

prepayments;

inventories;

accounts payable and accruals;

cost of sales; and

miscellaneous expenditure.


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2.3 Lake Asphalt adopted the tender rules and procedures established by the State

Enterprises Performance Monitoring Manual (SEPMM), and has been enforcing

compliance with said policy.

2.4 Lake Asphalt has also completed a review of its Tender Rules and, consistent with the

Public Procurement and Disposal of Public Property Act, 2015, has revised these Rules. The

revised rules are currently being reviewed by the Management and Board for finalization,

approval, dissemination and implementation.

2.5 In 2007 Lake Asphalt established a Computer Usage Policy and in 2012 Lake Asphalt

established its Cellphone Policy; there has been no known noncompliance with these

policies. However, the following were noted by the Committee:

The Cellphone Policy is inconsistent with the SEPMM; and

The Computer Usage Policy, dated 2007, makes no reference to Laptops.

2.6 Annual Administrative Reports for the period 2008 to 2015 were reviewed by the Ministry

of Energy and Energy Industries, and returned to Lake Asphalt in April 2018, with

suggested amendments.

2.7 The Ministry also completed its review of the 2016 Report and submitted comments. The

main issues highlighted are:

i. audited financial statements were not submitted along with the reports; and

ii. the reports lacked information on actual performance for each fiscal period.

2.8 Lake Asphalt is currently addressing the concerns highlighted by the Ministry and

revising its Administrative Reports for resubmission.

2.9 A Balanced Scorecard was established in alignment with Lake Asphalt’s strategic plan, as

well as targets that were included in the 2016 Administrative Report. It was launched 1

June 2017 and is being used to track and monitor performance for each fiscal period.


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Recommendations

2.10 Lake Asphalt should take every step required to ensure full compliance with the

framework for operations as outlined in the State Enterprises Performance Monitoring

Manual. Particularly:

timely submission of audited financial statements;

publishing of financial statements;

develop and implement a Project Management Protocol;

preparation and submission of Administrative Reports; and

timely submission of annual Performance Review and Appraisal Reports.

2.11 Lake Asphalt should fully implement all recommendations made in the report of the

Public Accounts (Enterprises) Committee during the Third Session of the Ninth

Parliament of the Republic of Trinidad and Tobago.

2.12 The Internal Audit function within Lake Asphalt should be staffed appropriately to

ensure financial prudency by proper record keeping of inventories, cash at hand, accounts

receivable, accounts payable and accruals, and miscellaneous expenditure.

Objective 2: To determine whether Lake Asphalt is able to meet the demand for its

bituminous products.

2.13 Lake Asphalt produces the following mix of products for local, regional and international

markets:

Trinidad Lake Asphalt (TLA);

Refinery bitumen 60/70;

TLA Asphalt Cement 60/75;

Bitumen Emulsions; and

LASCO range of products (Seam Sealant, Pipe Guard, Underbody Coating,

and Black Paint).


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2.14 Historically, sales of Bitumen 60/70, Asphalt Cement 60/75 and Bitumen Emulsions have

accounted for approximately 62% to 80 % of Lake Asphalt’s revenue. These products are

used for the paving of the secondary roads, highways and airport runways domestically,

regionally and internationally.

2.15 Lake Asphalt is losing market share due to:

Its present form and packaging of TLA - drums and pellets -; and

The growth in the use of synthetic modifiers.

2.16 When barrels are used to package TLA, the product coalesces to form a hard lump that

requires special machinery at the consumer’s end to make it fit for purpose. These

additional steps have significant impact on the costs of production and waste disposal.

2.17 In 2016, Lake Asphalt embarked on a Research and Development project for Powdered

TLA [Cold Milled TLA]. This R&D project is 90% complete. It will allow Lake Asphalt to

grow its market share and meet increased demands for more user-friendly and cost

effective packaging.

2.18 Lake Asphalt is moving towards a more mechanized organization:

Excess labour that results from the mechanisation will be diverted to

production of the LASCO range of products;

The plant for production of the LASCO range of products requires upscaling

to meet market demand for the products;

Currently LASCO products are not marketed internationally;

Labour will also be used to ensure that the mill is running 24 hours a day.

2.19 Demand for both Bitumen 60/70 and AC 60/75 are determined in large part by

Government infrastructure spending, which in turn is dependent on the price of Oil and

Natural Gas.


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2.20 The sale of petroleum and petrochemical products provide the lion’s share of Government

Revenue, which determines its spend on infrastructure projects such as road building.

2.21 The Table below shows the relationship between the average price of oil for the year,

Government spending on infrastructure and volumes of Refinery Bitumen 60/70 and TLA

AC 60/75.

Year Average Oil Price

(WTI) (USD per barrel)

Government Infrastructure

Spend (TT$)

Bitumen Sales (Metric tons)

2013 97.98 1.04 billion 26,433

2014 93.17 1.02 billion 32,519

2015 48.66 897.1 million 34,510

2016 43.29 303.9 million 7,858

2.22 Bitumen 60/70, Asphalt Cement 60/75

Lake Asphalt sold Refinery Bitumen 60/70 to contractors in the Domestic Markets which

it purchased from PETROTRIN at prices determined by a specified formula.

2.23 Projected sales of Bitumen 60/70 and TLA AC 60/75 are as follows:

Projected Sales (MT) 2019 2020

Bitumen 60/70 12,387 24,900

TLAC 60/75 6,300 20,050

2.24 With the closure of Petrotrin, Lake Asphalt is seeking an alternative supply of Bitumen.

Arrangements have been made to import bitumen from Barbados. The price for bitumen

from Barbados is US$23/gallon, compared to the price paid to PETROTRIN:

US$19/gallon.


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2.25 In order to maintain a competitive advantage in the market, Lake Asphalt proposes that

the Government writes into the specification for road building that all roads are to be

constructed utilizing TLA modified Asphaltic Cement 60/75, and that Lake Asphalt be

allowed to establish a small plant for the processing of crude.

2.26 The gestation period for these options:

Is not very capital intensive;

Will provide employment;

Can generate positive foreign exchange; and

Will improve the profitability of Lake Asphalt.

2.27 As there are no established performance grade standards for bitumen used in Trinidad

and Tobago, Lake Asphalt intends to develop a laboratory that will be used to determine

a benchmark performance grade for bitumen used for paving.

Recommendations

2.28 In light of the opening of the market to the importation of bitumen by private contractors,

Lake Asphalt should amplify its competitive advantage by accelerating its movement

towards establishment of a laboratory that will be used to test the performance grade of

bitumen used for paving.

2.29 An additional suggestion is that in light of the impact that a lowered CET poses to the

viability of Lake Asphalt, consideration should be given by the Minister of Energy and

Energy Industry to engage in discussion with the Minister of Trade and Industry

concerning the possibility of the CARICOM Council for Trade and Economic

Development (COTED) to revisit the decision to lower the CET level for bituminous

products.

2.30 In light of the limitations faced in developing new products and markets, a Research and

Development Unit should be formed and operationalised. This Unit should:


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Be comprised of University Graduates who have demonstrated the ability to

create innovative and viable products;

Partner with local Universities to encourage students at the Graduate level

to engage in research relating to Bitumen; and

Seek to remain current with the latest technology in the field, to ensure that

profitability is improved and maintained.

2.31 In order optimize financial management, Lake Asphalt should conduct cost/benefit

analyses to ensure that all products and initiatives, old and new, are economically viable

and suitably tailored to current and potential future market preferences.

Objective 3: To determine whether Lake Asphalt is achieving its mandate as a State

Enterprise.

2.32 The primary role of Lake Asphalt is to monetize the asphalt from the Pitch Lake in La

Brea. To do so, the company’s primary functions are extraction, refining, processing and

marketing of:

dried asphalt;

cement; and

asphalt derivatives.

2.33 Lake Asphalt is also responsible for management of the Pitch Lake.

2.34 The Committee finds that though Lake Asphalt at a first glance is achieving its mandate,

certain prevalent operational inefficiencies, combined with unsuitable product offerings,

pose a significant challenge to its future viability.

2.35 Additionally, despite the strategic placement of Lake Asphalt at the site of a “Natural

Wonder”, currently Lake Asphalt does not focus on developing and marketing for

tourism as that is not a part of its mandate, and therefore, tours to its facilities/plants are

organised by other organisations.


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2.36 However, in the strategic plan, the consideration is to convert the current Lake Asphalt

plant into a museum when the Cold Milled TLA plant comes into operation.

Recommendations

2.37 As TLA is unique to the Pitch Lake in La Brea, an application for a Geographical Indication

form of Intellectual Property Rights should be made. A Geographical Indication should

boost the marketability of TLA as it will carry with it an assurance to consumers the any

product labeled “TLA” will have certain unique attributes.

2.38 In order to boost the skill level of current employees, Lake Asphalt should allow staff to

access incentives that encourage the improvement of knowledge/skills bases that will

benefit the company.

2.39 Robust policies for knowledge transfer and succession planning must also be developed

and implemented to undergird the sustainability of the company.

2.40 In order to create stronger ties with tertiary level institutions, Lake Asphalt should work

along with its line Ministry to develop a scholarship programme that supports product

and systems research and development.

2.41 Collaboration with tertiary level institutions should also be geared towards the optimal

operation of the Cold Milled TLA plant, with a key area of emphasis to ensure that the

asset begins to provide a reasonable and steady return on the significant investment made

in its establishment.

2.42 While the Committee is aware that Lake Asphalt is wary of overstepping its mandate by

engaging in activities that may compete with the tour operations conducted by

representatives of the Ministry of Tourism, it would be worthwhile to consider

establishing a museum and gift shop where visitors can get an informed tour (from


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knowledgeable guides) of the sections of the Pitch Lake that are used for TLA extraction,

and the Lake Asphalt plant facilities.

2.43 An additional consideration may be developing an area on the Lake Asphalt compound

that will function as a plaza with shops offering suitable refreshments and interesting

souvenirs (books, tee shirts, caps, and themed decorations and mementos), as well as

clean restrooms. This is standard fare in many factories all over the world and would yield

streams of income, while giving the place status and meaning, and most importantly

would offer self-sustainable employment for persons in and around La Brea.

2.44 The development of such facilities may even have positive spillover effects for the

economy, for instance an astute tour operator could probably develop a number of

different tour options, for example: just the Pitch Lake or one where the Pitch Lake is part

of a wider tour of interesting geographical sites such as the Devils Woodyard.


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3 Conclusion

3.1 In light of the above, the Committee is optimistic that with diligent implementation of the

recommendations proffered, Lake Asphalt will be better managed to ensure that it is

effectively able to fulfill its mandate, and support the policy objectives of the Ministry of

Energy and Energy Industries.

3.2 Your Committee therefore awaits the response of the Minister of Energy and Energy

Industries to the recommendations listed on pages 11 and 12, in accordance with Standing

Orders 100(6) and 110(6) of the Senate and the House of Representatives respectively

which states inter alia that –

“The Minister responsible for the Ministry or Body under review shall, not later than

sixty (60) days after a report from a Standing Committee relating to the Ministry or Body,

has been laid upon the Table, present a paper to the House responding to any

recommendations or comments contained in the report which are addressed to it….”

3.3 Your Committee therefore respectfully submits this Report for the consideration of the

Houses.


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Sgd Sgd

Mr. Anthony Vieira Dr. Lester Henry Chairman Vice-Chairman Sgd Sgd

Mrs. Cherrie-Ann Crichlow-Cockburn, MP Mr. Wade Mark Member Member Sgd Sgd

Mr. Fazal Karim, MP Brig. Gen. (Ret.) Ancil Antoine, MP Member Member Sgd Sgd

Mr. Adrian Leonce, MP Mr. Garvin Simonette Member Member


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APPENDICES


35

FRAMEWORK FOR STATE ENTERPRISE

OPERATIONS2

2 State Enterprises Performance Monitoring Manual, 2011: http://www.finance.gov.tt/wp-content/uploads/2013/11/State-Enterprise-

Performance-Monitoring-Manual-2011.pdf




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The following framework provides the guidelines for the effective operations of a State Enterprise as outlined in the State Enterprises

Performance Monitoring Manual. These guidelines were used as a benchmark against which the JSC on State Enterprises conducted

exploratory assessments of State Enterprises operations.

Criteria Policy Compliance Requirements

Appointment, Removal And Resignation Of Board Directors

Strong Boards are vital for the effective governance of State Enterprises. GORTT appoints and removes Directors of Boards of State Agencies which must be done via the respective Line Ministers of State Agencies incorporated under the Companies Act, Chap 81:01 and by statute. The statutes specify the composition and required skills/experience of Directors. Letters of resignation of Directors of State Enterprises incorporated under the Companies Act, Chap. 81:01 must be forwarded to the Minister of Finance (Corporation Sole) under whose responsibility this lies

The Investments Division maintains a register of Boards of Directors of State Agencies.

Annual Meetings The Agenda of Annual Meetings (AM) should include the following:

1. Confirmation of minutes of the previous AM

2. The consideration of the financial statements

3. The directors’ report 4. The auditors’ report, if any 5. The sanction of dividends 6. The election of directors


37

7. The election of auditors

Appointment And Removal Of An Auditor

State Enterprises are no longer required to appoint the Auditor General as their Auditor unless required under the relevant statute of incorporation or if so desired. Auditors are appointed at an AGM with prior approval of the Corporation Sole.

By-Laws Special provisions are included in the Model By-Laws of State Enterprises to govern the interaction between the Minister and Companies. Changes to the By-Laws of Companies are to be approved by the Minister of Legal Affairs then accepted by the Corporation Sole and presented at an Annual or Special Meeting

Procurement Procedures

GORTT has agreed that the Minister of Finance review and audit contracts awarded by State Enterprises as considered necessary and appropriate.

State Enterprises are required to submit to the Minister of Finance within fourteen (14) days following the end of each month, lists of all contracts which were awarded during the month, together with the value of each contract. Tender rules and any amendments must also be submitted to the Minister of Finance for approval. Details on the Standard Procurement Procedures for the Acquisition of Goods, Provision of Services, Undertaking Works and Disposals of Unserviceable Items in State Enterprises/Statutory Bodies (State Agencies) are given at Appendix B of the SEPMM.

E-Auction All State Enterprises have been mandated to use e-Auctions to procure items of large spend.

The Ministry of Finance, in keeping with its initiative to reform Public Sector Procurement, is facilitating the implementation of e-auctions


38

among State Enterprises. The e-Auction system is a procurement tool using web-based software that allows suppliers to bid online for a contract to supply goods and services. The e-Auction or online/electronic reverse auction (e-RA) is a bidding event sponsored by a buying organisation and forms a single part of the greater e-Procurement strategy. It is an online dynamic negotiation or bidding process between suppliers who compete to supply products by successively bidding prices downward.

Dividend Policy GORTT has agreed that the profitability of the Enterprise, its liquidity, legal restrictions/loan covenants and the replacement cost of essential capital goods are considered in determining the quantum of dividends that a Company would be required to pay. State Enterprises are also required to pay interim dividends based on semi-annual financial results. Actual distributions of profit are to be agreed with the Minister of Finance and appropriately disclosed in the financial statements. State Enterprises with Retained Earnings in excess of Working Capital requirements may be required to pay a Special Dividend.

Approval For Overseas Business Travel

Managers (include Managing Directors and Executive Directors) and other senior personnel of State Enterprises who are required to travel obtain the approval of the Board of Directors of their Companies, who may delegate this authority. Chairmen and Non-Executive Directors who are required to travel obtain

The Company is required to meet only the expenditure related to official business. The costs associated with foreign travel should comply with the guidelines published by the Comptroller of Accounts or the Company’s


39

the approval of the Line Ministers responsible for their respective Companies.

Business Travel policy approved by the Minister.

Board Fees And Allowances

Board Fees and Allowances for State Enterprises are determined by GORTT.

Use Of Cellular Phones And Laptop Computers

State Enterprises may wish to utilise wireless portable communication devices at the level of the Board of Directors to enhance the efficiency of their operations. State Enterprises may therefore adopt the policy approved by GORTT on the use of Cellular Phones and Laptop Computers for the members as outlined at Appendix C of the SEPMM.

Appointment Of Executive Directors And Consultancy Contracts

Boards of Directors are required to obtain the written non-objection of the Minister of Finance (Corporation Sole) to authorise the following:

(i) appointment of Directors to be the holder of any executive position;

(ii) entry of Directors into consultancy contracts with their companies.

In each case, the detailed rationale for the proposal must be provided.

Procedures Regarding Negotiation Of Pay And Other Terms And Conditions Of Employment

GORTT has agreed that:

the monitoring of wage and salary negotiations, the establishment and/or revision of pay and other terms and conditions of employment of employees of State Enterprises, including managerial staff and persons employed on contract should fall under the purview of


40

Ministerial Committee for monitoring remuneration arrangements, a sub-committee of Cabinet.

terminal benefits such as separation packages and gratuities, other than those already specified in Collective Agreements, which State Enterprises propose to pay to employees be also subject to the approval of the Ministerial Committee for monitoring remuneration arrangements.

Payment Of Bonuses Bonuses are payable on the attainment of a minimum of eighty percent (80%) of the approved performance targets, after approval by the Line Minister. The bonus to be paid to each employee is limited to one (1) month’s salary annually.

Payments which do not conform to the policy require specific approval of the Ministerial Committee for monitoring remuneration arrangements.

At the beginning of the fiscal year, each State Enterprise is required to provide the respective Line Minister with identified performance targets, which could include, but not necessarily be limited to:

Profits

Quality of product and service delivery

Productivity

The targets to be used in the evaluation of progress in achieving objectives should be verifiable, feasible, measurable and consistent with the Business Plan of the State Enterprise. These targets must be agreed upon with the Minister to whom the State Enterprise is required to report on its performance. The Annual Performance Review and Appraisal Reports (Appendix K) certify the Company’s performance. Requests for approval of the payment of bonuses should be made within four (4) months of the end of the Company’s financial


41

year and the response time from Line Ministries is within six (6) weeks after receipt of requests.

Approval Of New Assets/ Investments, Debt And Contracts

State Enterprises or their subsidiaries are required to obtain prior approval of the Minister of Finance for the acquisition of significant assets, new investments in non-government securities, the incurrence of new/additional longterm debt and entering into significant contracts (relative to the Company).

In addition, all GORTT guaranteed borrowings of State Enterprises under the Guarantee of Loans (Companies) Act, Chap 71:82 are to be negotiated by the Ministry of Finance on behalf of the enterprises.

Inter – Agency Debt State Enterprises are to inform the Ministry of Finance on matters related to Inter-Agency Accounts Receivables and Payables that are unmanageable as detailed in the Quarterly Returns Report

Litigation Proceedings State Enterprises are to utilise avenues other than the courts for resolution of disputes. Under no circumstances should legal action be initiated by one State Enterprise against another without prior approval of the Minister of Finance.

State Enterprises are to inform the Ministry of Finance on matters related to litigation proceedings as detailed in the Quarterly Status Report

Publishing Of Financial Statements

State Enterprises are required to publish in at least one (1) major daily newspaper a summary of its audited financial statements within four (4) months following the completion of the financial year and a summary of the un-audited half-yearly statements within two (2)


42

months of the mid-year date subject to the approval of the Minister of Finance. These summary statements should contain the disclosures required by the Securities Industry Act, 1995.

Shares And Transfers State Enterprises are required to submit to the Investments Division original Share Certificates in the name of Corporation Sole and the Government Nominee Shareholders within five (5) weeks after the allotment of these shares and within two months after the date on which a transfer of any of these shares is presented to the Company for registration. The issuance of Government Shares must be with the approval of the Minister.

Statutory Compliance Payment of Royalties and Taxes

Integrity in Public Life

Occupational Safety and Health

Environmental Management

Occupational Safety and Health

State Enterprises are required to comply with the Act (as amended), which came into force in February 2006.

Environmental Management

In accordance with the Environmental Management Act, Chapter 35: 05, State Enterprises are required to collaborate with the Environmental Management Authority to facilitate the proper management of the environment and to achieve the goal and objectives of the National Environmental Policy

Performance Monitoring

Strategic Plans

Companies are required to submit their Strategic Plans to both the Investments


43

Division and the respective Line Ministry at least six (6) months prior to the start of the implementation period of the plan, for those receiving subventions to allow for National Budgetary Preparation activities and one (1) month for others.

Annual Operating Budgets

Companies that require subventions from GORTT are required to submit their annual Budgets to the Investments Division and respective Line Ministry for assessment at least six (6) months prior to commencement of the Fiscal year. The Investments Division and Line Ministry will review the Budget and respond within one (1) month prior to the start of the Fiscal Year.

Project Management Protocol

GORTT has agreed that a Project Management Protocol be adopted as part of the governance framework for the management of some of the State Enterprises with specific mandates.

Risk Management

The success of risk management will depend on the effectiveness of the management framework providing the foundations and arrangements that will embed it throughout the organisation at all levels.


44

Audited Financial Statements

State Enterprises are required to submit the following:

a) Audited Financial Statements (2 originals and 120 copies) to the Minister of Finance within four (4) months of their financial year end. These reports are to be laid in Parliament and subsequently submitted to the Public Accounts and Enterprises Committee for consideration;

b) Copies of their Management letters issued by Statutory Auditors.

Administrative Reports

Under Section 66D of the Constitution of the Republic of Trinidad and Tobago, Act No 29 of 1999, State Agencies are required to report to the public on their performance annually.

Board Minutes

Board Minutes should be made available to the Investments Division and respective Line Ministries to ensure that the Board is proceeding within the framework of the Strategic Plan and GORTT policy decisions.


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MINUTES OF PROCEEDINGS


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Present were:

Mr. Anthony Vieira Chairman

Dr. Lester Henry Vice-Chairman

Mrs. Cherrie-Ann Crichlow-Cockburn, MP Member

Mr. Fazal Karim, MP Member

Mr. Wade Mark Member

Brig. Gen. (Ret.) Ancil Antoine, MP Member

Mr. Adrian Leonce, MP Member

Mr. Garvin Simonette Member

Mr. Brian Caesar Secretary

Ms. Sheranne Samuel Assistant Secretary

Ms. Safiyyah Shah Parliamentary Intern

Lake Asphalt of Trinidad and Tobago (1978) Limited (Lake Asphalt)

Mr. Christopher John-Williams Chairman

Mr. Christopher Hagley Vice- Chairman

Mr. Roger Wiggins Chief Executive Officer

Ms. Claire Gomez-Miller Director

Mr. Stephen Mc Clashie Director

Ms. Ayanna Sylvester Corporate Secretary

Ministry of Energy and Energy Industries (MEEI)

Mrs. Penelope Bradshaw-Niles Permanent Secretary (Ag.)

Mr. Sheldon Butcher Director, Downstream Petroleum

Ms. Pamela Ragbir Senior Planning Officer (Ag.)

Ministry of Finance, Investments Division (MoF)


Ms. Seeta Beedasie Business Analyst (Ag.)

Mr. Inshan Mohammed Senior Audit Analyst (Contract)

CALL TO ORDER

MINUTES OF THE THIRTY-THIRD MEETING OF THE JOINT SELECT COMMITTEE ON

STATE ENTERPRISES, HELD IN THE ARNOLD THOMASOS EAST MEETING ROOM, LEVEL 6,

AND THE J. HAMILTON MAURICE ROOM, MEZZANINE FLOOR, TOWER D, THE PORT OF

SPAIN INTERNATIONAL WATERFRONT CENTRE,

1A WRIGHTSON ROAD, PORT OF SPAIN ON DECEMBER 17, 2018


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1.1 The Chairman called the meeting to order at 10:07 a.m. Those present were welcomed.

CONFIRMATION OF MINUTES OF 32ND MEETING OF 03.12.2018

2.1 There being no amendments, the motion for the confirmation of the Minutes was moved

by Mr. Wade Mark and seconded by Mr. Adrian Leonce.

MATTERS ARISING FROM THE MINUTES

3.1 Paragraph 5.3, page 2: The Chairman advised that the submission from NFM was

expected on December 17, 2018. Thereafter it would be made available to Members.

3.2 Paragraph 6.3, page 3: The Secretariat informed the Committee that the letter would be

dispatched on December 17, 2018.

3.3 A discussion ensued on the Committee’s work progamme and the order in which the

inquiries should be undertaken.

PRE-HEARING DISCUSSION: LAKE ASPHALT INQUIRY

4.1 The Chairman reminded Members that the written submission from Lake Asphalt was

received on November 09, 2018 and was made available to Members.

4.2 The Chairman informed Members that an Issues Paper was prepared by the Secretariat

based on Lake Asphalt’s submission. Members confirmed receipt of the document.

4.3 The Chairman informed Members that he requested the following additional information

from Lake Asphalt:

a) the last two (2) Annual Returns of Lake Asphalt; and

b) the last published statement under the Freedom of Information Act.

4.4 The Committee discussed the approach to be adopted during the public hearing with

officials of Lake Asphalt, the Ministry of Energy and Energy Industries and the Ministry

of Finance.

OTHER BUSINESS

Next Meeting of the Committee

5.1 The Committee agreed that its next meeting will take place on January 07, 2019 when it

will commence its examination of CEPEP.

5.2 The Committee also agreed that the inquiry into NFM would follow the CEPEP inquiry.

Suspension


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5.3 The Chairman suspended the meeting at 10:26 a.m.

PUBLIC HEARING: Lake Asphalt INQUIRY

6.1 The meeting resumed at 10:40 a.m. in public, in the J. Hamilton Maurice Room.

6.2 The Chairman welcomed officials and introductions were exchanged.

6.3 The Chairman outlined the objectives of the inquiry.

6.4 Detailed hereunder are the issues/concerns raised and the responses proffered during the

hearing with the officials of Lake Asphalt, the Ministry of Energy and Energy Industries and the

Ministry of Finance, Investments Division:

i. Lake Asphalt’s loss of significant market share due to a lack of technological advancement;

ii. Lack of a Research and Development Unit within Lake Asphalt. All research on the Cold

Mill TLA plant, and the powdered TLA product being done by an external researcher;

iii. Investment in Research and Development to regain market share through technology;

iv. Lake Asphalt’s MoU with UWI to engage young researchers to develop new Asphalt-based

products, methods of extraction, and modern machinery;

v. Discussions on the possibility of creating a Faculty focused on the study of TLA at UWI;

vi. Patent pending for the powdered Trinidad Lake Asphalt (TLA), and potential for enhanced

revenue;

vii. The status of Lake Asphalt’s capital projects:

upgrade of Lake Asphalt’s facility (On hold);

New Dried Asphalt plant (terminated); and

Cold Mill TLA plant (end of 2019);

viii. Lake Asphalt’s plan to fund the Cold Mill TLA project on its own;

ix. Effect of PETROTRIN’s closure:

Import of first shipment of Bitumen from Barbados (CET rate 30%, bitumen

performance grade 64/16);

Increasing storage capacity;

x. Lowered or removed CET rate, making access the larger players in the bitumen business

easier;

xi. Monopoly of Asphalt Cement;


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xii. The price being paid for bitumen from Barbados compared to the price paid to

PETROTRIN: $23/gallon vs. $19/gallon;

xiii. Effect of PETROTRIN’s closure on Lake Asphalt’s employment (approximately 300

employees) – Limited impact due to revenue from other products like Asphalt Cement;

xiv. Lake Asphalt’s short-term plans to employ persons who may be unemployed and/or

underemployed, particularly from the group of skilled workers who suffered job losses with

the closure of PETROTRIN;

xv. Auditing of financial statements for the years 2014, 2015, and 2016 and aim for presentation

by 2019;

xvi. Absence of partnerships for the mining and monetising of the TLA with any local or

international bodies;

xvii. Lake Asphalt existing relationship with Beijing Construction Engineering Group Company

Limited for distributorship;

xviii. Lake Asphalt’s marketing strategies targeting China, Nigeria, and Ghana;

xix. Establishment of distributors in the Middle East;

xx. Lack of TLA user-friendliness. The refinement TLA is at the cost of the buyer;

xxi. Over 80% of employees at Lake Asphalt coming from La Brea and environs;

xxii. Challenges facing Lake Asphalt:

Operation Systems from 1816

Outdated machinery

Packaging of products

Skilled human resource;

xxiii. TLA not being a commodity product. Every tonne of Asphalt that is sold, is based on a

project’s TLA requirement;

xxiv. Systems Audit conducted by Corporation Sole in November 2016 with finding that Lake

Asphalt’s internal controls were weak and a recommendation for a Forensic Audit (to

commence shortly);

xxv. Ongoing discussions with the MEEI on Lake Asphalt’s bitumen importation proposal;

xxvi. Lake Asphalt’s responsiveness in dealing with issues highlighted by the MEEI such as lack

of transparency and accountability.

6.5 A request for additional information was made of Lake Asphalt.


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6.6 The Chairman thanked officials for attending and they were excused. The Chairman also

thanked the viewing and listening audience.

(Please see Verbatim Notes for detailed oral submissions)

Suspension

6.7 The Chairman suspended the meeting at 12:30 p.m.

POST-HEARING DISCUSSION

7.1 There Chairman reconvened the meeting in camera at 12:33 p.m.

7.2 The Chairman invited discussion on the just concluded public hearing.

5.4 The Committee agreed that it would determine whether another hearing with Lake Asphalt

was necessary based on a review of the additional information requested.

7.3 A site visit to Lake Asphalt was suggested. The Committee agreed to consider it.

Other Business

7.4 The Chairman suggested that the Committee consider the effectiveness of the State

Enterprises model and it was agreed that this matter would be further discussed at a subsequent

meeting.

ADJOURNMENT 8.1 There being no other business, the Chairman thanked Members for their attendance and

the meeting was adjourned.

8.2 The adjournment was taken at 12:44 p.m.

I certify that these Minutes are true and correct.

Chairman

Secretary

January 11, 2019


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VERBATIM NOTES


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Lake Asphalt of Trinidad and Tobago (1978) Limited

Mr. Christopher John-Williams Chairman

Mr. Christopher Hagley Deputy Chairman

Ms. Claire Gomez-Miller Director

Mr. Stephen Mc Clashie Director

Mr. Roger Wiggins Chief Executive Officer

Ms. Ayanna Sylvester Corporate Secretary

Ministry of Finance, Investments Division


Ms. Seeta Beedasie Business Analyst (Ag.)

Mr. Inshan Mohammed Senior Audit Analyst (Contract)

Ministry of Energy and Energy Industries

Mrs. Penelope Bradshaw-Niles Permanent Secretary (Ag.)

Mr. Sheldon Butcher Dir. Downstream Petroleum

Ms. Pamela Ragbir Senior Planning Officer (Ag.)

Mr. Chairman: Good morning, the time is now 10.40 and I would like to call this

meeting, the 18th public hearing of the Joint Select Committee on State Enterprises for the

Eleventh Parliament to order. Ladies and gentlemen, my name is Anthony Viera, and I

would like to extend a very warm welcome to you all. I really appreciate your attendance

today.

Before I ask other members of the Committee to introduce themselves, may I just indicate

for the record we are all present. May I ask Committee members to please introduce

themselves?


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[Introductions made]

I understand our Vice-Chair is still on his way. I also understand that officials from the

Ministry of Energy and Energy Industries and the Ministry of Finance are present. So I

will ask members of the Lake Asphalt Company to first introduce yourselves, and then the

other Ministry officials. Thank you.

[Introductions made]

Okay, thank you. Before we start the official proceedings, just a couple of housekeeping

matters. I would be grateful if you could turn off your cellphones or put them on silent.

Also, if you could turn on the microphone before speaking and then turn it off after

speaking. Time is limited and we have to conclude by midday, and there is a lot we have

to cover. So accordingly I will ask participants to keep questions and answers as brief and

as focused as possible so that we can maximize the number of persons who want to

contribute.

This Joint Select Committee is a creature of the Constitution. Under section 66A(d) we

are appointed to enquire into and report to both Houses of Parliament in relation to your

administration, the manner of the exercise of your powers, your methods of functioning

and the criteria you use when exercising your powers and functions. In other words, our

task is to review and evaluate the efficiency, economy and effectiveness of your operations

with a view towards ensuring transparency and public trust, and that you are properly

fulfilling your mandate, and that your policies and processes are clear and accessible to

relevant stakeholders, and the public. So it is all about transparency, good governance

and accountability.

However, in addition to our oversight function, these sessions also afford you an

opportunity to share your challenges, your disappointments, your concerns, your

achievements, and to make recommendations. So they provide a unique opportunity to

increase public awareness, understanding and support in respect of your operations.

The purpose of this meeting is to commence its enquiry into the operations of Lake

Asphalt of Trinidad and Tobago (1978) Limited, and to determine its effectiveness at


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fulfilling its mandate. Our role is firstly to examine the issues which arose based on your

written responses to the Committee’s questions and, secondly, to aid the company in

improving operations resulting in a more efficient and effective organization.

This meeting is being broadcast live on the Parliament Channel and on Radio 105.5FM.

So welcome again, and I shall now invite the CEO and Chairman to make brief opening

remarks, and to provide us with some salient information about the company.

Mr. Wiggins: Morning again everyone. Lake Asphalt of Trinidad and Tobago (1978)

Limited was incorporated on April 27, 1978 as a wholly state-owned company of

Trinidad and Tobago. We were owned as a subsidiary of the Trinidad and Tobago Oil

Company Limited which is called TRINTOC. We were subsequently made a wholly state

enterprise in 1998.

The primary role of Lake Asphalt is to monetize the asphalt from the Pitch Lake. The

company is therefore involved in the extraction, refining, processing and marketing of

dried asphalt, cement and asphalt derivatives, and we are also responsible for managing

of the Pitch Lake. It would be remiss of me not to mention that we are in the bitumen

business. As a company we provide to customers bitumen that we would have gotten from

Petrotrin.

At this time I will hand over to the Chairman, if he would like to add anything to that.

Mr. John-Williams: Good morning again. What I would like to add, I would like to tell

the Committee, and by extension the country, Lake Asphalt is one of the country’s jewels

and it is a sleeping giant. We have continued to operate, unfortunately, the way we did in

1867. Our process and our technology have remained the same, and we are attempting to

compete with technology that is current. So at this point in time we market refined asphalt

that we ship to customers in a wooden drum, that is not user-friendly, and we have lost

significant market share.

What this board has done is invest in research and development, and we have developed

a new form of the material, which is a powdered form of the material, which will now

make it more user-friendly, and the results of this new material is that you require less


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material to get the performance grade when you are modifying your bitumen. All the tests

on this material has proven that it is a fantastic material. The patent is now pending. We

have applied for a patent, and we have had our proof of process, and we will have our first

train of this new plant and new process running by the last quarter of 2019. This is

supposed to significantly enhance our revenue.

We are competing with polymers made by large companies like DuPont and Shell and

these people, but we have the best modifiers in the world. The best modifier in the world

is made by the hands of God, and once we start to monetize it in a real way, Lake Asphalt

will make a significant contribution to GDP.

Mr. Chairman: Thank you, Chairman. The floor is now open. I believe Mr. Leonce

you had a question.

Mr. Leonce: Thank you, Chair. I am happy to hear what you just said, because I think

that in this country where we have, as you said, sleeping giants, we need to be able to

maximize it and improve it as best as we can. So I am glad that we are going into new

technology and looking to compete with the best.

I have looked at your strategic plan 2017—2021, and I would like some clarification on

some of your major capital projects as it supports this strategic plan. I looked at three

main ones, one being the upgrade of the facility, which I am seeing is on hold. The second

one being the new dried asphalt plant, and the third one being the construction of a cold

mill TLA plant.

Now the reason I am asking specifically on those three is because, one, the contribution,

the budgets are significant and, two, they all seem to have some issue in terms of

completion. So, I just want to know in terms of how those projects affect the strategic

plan, what the status of them is and how we plan to mitigate against some of the issues.

Mr. John-Williams: There was a plan before to build a super still and put the dried

asphalt now into plastic bags. When we came into office and we met with the particular

company, we asked them, “We would like you to provide a sample of the material that

this new plant can produce, so we can compare it with what we produce right now which


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we have as our gold standard”. They told us they could not do that, and when I asked

why, he says because to do that they would have to build a pilot plant. That was not good

enough. If we had to expend eighty-something million dollars in a technology that is not

proven, of course it is not an investment that we would want to pursue.

Mr. Leonce: That particular project, the new dried asphalt plant, is not being pursued?

Mr. John-Williams: No, we have replaced that with CMTLA, which is a result of

research and development. And we have developed this new product. We have proof of

process. We have taken our materials all over the world. Now remember, this is not a

technology that you can go anywhere and purchase. Nobody does this, so we have to

develop the process. We have to choose the machinery, et cetera.

So we have done that. We have taken our materials all over the world, have it tested on

different systems, and we now have proof of process. So we are in the process of doing

the investment proposal to submit to the line Minister and the Ministry of Finance.

Mr. Leonce: I saw specifically with that project you all have a proposed org structure,

and bringing in new employees to support that whole thing. What are the proposed time

lines for operationalizing this new venture?

Mr. John-Williams: We anticipate that this plant will be operational—a stretch will be

end of 2019. That is our stretch time. The first train will be a 60 tonne-an-hour plant; that

would be our first train.

Mr. Leonce: What impact do you anticipate in terms of revenue percentage that this will

have on Lake Asphalt?

Mr. John-Williams: Tremendous. Now remember we have the best modifier in the

world, but if you are selling me a modifier that is—we sell a quarter tonne of asphalt in a

wooden drum. You have to find a way to get this into your bitumen tank. So of course

you have to break it open. You need to crush it again, and you need to get it into your

bitumen tank as opposed to a polymer that you get in a 20 kg bag. Things like SBS but

styrene, butadiene styrene or styrotex, if you want to call it that. It is easy for the end user

to get this into his bitumen tank to modify his asphalt. So when we get to that stage where


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we can now give the customer this material in a 20 kg bag or in a super sack, we are now

in the business. Not to add that packaging as we do right now adds significant cost to our

material. So at this point in time with what we produce, we are not very competitive.

Mr. Leonce: Okay.

Mr. Chairman: Mr. Simonette, you had a question?

Mr. Simonette: Mr. Chairman, two questions. One, I note that the company indicates

that it finances all its projects from its own resources, and the company has no debt. Is it

that this new plant will be fully funded from the company’s own resources?

Mr. John-Williams: At this point in time that is what we are hoping to do.

Mr. Simonette: And you see no challenges in the targets for completing both the funding

and the work to be done to bring on the new plant?

Mr. John-Williams: No we do not. Once it is approved by the Investment Division, we

are ready to go.

Mr. Simonette: Switching to a question that was, I believe, put by the Committee in

writing. The company seems to have expressed a concern on the likelihood of increased

competition should bitumen be imported, should the market for bitumen be liberalized,

and bitumen imported, I am assuming, by competitors. What do you see to be the

challenges there and what issues do you think this Committee ought to have close to its

deliberations in order to, I would suggest, assist the company in its successful continued

operations?

Mr. John-Williams: Well, bitumen has formed a significant part of our revenues over

the years. I mean it has accounted for over 80 per cent of our revenue. We were the sole

agents for Petrotrin’s bitumen, so therefore everybody that needed bitumen in Trinidad

and Tobago paid Lake Asphalt, we gave them documentation, they went to Petrotrin and

collected their bitumen. With Petrotrin no longer in the picture, we now have to import.

And we also had to increase our storage capacity and at this point in time I would like to

commend the team at Lake Asphalt for really pulling out all the stops to increase our

storage capacity. At this point in time we have brought in our first shipment of bitumen


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from a CARICOM country, Barbados. That shipment is here. I mean, it involves a lot

more logistics than it did before, and of course there is going to be a price increase. At

this point in time the reason for going to Barbados is because of the CET, and our CET is

30 per cent, thereby it made the other international players uncompetitive. But if the CET

is lowered then we would have to shift gears and go to these international competitors.

They will no longer make Barbados very competitive.

Mr. Simonette: Mr. Chairman, can you expand a little bit on this question of the

importation dynamics of bitumen? So bitumen imported from Barbados, firstly. Does

Barbados have sufficient quantities to satisfy the demand that Lake Asphalt has?

Mr. John-Williams: Yes they do.

Mr. Simonette: In terms of the CET issue, I am assuming that under our CARICOM

arrangements the product enters Trinidad at a lower rate?

Mr. John-Williams: Duty free.

Mr. Simonette: Duty free. So that ultimately, the Barbados product imported by the

company is made available at a reasonable price, albeit increased because of the need to

transport it from Barbados as opposed to from Pointe-a-Pierre?

Mr. John-Williams: Yes it is, and what is good about Barbados, we have a delivery time

of only seven days, whereas when you are looking at your other suppliers, foreign

suppliers, you are probably talking a minimum of six weeks. So Barbados at this point in

time is quite an attractive option.

Mr. Simonette: What therefore is the fundamental driver of the concern expressed in the

submission, that the liberalization of the market could lead to pressures on the company?

Mr. John-Williams: Well if the CET is lowered or even removed, it opens the market to

just about anybody—anybody importing. We still think, despite that, we have a

competitive edge because we have the finances, we have the storage capacity, so I think

that gives us quite a substantial edge.

In terms of our asphalt cement, we will maintain that monopoly because there is nobody

that does asphalt cement. What the asphalt cement is, is our 180/200 bitumen that we blend


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with the TLA that is used to pave our highways, et cetera. So there is no competition

there. Where we will have competition is in our 60/70 bitumen which is used to pave all

the other roads.

Mr. Simonette: Other than price, for example, the procurement of bitumen perhaps at

maybe a more competitive price than that from Barbados if the CET was removed or

lowered, are there any other issues regarding bitumen from outside the region that you

would think relevant for this Committee’s consideration?

Mr. John-Williams: Well like I said, if the CET is lowered or even removed, it opens

the door for the larger players, I mean, the economies of scale. If you are dealing with

large players like Timco Tans or Sargeant Marine or one of these companies, I mean, not

even Barbados can compete or even Petro Jam. Petro Jam, they produce like about 400

barrels a day for export purposes and Staatsolie in Suriname, none of these companies will

be able to compete with those giants. That is the harsh reality.

Mr. Simonette: Final question, Mr. Chairman. Is there any issue as to quality from

bitumen acquired regionally, as opposed to bitumen coming from outside the region?

Mr. John-Williams: What I can tell you is our market here is not quality driven. It is

just penetration grade, and basically penetration grade is a sort of a viscosity test. It does

not tell you how the asphalt is going to perform when it is laid on a road. But what I can

tell you is that the bitumen we are buying from Barbados, the performance grade is 64/16,

meaning that on the high end you are talking 64 degrees Celsius, and on the lower end it

is minus 16 degrees, which is not relevant to here. So in terms of the PG grade for the

bitumen that we are importing, it is excellent. Petrotrin’s PG was 54/22, so the quality is

even better than what we were getting from Petrotrin.

Mr. Simonette: Thank you very much Mr. Chairman.

Mr. John-Williams: You are welcome.

Mr. Mark: Thank you Mr. Chairman. Good morning. I would just like to follow up on

the heels of my colleague’s questions.

Can you provide this Committee with an appreciation of what the real prices would be,


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having regard to your recent importation of bitumen, particularly when you compare the

proposed price increases with what would have existed under the Petrotrin/Lake Asphalt

arrangement? What is going to be the new price for bitumen, let us say that contractors

would have to purchase from Lake Asphalt, as compared to what it would have been

before Petrotrin stopped supplying your organization with bitumen?

Mr. John-Williams: All right. To put it in perspective, Petrotrin, we were selling 60/70

for $19 an imperial gallon. Our imported stuff right now that we have here, we are talking

about $23 a gallon. So there is an increase.

Mr. Mark: How would you suggest this will impact on overall infrastructural costs?

Well, I guess you may not be in a position to deal with that, so let me not burden you with

that.

How is this going to impact on the overall operations of Lake Asphalt in the context of

employment levels at the plant? We understand you have over 300 workers, including

casual workers at this time, temporary, contract workers, call it what you will, along with

permanent. Do you anticipate with these changes your operations as it relates to

employment levels would be adversely affected, or would you be able to maintain

employment levels at the plant, Lake Asphalt?

Mr. John-Williams: Yes we will be able to maintain our levels at this point in time

because, like I said, asphalt cement, that monopoly is going to remain. There are several

pluses on Lake Asphalt’s side—the fact that we have storage. The contractors, unless they

invest significantly in increasing storage capacity, it would be more economical to buy

from Lake Asphalt than they going outside there and sourcing material on their own.

Mr. Mark: Maybe the CEO or your good self can help us here. You spoke about this

company being the jewel, one of our jewels. Could you explain why you have not been

able to provide the Parliament and/or the Minister of Finance with the financials—audited

financials—of Lake Asphalt for the years 2014, 2015, 2016, 2017? What is responsible

for that?

11.10 a.m.


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Mr. John-Williams: When we came into office we met 10 years of unaudited financials;

and I will have Director Miller brief you on that.

Ms. Gomez-Miller: So it was apparent that the company’s focus was not on presenting

financial statements, so it meant that when we took up office in 2016, we did the annual

general meeting, and we had in May 2016, we presented 2009 and 2010 audited financial

statements. In 2017, we had another annual general meeting and this time we presented

2011, 2012 and 2013 audited financial statements.

Unfortunately those financial statements were qualified because the record-keeping within

the organization was extremely poor. So a lot of the substantiating documents to support

the preparation of the financial statements were not present within the organization, so it

meant that we were forced to have the three years qualified, but we still presented at the

AGM. We were able to declare a small $1 million dividends for the first time because we

were able to demonstrate that there was profitability within the organization.

During this year 2018, we are currently, the auditors are in right now, and they are auditing

the 2014, 2015 and the 2016 statements. So, we expect that in early 2019 we will be

having another annual general meeting and presenting those three years. So far it appears

that those accounts will not be qualified, so we have been able to get a lot more of the

documentation and provide the information and documentation that the statutory auditors

require.

Mr. Mark: Mr. Chairman, may I ask the Chairman or the CEO whether you can share

with this Committee or advise this Committee whether there is any partnership with any

foreign or local entities aimed at partnering with Lake Asphalt for mining of our pitch or

the lake, and if so, can you identify those entities for this Committee?

Mr. John-Williams: At this point in time there are no such partners or partnerships.

Mr. Mark: Can you indicate to this Committee whether you are aware of any agreement

signed between Lake Asphalt and Beijing Construction Engineering Company for

partnering with Lake Asphalt as it relates to the mining and monetizing of our asphalt?

Are you aware of any such—


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Mr. John-Williams: No such agreement has been signed. The agreement that we signed

with Beijing Construction is a distributorship agreement. So if such an agreement exists,

I am unaware of that.

Mr. Mark: Okay. Can you make available that agreement? I think we did, in fact,

request.

Mr. John-Williams: It is there. It is in your binder.

Mr. Mark: That has been there? The latest one I am talking about.

Mr. John-Williams: Yeah. Yeah. There is only one.

Mr. Mark: You only have one—

Mr. John-Williams: Yeah.

Mr. Mark: Mr. Chairman, did we receive that? It is in our package? All right. I will just

pause for this time.

Mr. Chairman: Mr. Karim, and then we will come back to Mr. Mark.

Mr. Karim: Thank you very much, Mr. Chairman. Good morning to all. Mr. Chairman

of Lake Asphalt, you indicated that the company was not very competitive; am I correct?

And at some point in time in the responses you gave to us, it was mentioned that while

there were some tangible improvements throughout the organization, they were not

sufficient to make it best in class. Could you, for example, indicate to the Committee,

what steps have you taken?—bearing in mind that you have identified the company as not

being competitive. Why is it not competitive, and what are you doing to make it

competitive?

Mr. John-Williams: Like I said before, our core product, the modified that we produce,

which is the refined asphalt, which is used to enhance the properties of bitumen, which

traditionally over the years has been used on specialty pavements, namely airport runways,

bridges, decks, heavily used intersections, et cetera. But like I said, we are working with

1816 technology, ’67 technology, and there was no research and development that

revolved around this particular product, it was never changed, so the world continued

along and we lagged behind.


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So our research and development now, we have developed this new form of the material

which is—we are going to be even using less of this material to give us the performance

grade that we want in the bitumen. All the tests that have come back from independent

laboratories in the US have proven that this material is a super material, it has positive

effects on the pH of bitumen. Right?

To give you an example, our distributor in Germany, to make our product fit for use, he

takes our—we ship a quarter ton of solid asphalt in a wooden drum, he breaks this open,

he crushes it and he repackages it in a bag, a 20 kg bag with cellulose paper to prevent

coalescing to make it user-friendly for his end users. Right?

So with this new product, as a matter of fact, we have even gone the extra mile of

polymerizing the product. So if you have to pave a road in Greenland, for example, we

already have it, the material is already polymerized, so you can get that low-in-temperature

flexibility. So, I mean, the future is bright once we start producing this material.

Mr. Karim: Okay. Thank you. In terms of your new marketing strategies, what are

those? I mean you were—Okay.

Mr. Mc Clashie: With regard to marketing, we have gone out extensively to China in

particular. We have been expanding and having talks with people in Nigeria and Ghana

on the African continent. We have now distributors available in the Middle East, so we

have been very active in looking for new markets.

Standard within all of those markets is that our product, though great, is not user-friendly.

So that anybody using our product has to invest in other pieces of equipment to reheat and

to make our solid mass liquid before they can introduce it; that adds a lot of cost.

The competing polymers, because they come in bags, they can just basically take them

and throw them into the mix without any additional cost. And in order to compete with

that, we have to create a product that will compete along the same lines, and that is why

our thrust into the cold-mill technology and creating, what is that?—a powder; it is one of

the ways we will become more competitive. Until we get there, people will use our

products only for high-end purposes—airports, racetracks—but they will not be using it


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for normal run-of-the-mill first-grade roads because it just adds too much cost to their mix.

Mr. Karim: Do you intend to create any forward linkages with what you have existing

utilizing improved technology to ensure this jewel improves and maintains its

profitability?

Mr. John-Williams: Yes.

Mr. Karim: And if you can tell us some of those?

Mr. John-Williams: Yes. One of the things that we keep talking about is paving roads,

but together with the University of the West Indies and our own internal research, we have

developed quite a few coatings and specialized products that we would wish to market

within the next year or two.

You would be probably familiar with the LASCO brand, and that particular brand we are,

in fact, now dealing with people in South Korea who do—well, this is a brochure here

[Displays document]—who do car manufacturing—to see if we can get those products

into that line of production so that we can improve our whole LASCO brand.

So it is not just, as we see it, we are not just selling road-paving material; we wish to create

a whole new substrata in terms of the products that we can offer locally, regionally and

internationally using the research and development that we are doing in the background.

But in terms of cost and investment, we need to start somewhere, and our priority at this

time is to do the CMTLA which is the cold-mill process.

When that process is done, we will then use the dried powdered material to do now a cold-

mist LASCO product. And LASCO, we heat the material and pour it and do a number of

different things. The CMTLA will give us an additional advantage that we can now do a

cold process for all our other downstream industries. So it is really not a—we are not a

one-product company; everything we do is linked to the bitumen market. We cannot take

pitch, for instance, and pave a road. It must be introduced into bitumen, and that is why

we started early by saying we are a bitumen company. We have to understand it in order

to market our product.

Mr. Karim: Okay. Given what you have in mind, your vision for the advancement of


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the company—of the 300 employees you have in La Brea, could you give us a sense of,

firstly, how many of those 300 are from La Brea and the environs? And secondly, have

you identified any skills, gaps and training needs to take you to where you need to be?

Mr. Wiggins: All right. Currently, over 80 per cent of our employees are from the

community of La Brea and environs. What we have done from the human resource point

of view is looked at the skills and competencies. What we have done as well working

with the board and management team is produce a document which is our job profile,

where we actually right now understand and appreciate within the organization the

employees, the competencies that are required within the different levels, where people

are, the gaps and the steps that we will need to take to close those gaps.

Mr. Karim: Okay. I will come back to the question later on. But do you support any

scholarship financing or funding via Lake Asphalt to anyone?

Mr. Wiggins: Could you repeat the question?

Mr. Karim: Do you support, do you provide any scholarships either to any affiliates of

the organization or to any persons in the national community through Lake Asphalt?

Mr. Wiggins: Yeah. We do support continuous development. So within our policies,

employees who are continuing their training and development, we will support them in

what way they can. Yes. People do write to us and we do provide support financially.

Mr. Karim: Okay. What percentage is outside of the company then, do you support?—

of the scholarship financing. How many persons would you say you provide that financial

assistance to?—outside of your immediate internal environmental.

Mr. Wiggins: I do not have the information here right now, but I would be able to get it

and provide it at a later date.

Mr. Karim: All right. Thank you.

Mr. Chairman: I have a couple questions, but before raising them, I just want to preface

them with a couple remarks. So to my mind and, I think, a lot of ordinary people, pitch is

a distillation of petroleum? Right? It is binding agent, it is water and impact resistant,

and it is used for roads, it used for waterproofing, it is used to make electrodes, carbon,


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steel and pitch oil. Now, so there are many different uses for pitch.

You say that you have been a sleeping giant, and I gather you have been sleeping since

1816 because you have been using 1816 technology. My question is: Do you have a

research and development department? And have you been looking at the other potential

uses of pitch?

Mr. John-Williams: All right. We do not have a research and development department.

What we have done, we have hired a researcher, as a matter of fact, who was once

employed at Lake Asphalt who developed the LASCO range of products. We hired her

to produce, to develop the new powdered form of the material and the polymerized version

of the material. And together with the UWI who has done—they have developed a number

of products. There is an MOU in place between UWI, and at this point in time we are

looking to market two of their products, one of them is a vertical seam sealer, and the other

one is an anti-corrosive paint.

It is sad that after all these years that none of the universities has developed a faculty that

revolves around asphalt. We have the best modifier in the world. I mean, we are supposed

to be telling the world, “aye, listen this is how we use our material”. Right? Just how the

British, the process that the British have developed, we just continued along with it, we

did nothing with it and then, of course, the company became, I guess, probably pretty fat

and lazy when they were making easy money from selling Petrotrin’s bitumen.

Mr. Chairman: So for a long time the impression I have is that the model was that you

basically have this resource there, you extract it, you package it and you sell it. But you

have said it is not a user-friendly product, and it is not just selling road-paving material,

and so you are now competing with people who are using technology, these polymers,

these Germans and whatnot. What is stopping Lake Asphalt from investing in research

and development and bringing in your own technologists?

Mr. John-Williams: Well this is what we have done. We invested in research and

development, and hence we have a new product that we are giving to the world, a new

material that we are giving to the world.


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Mr. Chairman: And so research would be in the product itself, the bitumen, the pitch, it

would be in the extraction methods, it would be in the packaging.

Mr. John-Williams: Yes. We are even changing the extraction method. At this point in

time we use bulldozers and over-loaders, et cetera, et cetera; our new way of extraction

will be via milling. And we have discovered that from milling the material we start

changing the material, our research and development has shown us that.

Mr. Chairman: Are there any other uses or applications for pitch?

Mr. John-Williams: Of course, I mean, waterproofing, you know, the seam sealers, I

mean, we have, we produce right now a black paint, anti-corrosive black paint. We

produce the LASCO sealant. Right? So, of course, there are a number of derivatives.

Mr. Chairman: So there can be a number of spin-off downstream industries?


Mr. Chairman: Okay. Mrs. Cockburn.

Mrs. Crichlow-Cockburn: I noted in your submission that you would have indicated

that your internal audit function is under-resourced by more than 50 per cent. One, is that

still the case? In addition to which, what is the impact of having an under-resourced

internal audit function in the organization? And how do you ensure transparency and

accountability?

Ms. Gomez-Miller: It is impacting because in 2017 we established our balance scorecard

after we completed the strategic plan because we needed to do the balance scorecard to

ensure that all of the objectives within the strat plan are being focused on, and after that

we were supposed to go into enterprise risk management. So without a fully functioning

internal audit unit, it has impacted our thrust in getting that scorecard being properly

assessed for risk, and making sure that all of the objectives are being achieved.

At this point in time we have three auditors, so we do have our senior auditor present with

us here, Mr. Denzyl James, and along with two other auditors. So, at least, for the time

being we are concentrating on identifying the areas of highest risk within the organization,

focusing on that. Thankfully a lot of the ad hoc investigations that were taking place in


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the first few years, that has more or less abated. So, we can now have the internal audit

function just focusing on providing assurance and also facilitating the enterprise risk

management system.

Mrs. Crichlow-Cockburn: I noted you advertised most of your audit positions this year,

but were unsuccessful in filling all of those positions. What is the reason for that inability

to fill those positions?

Ms. Gomez-Miller: The compensation package is very low, plus that, given the

geographical location of the company which is within La Brea, you actually have to get

the type of competencies coming from outside of La Brea per se. And as such, no one

will leave, let us say, the east or west corridors, et cetera, to come down into La Brea if it

is the compensation package is not attractive.

Mrs. Crichlow-Cockburn: So do you plan to probably give a scholarship, grant

scholarships to persons who are currently within the organization?—because if they are

already there they may be more likely to remain. So, do you have any plans, one, for

succession planning? And two, for building capacity internally by probably providing

scholarships?

Ms. Gomez-Miller: One of the auditors actually came from the finance and accounting

unit, so we were happy to have her. The only thing is that we have to spend about a year

before we can use her doing any of the financial audits. But we did not contemplate on

providing scholarships, but we are recognizing that, yes, that might be one of the

incentives that we can use.

Mrs. Crichlow-Cockburn: The last question has to do with the strategic objective of

monetizing Lake Asphalt. And I noted, well one, sales dropped, and it is a combination

of plant overhaul and low performance culture. Could you explain to the Committee what

is meant here by “low performance culture”?

Ms. Gomez-Miller: Because of the process that is being used, you would find that the

full labour force is not geared up to that high level of performance at any one point in time.

From the perspective of, if you have a continuous production, a continuous volume of


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production, you would find your labour force would be always peaking at that high level

of performance.

So it meant that the balance scorecard was used to try to bring that performance up because

it carries what we call stretch base and min targets, so everything is around that. The

status reports that are coming into the boardroom also have that stretch base and min

targets, so that nothing is done without it being measured. So, we have been moving the

culture of low performance into focused performance, and we expect that as we move into

the new process, you would have that continuous business flow.

Mr. Hagley: If I should interject here. We are going back to 1800s. Right? You see,

Lake Asphalt functioned under a capacity which labour was actually called by a horn when

the ships came in and then you started to ramp up production to deal with loading these

ships. So this culture, more or less remained, and because of the present form of the

product, it is not feasible to load and pack large volumes of unused pitch in the

warehouses.

So a kind of culture of, we produce to deal with orders rather than this is a product that we

could have like assets then, you know, so therefore a continuous production. So this is the

new stride of our strategic plan where we get into cold mill, we will be able to continually

produce, schedule and even store the asphalt in the new form because it will have a longer

shelf life, and that is what we talk about changing the culture, how we look at production.

Mrs. Crichlow-Cockburn: Okay. Thanks for that explanation, because I was concerned

whether it was the human resources themselves, but it has to do with the systems and the

processes.

Mr. Hagley: Systems and the processes.

Mrs. Crichlow-Cockburn: Okay. Thank you.

Mr. Chairman: Thank you. Brig. Gen. Antoine.

Brig. Gen. Antoine: Good morning. In your submission when you were asked, what is

the demand for the bituminous products, I have bitumen 60; 70 asphalt cement emulsions.

In your projection, your October 2018 to December 2019, and your projections from


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January to 2019 to 2020, there is a great discrepancy. You have 120,000 gallons,

2018/2019 over a 15-month period; but then you have nine million gallons, January 2019

to December 2020, which is a 24-month period. What is the basis for these projections?

And the basis for the differences?

Mr. John-Williams: Our bitumen demand is contingent on Government’s road-paving

programme. If there is significant road paving taking place, our sales are going to be up,

and you will see a significant drop in our sales of bitumen over the last two years, and that

is because the road-paving programme has not taken off; so that is going to change

significantly.

Brig. Gen. Antoine: But your projections for 2019 to 2020 are based on the

Government—that is why I say, what is the basis for your projection?

Mr. John-Williams: Well, I mean, let us be brutally frank here, I mean, we have an

election next year, and we assume that with election, road paving is going to pick up, so

that has been the tradition over the years and, I mean, history will prove that, you know.

Mr. Chairman: Mr. Mark.

Mr. Mark: Thank you, Mr. Chairman. May I ask the CEO, the Chairman, is there a

formal credit policy having regard to that matter being red-flagged by your auditors some

time ago? Is there a formal credit policy at Lake Asphalt?

Mr. Wiggins: Yes. We would have drafted our policy and we would have gotten the

board’s approval, so we do have a credit policy.

Mr. Mark: Can you make a copy?

Mr. Wiggins: Sure.

Mr. Mark: Can you make a copy of that available?

Mr. Wiggins: I will make it available. Sure.

Mr. Mark: And then in terms of one of the other areas that was mentioned, inadequate

maintenance of a fixed assets register and the non-journalization of inventory transaction.

Could you give us a status report on those two matters?

Mr. Wiggins: Sure. Having identified in previous audit reports the matter of the fixed


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assets and the inventory, what we would have done as an organization is that we would

have had—we bought a system, an enterprise reporting management system, Great Plains

Microsoft Dynamics, whereby we are now able to have at real time, at any point in time,

have the information available relative to reporting. Where the fixed asset is concerned,

we would have also invested in a TMA system, total maintenance system. We as an

organization recognized that information was not available, and when it was available it

was manual. We are now going to computerize and it will go both for the inventory and

for the fixed assets register system.

Mr. Mark: Okay. Can you provide this Committee with a report on what has happened,

based on what you have said—

Mr. Wiggins: Sure.

Mr. Mark:—to these two items? May I also ask, through the Chair, the following: Could

you give us, Mr. Chairman, the approximate reserve of raw asphalt sitting in the lake at

this time? And can you give us also the daily extraction rate of the raw asphalt product in

metric tonnes?

Mr. John-Williams: Well, there have been a number of figures touted, you know, some

saying about 400 years of use, et cetera. But at this point in time our rate of extraction is

like about 200 tonnes a day, and that is because the demands are soft.

Mr. Mark: And what is the maximum capacity—based on your own analysis of your

reserve without imparting negatively on the environment—you believe that if you are

operating at optimum efficiency levels you can extract on a daily basis?

Mr. John-Williams: The thing is that, and this is what makes this new product so

exciting. Given, with our old product, we needed to modify, we needed to add 25 per cent

of our TLA into the bitumen to modify it to get a performance grade of 64/16. Now with

the CMTLA, we only need to use 15 per cent to give us that performance grade. So, we

will add life to the lake with, you know, your extraction rate is now going to be lower.

Mr. Mark: Could you also indicate—the daily production you said is about what?

Mr. John-Williams: 200 to 300 tonnes.


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Mr. Mark: 2,000 to 3,000—

Mr. John-Williams: No. No. No. A 100 tonnes a day that we extract.

Mr. Mark: 100 tonnes a day.

Mr. John-Williams: We extract daily.

Mr. Mark: Right.

Mr. John-Williams: So roughly right now we are producing 3,000 tonnes a month.

Mr. Mark: A month.

11.40 a.m.

Mr. Mark: What is the cost to the company when you extract at least one tonne of raw

asphalt? What is the cost for one tonne?

Mr. John-Williams: Could we provide that to you in writing, and I would tell you why.

There are a number of people outside there that are prospecting, et cetera, et cetera, who

will be listening to this meeting here today.

Mr. Mark: Right.

Mr. John-Williams: So we can provide that to you in writing.

Mr. Mark: Okay. Can you also indicate the companies and their locations that you have

purchase agreements with, and what price you have arrived at in terms of metric tonnes?

You want to also provide us that in writing?

Mr. John-Williams: Yes, we will.

Mr. Mark: Okay. Thank you, Mr. Chair.

Mr. Chairman: I think Mr. Mark was also driving at, if you could answer, what sort of

metrics are available to tell us how efficiently and effectively you are performing.

Mr. John-Williams: We are performing under capacity right now. I mean the plan has

a capacity of about 50,000 tonnes a year. Right now we are just operating at about 36,000

tonnes a year, and that is because of soft demands for the material. But that is going to

change. Once we have a material that is user-friendly that is going to change

tremendously.

Mr. Chairman: Mr. Karim.


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Mr. Mc Clashie: All right, before he goes on I would just like to clarify something that

we need to put in the room, and that is that TLA, Trinidad Lake Asphalt, is not a

commodity product. There is this feeling out there that you produce asphalt and therefore

it will sell. People do not buy asphalt to put on a shelf and look at it, therefore every tonne

we sell is specific to some project somewhere in the world. So, if somebody wants to

build a highway, they will come to us and they will buy only what they need to build that

highway. We do not sell to people who do prospecting. So traders find it difficult to buy

our material and use it. In fact, there is a client we once had in China who bought 15,000

or 20,000 tonnes thinking that they could have sold it, and it is still on their hands because

it was not associated with a particular project. And we need to make that distinction. So,

we could produce all the asphalt in the world, if there are not projects that they can be used

on they go nowhere. So, I just wanted to make that clarification because there is this

thinking that the more you produce the more you sell, and it is a commodity that you buy

across the board. It is not.

Mr. Chairman: Thank you for that. Mr. Karim.

Mr. Karim: Thank you very much, Mr. Chairman. Mr. Chairman if I heard you correctly

you said you extract about 200 tonnes daily?


Mr. Karim: All right. Out of that how much is utilized or sold on the local market, and

how much is exported?

Mr. John-Williams: Well, I mean I could not give you the breakdown specifically. Now,

from that we would produce our AC, and some of it we will export. Some of it goes into

our LASCO range of products.

Mr. Karim: But on the average as a percentage, I do not know if you could give us a

ballpark figure as to what is utilized locally?—because there are many persons who are

complaining about the lack of infrastructure development and so on. I understand what

your colleague said in terms of you cannot buy it off the shelf. I understand that. The

question I am really asking is: What is the ratio of utilization in the domestic market as


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opposed to export?

Mr. Wiggins: Okay. This gives us the opportunity to promote the use of asphalt in the

road paving locally. Within the local market the TLA that we sell is not highly used.

Within the local market it is only—and I am just giving percentages here—0.1 per cent of

the TLA that we use. What is used locally is the bitumen. Now there is the refinery

bitumen, the 60/70 that we refer to, that you could use for the road paving. Our modified

asphalt or TLA modified bitumen is what we would recommend to be used. Now, as we

said, we have the number one modifier. It has been proven the use of our product ensures

long lasting pavements. Now we always market the TLA that we sell as the Rolls-Royce.

It is a premium produce which attracts a premium price. But we do understand the

contractors of themselves may not like to use the modified version because it is a little

more costly, but also the road lasts longer. We in Lake Asphalt want to take this

opportunity for those who would be interested in the company and road paving on a whole.

We do promote the use of the asphalt cement, which we sell, which is TLA-modified

bitumen. So the TLA, I just want to repeat, the TLA is more for the international market.

The TLA of itself.

Mr. Karim: Are you satisfied with the uptake of the international market?

Mr. Wiggins: No. What we have done from a marketing perspective, we have done

certain things. We have removed the exclusivity of distributors. We have expanded the

distributors. We have done a serious thrust, an aggressive thrust towards meeting our

current distributors and new distributors, for example when we would have visited China.

Locally, however, with the bitumen, and where the bitumen is concerned we have 94 per

cent of the local market because there is a local provider of bitumen as well that has a 6

per cent margin.

Mr. Karim: Okay. Just to follow, you indicated before that in terms of moving the

company forward in terms of the marketability of the various products or diversifying the

range as it were, or adding value, that you have secured the services of a researcher. Might

you be able to tell us who that person is, and what is the cost of that investment to that


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researcher? And what really that researcher does? Maybe you should tell us rather than I

suggest what it could be.

Mr. John-Williams: That researcher is Ms. Dolly Nicholas, and I will venture to say that

she probably has the most research in this material in this country. She is quite a resource.

She is the one who has developed the entire LASCO range of products.

Mr. Karim: How long now has she been on board as a researcher?

Mr. John-Williams: When we came into officer we hired her to develop the new

powdered form of the material.

Mr. Karim: So, three years ago?


Mr. Karim: And the only thing you have, when the Chairman asked the question about

an R&D department, the only thing that you have is the R? You do not have a department

as such?

Mr. John-Williams: No, there is not a department. No.

Mr. Karim: Why is it that, if you have this ability, if you have this futuristic vision as to

what this company should be in terms of the jewel, why is it have you not seen it fit to

increase the amount of R&D and to build the capacity into a unit for R&D sustainable?

Mr. John-Williams: Well, we have not developed to an in-house unit, but we have been

making use of UWI, for example, who has developed a lot of new materials, and we are

partnering with them.

Mr. Karim: To what extent the UWI relationship has added to your commercialization

value?

Mr. John-Williams: Well we have not started producing their products as yet. We

should be doing that sometime next year. We will start producing their materials on a

commercial basis.

Mr. Karim: Okay. Do you have any desire or any intent to create a sustainable unit for

R&D within the organization?

Mr. John-Williams: Yes, we do.


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Mr. Karim: And by when you might do that?

Mr. John-Williams: That would be next year also.

Mr. Karim: Okay. Again, along the HR issues.

Mr. John-Williams: Sorry?

Mr. Karim: Along the HR issues, could you tell us how many vacancies do you have

existing in the organization, and by when you expect those to be filled?

Mr. Wiggins: I do not have the exact number here. I will have to provide it.

Mr. Karim: All right. If you could also tell me the competencies that you are lacking?

Because I am aware of some of the facilities/institutions like the NESC—it is nearby to

you—UTT in Point Fortin, MIC in Point Fortin, and so on. You spoke about UWI, but if

you can also indicate to us what are your skills gap and how do you intend to fill those?

Two final questions, Mr. Chairman. If you can give us an idea, do you have any legal

matters that is facing your organization? And if you can give us any details of those

without, you know, breaching the confidentiality of it?

Mr. John-Williams: Yes, there are.

Mr. Karim: Could you give us a sense as to what these matters are, and how long have

they been there?

Mr. John-Williams: Well they have been there since we got into office. I mean, we can

provide written details for you. A lot of the matters are sub judice at this point in time.

Mr. Karim: Okay. Could you also tell us about your status of your receivables and

payables, which may be in there, but for us and the benefit of the people who are listening

to this live broadcast?

Mr. Wiggins: The information would be here, but I do not want to give the incorrect

information with receivables and payables, so I would—

Mr. Karim: Do you have moneys outstanding to contractors? Are you up-to-date with

your payments?

Mr. Wiggins: Where debt is concerned, no?

Mr. Karim: Okay. All right, so you will—


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Mr. Wiggins: You have receivables.

Mr. Chairman: I think Mr. Karim is on the same page as me because it really warmed

my heart when I heard that you were saying that you have developed a new form of the

material. You have a patent pending, but it seems as though you are relying entirely on

external support. You know, in the 21st Century you would think, given the resource that

you sit on, that there would be some sort of value for creativity and innovation within the

organization, and whether you are making any systemic attempts to stimulate creativity

and innovation.

Mr. John-Williams: Well, we are going to be expanding our technical services

laboratory. At this point in time it is just a quality lab. Given the fact that we are going

into this new material we will be expanding the services there where we now have to go

into things like PG testing, et cetera, et cetera. Because if we are selling to the international

market, everything that we export we must be able to say, okay, look, it meets this

particular standard. So, there is going to be expansion in that area, the technical services

area, and the R&D area.

Mr. Karim: Can I just quickly? What percentage of your asset base or in terms of your

profits or your revenue would you say that you spend on R&D? What percentage?

Mr. John-Williams: On R&D so far, since we have been there, we have expended like

about $10 million, and that would be developing of the new CMTLA cold mill product,

and also the polymerizing of this new product.

Mr. Karim: This has really been—finally to say—to seek external assistance for R&D

as opposed to building your internal capacity for leveraging your future marketability, am

I correct?

Ms. Gomez-Miller: Yes.

Mr. John-Williams: At this point in time—

Mr. Karim: I heard an answer, yes, eh.

Mr. John-Williams: Sorry? [Laughter]

Mr. Karim: I heard an answer, yes, before you answered it.


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Mr. John-Williams: The in-house aspect of it will take a while to develop because we—

I mean, we do not have the luxury of time. We had to go to someone who has had the

experience, someone who knows this material intimately, so we had to outsource it.

Mr. Hagley: Mr. Chair, if I could also interject here. I know he is being very cautious,

but those of you who have had the privilege of working or serving on state enterprises

would know that our structures move extremely slow. So to increase departments, and to

increase staffing, and to increase structures, sometimes you have to get creative, and I

think this board has tried to utilize existing skills set, especially with the university to get

the job done. We see it, and if you look at our strategic plan, and at least me personally

as a man from the south area, I have told them I am hoping that sometime in a future state

we would be exporting less asphalt and more asphalt products. So, I mean that is where

we see the company going, but we have to creep before we walk, you know, and we want

to say that this is the vision we have and we hope that whoever comes after would take

the baton and continue in that general direction.

Mr. Chairman: Thank you deputy chairman, and in fact this is a nice segue for me to

ask a couple of questions of the Ministry of Finance, because as the shareholder, should

we be not encouraging all our state enterprises to develop this systemic attempt to

stimulate creativity and innovation, and to value this whole creativity and innovation

within organizations?

Ms. Durham-Kissoon: Yes, Chair, you are correct. We would like the state enterprises—

all state enterprises—to look at innovation and have their organizational structure tailored

to suit. We rely heavily on the line Ministry that has the strategic focus for the sector to

look more deeply into that area and collaborate with us, well, collaborate with the

company first, and try to stimulate, as you have said, Chair. But, yes, that would be our

desire as corporation sole.

Mr. Chairman: Dr. Henry?

Dr. Henry: Morning everyone, apologies for being a bit late. This is a question that

comes up regularly when the deal with state enterprises for the Ministry of Finance, in


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terms of what have you done in recent times to ensure the transparency and accountability

of this particular enterprise? It is something that we ask frequently with just about every

state enterprise. You are the Ministry of Finance person.

Ms. Durham-Kissoon: Okay. Through you, Chair. The Ministry of Finance, as you

know, we are guided by the policy document, the State Enterprises Performance Manual,

and there are several documents that are required for companies to produce in compliance

with that manual. At this time of year every year we do a sort of check as to how

companies have complied with the documents. That is not to say that during the year we

regularly keep on top of companies to ensure that they submit their board minutes on time,

and we look at all their other requirements and we keep on to top of them. I do not know

if there is a specific area that you are looking into. I mean, the audited financial statements,

before you came in, we discussed that and we are working—we are on top of the company

so that they can move quickly towards becoming up-to-date.

Dr. Henry: I understand that, and thanks for your information. But then, just saying, are

there any specific challenges outside of the norm with Lake Asphalt?

Ms. Durham-Kissoon: Chair, we have communicated with the company with their

reliance on the output of Petrotrin, and we have sought to ask them how they would wean

themselves off the dependence on the company. So that was an area of concern for us,

which we have communicated to the company and the Ministry. The other area, and I

think it comes from what had been raised earlier, a bit of a weakness in internal controls.

All right. That triggered in 2016 the Ministry of Finance launching a systems audit

between March and July of 2016, where there were weaknesses that were discovered, and

that has led to us calling for a forensic audit. That is where we are at the moment. The

forensic audit is to be commenced, I believe, shortly.

Dr. Henry: Okay.

Mr. Chairman: And on that point, in submissions received from Lake Asphalt on Page

9, when questioned about the company's adherence to tender rules and procedures, it was

stated that there is one exception of note where Lake Asphalt experienced challenges in


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complying with its standard tenders rules. This was in the case of the procurement of

forensic audit services which was recommended by corporation sole. When was this

recommendation made, and when was the matter reverted to corporation sole?

Ms. Durham-Kissoon: Chair, I believe the recommendation for the forensic audit was

early 2018. I am just checking for—all right, but I think it is earlier this year we

recommended that the forensic audits be conducted.

Mr. Chairman: And was any feedback given to the company?

Ms. Durham-Kissoon: We asked the company to launch the forensic audit and they did

issue an RFP. The issue with that RFP was at devaluation. The evaluation that was used

differed somewhat from what was launched in RFPs, so we raised an issue, and I believe

the company is addressing that at the moment.

Mr. Chairman: And in submissions received from the company, Page 28, when

questioned on what the company does to ensure transparency, accountability and value for

money of its finances, it was stated that the company has adopted several measures

internally to ensure transparency, accountability and value for money, when was that

recommendation made by corporation sole, and when was the matter reverted to

corporation sole?

Ms. Durham-Kissoon: I do know if my colleagues have that information, but, Chair, can

I get that back to you please?

Mr. Chairman: All right, we are coming down to the end. Does anybody has any

question? Mr. Mark.

Mr. Mark: You wanted to ask the chairman or the CEO, is there a practice or policy at

the level of the company to have arrangements with companies for the exclusive

distribution of products—that is of its products—within Trinidad and Tobago, and to

receive payment in cash? And could you tell us whether any such agreement has been

entered into by your company and with whom, and whether that agreement still exists?

Mr. John-Williams: We have taken a decision—when we came in we met several

exclusive arrangements, one of them was with a company in China that had an exclusive


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for the Chinese market with a take-or-pay contract. They did not—they were not taking

what they were supposed to, and we negotiated with them to be able to free up ourselves

to have other distributors in the Chinese market. So our policy has been one of non-

exclusivity. We are not offering any exclusive contracts to anybody for any market.

Mr. Mark: Locally? That is externally, but locally?

Mr. John-Williams: And locally.

Mr. Mark: So are you saying to this Committee that as far as you are aware there is no

agreement between your company—Lake Asphalt— and any local companies for the sale

of the company’s products exclusively on the Trinidad and Tobago market, and to be paid

in cash? I would like to know if you are categorically stating that you do not have in your

records at this time a signed agreement between the CEO, not necessarily the current CEO,

and not necessarily your good self as chairman, but do you have such an agreement, or are

you aware of such an agreement?

Mr. John-Williams: I am not aware that such an agreement exists. CEO you want to

take that?

Mr. Wiggins: I am not aware of any agreement, but I would do some due diligence and

get back to you.

Mr. Mark: Well, I want to invite you in doing your due diligence to look at an agreement

which was signed on the 1st day of October 2008 between Lake Asphalt, as the supplier

and a company by the name of Specialist Asphalt Transport Company Limited, and there

is no end date. There is no end date, Mr. Chairman. There is a starting date, Mr. Chairman,

but there is not end date, so maybe that is why you are not aware, because this thing is

forever. So, I would like to know, on behalf of this Committee, if you can supply us with

this agreement, and if you can tell this Committee whether in this transaction the company

has agreed to receive the sale of products by this agreement only in cash, and whether that

is a proper arrangement as far as you are aware?

Mr. John-Williams: This board, when we came in we met a number of existing contracts

that did not seem to have an end date. As a matter of fact there were contracts that we


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could not even find a start date. So, we have mandated that every single contract has to

go back out for tender. Now this company you are referring to, Specialist Asphalt, as far

as I am aware they transport our bitumen for us from Petrotrin to La Brea. That is the

180/200, right. But we are mandating management that every single contract must be

re-tendered. For example, the mining of the lake. When we ask, okay, let us see a copy

of it, we could not even find a copy of the contract. So all these things are going out for

tender.

Mr. Mark: You see, Mr. Chairman, the reason why I raised this is because you have said,

and I agree with you, that this is a jewel, and this company has a monopoly, but yet still

we find that the company is not making the kind of profits that it ought to be making. And

as you rightly said, there are agreements that are very questionable and suspect, and I think

I would like to ask, through the chairman for Lake Asphalt to make available to this

company all those open-ended contracts that you have inherited, as you claimed, as well

as those that have no start date, which is amazing. So you have no start date, you have no

end date, and we have a situation where we are told that this arrangement is to be made in

cash. So you could well appreciate the challenges that this company is faced with as it

relates to its operations, and what can be actually occurring as a result of this arrangement.

So, it is against this background, Mr. Chairman, I would like to ask, through you, that all

these agreements be made available to this Committee so we can do our own analysis,

evaluation and assessment of those agreements, both in terms of non-starting dates as well

as non-ending dates Mr. Chairman?

Mr. Chairman: So we would invite you to provide us with those documents. As we start

winding down I am going to take three more questions in this order: Mr. Leonce, Mrs.

Cockburn and Mr. Karim. Mr. Leonce.

Mr. Leonce: Chair, thank you. Just stepping back a bit on some questions in terms of

HR and training. Again, I am impressed with the 2017—2022 strategic plan, and I think

once these things can be achieved Lake Asphalt will be, as you say, realized by the national

community, the gem, and the sleeping giant will wake up. My question, I have been


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hearing you speaking about UTT and researcher, and some of the members on the team

here have spoken about, how are we going to get this technology transfer resident in the

Lake Asphalt and the training? Now, I know you all would have an organizational chart

specific to support this, and I heard one of your members also talk about the challenges in

having this thing official, maybe approvals from CPO, or whatsoever. You spoke about

some innovative ways to do this, and I would just like for you to ventilate a little bit more

on what are some of the innovative ways that you all are using for this technology transfer

and training, even without the complete processes, CPO approvals and the full

complement of the org chart, what are some of the innovative processes or strategies that

you all have done to ensure that Lake Asphalt, even without the complete achievement of

the strategic plan, how is that innovation supporting this?

12.10 p.m.

Mr. John-Williams: Right now the technology that we use, if I can find an analogy to it,

many years ago we used steam to run the trains, right? Now trains are run by electronics

and electricity. Our new plant will require a total shift of technology and in terms of the

human resource that we require. Because right now our process is steam driven. We have

no sophisticated control systems. Our new plant however, will require such systems. So

you are talking about a new breed of people, of employees. So we will have to sit with

the bargaining unit because there will be positions that are non-existent in the present org.

structure and in the present bargaining arrangement. So this is a conversation that we have

to have.

Mr. Leonce: Well, okay. But this is a five-year plan which basically we are already well

into halfway or going into halfway of this plan. So I am just thinking—I see you want to

say something. Go ahead, sorry.

Mr. Mc Clashie: One of the things that I think we need to expand on a little is our

arrangement with UWI and we have been talking about how do we get into innovation

and research and development. One of the things that we recognized is that UWI as an

intellectual organization has a lot of capacity. They have been doing very meaningful


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work. We have made the first step of having an MOU with them with regard to the

development of products.

We have also spoken to them very preliminarily about support from Lake Asphalt for

research and development within UWI and the creation of, maybe, some different

scholarships, because research and development, you do not walk out of a classroom today

and start to do research and development tomorrow. So it is a long term relationship. And

in fostering that long term relationship we have committed to UWI, which is still in the

preliminary stages of discussion, how Lake Asphalt and UWI can work in terms of the

development of a complete research unit within the university, that Lake Asphalt will be

able to give both of resources and UWI will then develop the expertise. So in a true

partnering arrangement—because at this point in time we have so many other issues to

deal with in bringing Lake Asphalt to best in class, that we cannot go out the road, for

instance, and pick up somebody who knows anything about asphalt and asphalt research.

Mr. Leonce: Sorry. I do not want to cut you because I know time is of the essence. One

of my colleagues would have spoken about doing scholarships and that kind of stuff. So

I am just wondering if that was part of the strategy in terms of keeping the technology

transfer resident.

Mr. Hagley: Through you, Chair, in my seat on the HR committee we have been trying

to introduce a graduate trainee programme. But as you would understand, and this is not

in lieu of making an excuse, we have been juggling so many crises in terms of managing

this organization, we had to be a little prudent. So we know that what we have to get is a

good graduate trainee programme where we would develop people who hopefully will

have some loyalty to the organization and maybe would accept the not-so-market rates,

okay, but we are juggling it and we are aware and we think graduate trainee programmes

and maybe scholarships when the money becomes available. But we are trying to manage

scarce resources to make sure that we have a sustainable organization in the future while

we also see how we can get the human resources that are available at market and in the

community. But I understand your concern, but we cannot spend money willy-nilly, we


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have to try and, through the CEO, manage our existing resources as carefully as possible.

Mr. Chairman: Thank you. Mrs. Crichlow-Cockburn.

Mrs. Crichlow-Cockburn: Thank you, Mr. Chairman. My area of concern is the human

resources. I note your comments and I get that you are on the right track. But we have a

strategic plan, five-year period. And I am looking at some of the challenges you identified:

low skill bases, high percentage of unskilled staff unsuited to drive transformation into

new technology. And as we are all aware, your human resources will determine whether

your organization is successful or not. Top heavy inexperienced management and archaic

organizational structure—and when you put that together with an aging work force and a

consequential loss of institutional memory, my area of concern is, what can you get done

within that short term period, five years? Because if we have to achieve the objectives of

the strategic plan you need to have the right resources resident in the company and based

on the challenges identified I am not seeing it. In addition to which, I do not know how

your balance score card is working if you do not have a performance management system

in place. So those are the areas of concern I wanted to have addressed by you.

Mr. Hagley: Well, through the Chair, a crisis is a good thing to waste and we have a

scenario with Petrotrin. I think we have a lot of young people right now who are under-

employed. So we may very well in the short term, go out to market to get the kind of skill

set required, from among the community, because as you know, Petrotrin has—you know

the situation with Petrotrin. So therefore, we feel that the market for skilled, technically

skilled people is a bit soft right now to put it mildly. So we are hoping that we will be

able to recruit externally. When I say external, external but within the community in the

three to five-year horizon and definitely we intend to develop our graduate trainee

programme. I know one of the conditions of the new plant, definitely, is a whole skills

set programme so that we would know—we would be part of the machinery that is coming

in, comes with training and development. So we would also be bringing in graduate

trainees to help build that new trend for the new technology that we are going to bring in

to Lake Asphalt.


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Mrs. Crichlow-Cockburn: And are you satisfied that you have a new org. structure that

can drive this whole process?

Mr. Hagley: Yes, we do. We recently created a COO position with engineering capacity

that is specific to drive that new thrust, because we felt that the research, development and

the engineering aspect of Lake Asphalt was so critical that we need to have a COO

focusing on that kind of operation. So we are kind of like, starting from on top with that

drive.

Mr. Chairman: Mr. Karim, you have the last question.

Mr. Karim: Thank you very much, Mr. Chairman. I have a question each for the Ministry

of Finance since you have not been asked yet, and the Ministry of Energy and Energy

Industries. If I do so, in keeping with the last issue that was raised, Mr. Chairman of the

company, are you aware whether any positions have been filled or anyone has been

employed without Cabinet’s approval and CPO’s guidelines?

Mr. John-Williams: I am not aware. The only positions that we have filled in our tenure,

we had an HR manager we had on contract. She has left. We have hired, recently,

CORPSEC, we have hired the COO. Those are the positions that we have and we have

confirmed the CEO who was acting after advertising internally.

Mr. Karim: So you have had no positions filled without—all these positions have been

filled in accordance with Cabinet approval and CPO guidelines?

Mr. John-Williams: Yes, they have been. All these positions were advertised, right, and

interviews conducted.

Mr. Karim: And therefore, my question to the Ministry of Energy and Energy Industries:

Are you satisfied as the oversight Ministry, or one of, with the performance of the Lake

Asphalt of Trinidad and Tobago? And if you are not, could you tell us why not?

Mrs. Bradshaw-Niles: In terms of the Ministry of Energy and Energy Industries and our

function with respect—as the line Ministry with Lake Asphalt, we continue to work with

the company in several different areas in terms of transparency and accountability. One

of the key things that we are continuing to work with the company on, is in terms of getting


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up-to-date the annual administrative reports and so—

Mr. Karim: Are they up-to-date or are they outstanding?

Mrs. Bradshaw-Niles: They are still outstanding, but—

Mr. Karim: How many years?

Mrs. Bradshaw-Niles: We have outstanding up to way back to 2008. So we have been

working to get those submissions. Part of that was the financial statements, the financial

reports. And so, they have been working on getting those completed so that they can be

submitted along with the rest of the report.

Mr. Karim: So the question I am asking is, are you satisfied?

Mrs. Bradshaw-Niles: Well, in terms of the reporting, the annual reports, of course, that

is a statutory obligation. So in term of that, we as with all the other agencies, we are

working with them. However, the Lake Asphalt is responsive and so we do, when we

make a request, we do continue to have dialogue and get responses. So that is—we are

satisfied in terms that aspect but, of course, until they are all submitted we will not be

satisfied until they are all submitted and up-to-date.

Mr. Karim: Are there other areas of concern?

Mrs. Bradshaw-Niles: Well, we work as well and we are working together with the

company in terms of the change with respect to the importation now for the bitumen. So

we have had—as soon as the closure of the Refinery was announced the company did

submit a proposal and we have had several discussions with them in terms of the way

forward. And I think where they are at now they have a plan in place which has been

approved and seen both by the Minister and the Cabinet, and so we are satisfied in terms

of the continued operations. What we have done as a Ministry, we have looked for their

strategic plan and our strategic alignment in terms of the future to ensure that the enterprise

is in line with what the Ministry wants to do and what we—

Mr. Karim: And are they aligned?

Mrs. Bradshaw-Niles: Yes, we have seen the alignments. So we continue to work with

them and all the different areas. With respect to the human resource areas, we do get


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information and request information on behalf of the human resource advisory committee.

And so just recently, we are part of one of those meetings.

Mr. Karim: And finally to the Ministry of Finance: Are you satisfied that the Lake

Asphalt Company is operating within the confines and the remit of the State enterprises

operating manual as outlined? And have they been meeting all their statutory

requirements? Are they timely, are they up-to-date with the payment of taxes and other

statutory deductions as outlined in the State Enterprising Performance Manual? The

question again: Are you satisfied that they are operating within the remit as has been so

directed? To the Ministry of Finance.

Ms. Durham-Kissoon: Through you, Chair, thank you for the question. The Lake

Asphalt Company is largely compliant with the submission of documents. But as I

indicated earlier we would have undertaken assistance audit, that, as I said, that would

have been triggered by some weaknesses in their internal controls. This is an opportunity

for me to correct something earlier that the forensic audit—Chair, you asked me the

question, we requested it on November 2016. So that was on the heels of the systems

audit. So with that said we feel that there is need for improvement in the internal controls

and also in their procurement procedures.

Mr. Karim: What about the terms of the deduction, in terms of the statutory payments

that are required by state companies? You know we have seen some that have been

lagging behind in terms of the payment of taxes and other deductions. Is the Lake Asphalt

compliant in that regard and up-to-date?

Ms. Durham-Kissoon: Through you, Chair, I am seeing in my notes some issues with

payments of corporation tax. There are some accruals there. Of course, this is based on

the audited financial statements that we have received, up to 2013. But I believe there are

some payables in that area.

Mr. Chairman: Thank you. I understand Mr. Simonette had one final question.

Mr. Simonette: Thank you very much, Mr. Chairman. In the light of the new product

that is being planned to be brought on, could I just have a clarification as to whether the


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company’s ability to finance, not just the technology, not just the new plant, but also the

creation of new packaging and marketing and so on, that the company is satisfied that it

has sufficient financial resources to bring that product to market, that new product launch

to market.

Mr. John-Williams: At this point we are quite satisfied that we have the ability to do it.

The worst case scenario is that we go to market for financing if we cannot do it from cash-

flow, but at this point in time we are seeing that we can do it from our cash-flows.

Mr. Simonette: Thank you very much.

Mr. Chairman: Thank you all. Now, I am going to invite closing remarks, first from the

Ministry of Finance, then from the Ministry of Energy and Energy Industries and then

from Lake Asphalt.

Ms. Durham-Kissoon: Thank you, Chairman, members, colleagues. We thank you for

this discussion this morning and we are happy that this current board, at Lake Asphalt, is

looking at more research and development and developing new products to increase

market share. As I indicated we look forward to the company’s strengthening in the area

of internal controls and weaning itself off its dependence on Petrotrin given the new

strategic direction of the energy sector. And we look forward to better things from the

company, and again thank you for this enquiry.

Mr. Chairman: Thank you.

Mrs. Bradshaw-Niles: The Ministry of Energy and Energy Industries will continue to

work with Lake Asphalt, understanding the need and also their desire to modernize and to

move forward as a company. And really our role will be to continue to ensure that

whatever is done will be both, well, first with the benefit of the nation and to satisfy the

local needs as we move forward and also especially with the case of the bitumen, as well

as to ensure that they can expand internationally, into some of the other areas and products.

We note the questions from the Committee with respect to research, development and

scholarships and therefore we will have dialogue with them to ensure that we can see how

these can be implemented. Thank you.


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Mr. Chairman: Thank you. You have the final word.

Mr. John-Williams: Yes, thank you very much, Mr. Chair. I would like to thank the

Committee for this enquiry and I hope that we were able to bring clarity as to what Lake

Asphalt is about and to bring to the national community a sense of what Lake Asphalt is

all about. Now, I say that this is a jewel because the modifying market, internationally, is

worth US $22 billion annually. With the best modifier in the world, we do not even have

quarter of a per cent of this market. With the new trust and the new product, I mean, Lake

Asphalt can be a significant contributor to GDP. And I heard the PS talk about weaning

ourselves from Petrotrin, well, there is no weaning to be had because the mother is dead.

But we will continue in bitumen, bitumen is our business and we will continue to be in the

bitumen business. Thank you.

Mr. Wiggins: If I could just add, we want to thank the line Ministry, Corporation Sole,

the Joint Select Committee for this opportunity. And even as we know we will achieve

our strategic plan once given the opportunity, and one of the pillars that we have is

stakeholder engagement and management, internal and external. And that is why I was

so pleased to hear the line Ministry say that working with us—we intend to respond in a

timely manner given, for example, the admin reports. We would have sent 2008—2016,

but because it is new to Lake Asphalt, some of the format was not—there were some

questions which we did address and we send back a response and they have responded

and we believe within the next two weeks we would be able to bring this to a closure. So

once again, thank you for the opportunity.

Mr. Chairman: Thank you all very much. I want to also thank the media and the viewing

and listening audience. I will now suspend this meeting.

12.30 p.m.: Meeting adjourned.


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ATTENDANCE REGISTER


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ATTENDANCE REGISTER 2018/2019 Session, Eleventh Parliament

Name 31st

Meeting

29.10.18

32nd

Meeting

03.12.18

33rd

Meeting

17.12.18

34th

Meeting

14.01.19

35th

Meeting

28.01.19

36th

Meeting

11.02.19

37th

Meeting

11.03.19

38th

Meeting

01.04.19

39th

Meeting

06.05.19

40th

Meeting

27.05.19

Mr. David Small √

Mr. Anthony Vieira3 √ √ √ √ √ √ √ √ √

Dr. Lester Henry √ √ √ √ √ √ √ Exc. Exc. √

Mrs. Cherrie-Ann Crichlow-Cockburn Exc. Exc. √ Exc. Exc. √ √ Exc. Exc. √

Brig. Gen. (Ret.) Ancil Antoine √ √ √ √ √ √ √ √ √ √

Mr. Adrian Leonce √ √ √ √ Exc. Exc. √ Exc. √ √

Mr. Fazal Karim √ Exc. √ √ √ √ √ √ √ √

Mr. Wade Mark √ √ √ √ √ √ √ √ √ √

Mr. Garvin Simonette4 √ √ Exc. Exc. Exc. √ Exc. √ Exc.

3 Mr. Anthony Vieira replaced Mr. David Small w.e.f 27.11.18 4 Mr. Garvin Simonette replaced Mr. Ronald Huggins w.e.f 27.11.18

Documents

10 REPORT OF THE2019/02/07 · o LASCO Bituminous Black Paint; Cationic Bitumen Emulsions; iii. Before the cessation of operations of the Petrotrin refinery, approximately eighty