Concerns raised about whether Noble breached CAP pact

Members of the previous Clarendon Alumina Production (CAP) board of directors were not able to verify the price its business partner, the Noble Group, obtained for Jamaica’s share of alumina produced by Jamalco, a Sunday Gleaner investigation has revealed.

That’s because up to last month when the former board was dissolved, Noble had ignored repeated requests by CAP for full disclosure of all alumina sales contracts it entered into under a marketing agreement signed between both sides in September last year, documents and insiders have suggested.

Jamalco is operated under an unincorporated joint venture arrangement between the Jamaican Government and Noble Group, which controls a 55 per cent stake in the Clarendon-based refinery through its subsidiary, General Alumina Jamaica.

The remaining 45 per cent is owned by Jamaica and managed through CAP.

The marketing agreement requires that Noble maintain a positive financial position. It stipulates, too, that the global conglomerate based in Hong Kong make full disclosure to CAP about all alumina sold on Jamaica’s behalf, including the price and identifying the purchaser.

But one insider claimed that Noble was in breach of the pact from day one and that “to date, CAP has not seen a single contract”.

“So, CAP stands without evidence of the price for which their alumina is being sold,” the insider charged.

What’s worse, according to the insider, executives at CAP and the former directors have no clue how many sales contracts have been negotiated and executed by Noble since the signing of the agreement.

There were jitters, too, among members of the Norman Reid-led CAP board that the financial woes threatening Noble’s global operations amounted to a breach of the marketing agreement and, by extension, posed a clear risk to Jamaica’s earnings from the sale of its alumina.

“If the company that’s selling your product goes bankrupt, it means that creditors could step in and hold on to Jamaica’s revenues,” said the insider, explaining the rationale for the clause in the agreement that requires Noble to maintain a positive equity position.

NO COMMENT

The Sunday Gleaner emailed a list of questions to the Noble Group last Wednesday, but the company indicated, through a spokesperson, that it would not be commenting on the claims.

“We are not adding to the statement we have given you,” said the spokesperson, making reference to a one-paragraph response the company provided to questions related to the US$100-million gap reportedly uncovered by a treasury and financial review of Jamalco’s operations.

Jamalco and CAP also did not respond to questions emailed last Thursday.

“I am not sure you will be getting a response today or any at all, but we have received your questions,” a Jamalco spokesperson said on Friday.

Professor Gordon Shirley, the recently appointed CAP chairman, declined to comment, saying the new board was “still trying to get on top of the issues”.

“There are a number of things that we are gathering information on, so I wouldn’t be able to comment on that right now,” Shirley explained.

‘Basis for termination’

But documents obtained by The Sunday Gleaner showed that in June this year, Shanice Nesbeth, general manager of CAP, wrote to several persons, including Reid and his deputy at the time, Dennis Wright, pointing to a number of alleged breaches of the marketing agreement by Noble.

She cited, as an example, clause 21.7 of the agreement, which stipulates that either party “shall promptly do, make, execute, deliver or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party may reasonably require from time to time … for the purpose of giving effect to this agreement”.

“It is my opinion that Noble’s non-disclosure of the individual contracts is a material breach of the agreement, which is also a basis for termination,” Nesbeth opined in her letter.

She cited, also, clause 15.1 of the agreement which indicates that the agreement can be terminated if either party is presumed, deemed or admits to being “unable to pay their debt as they fall due” or suspends debt payment “by reason of actual or anticipated financial difficulties”.

Nesbeth, who has not responded to questions from The Sunday Gleaner, surmised this could be the reason Noble was withholding financial information from CAP.

“They recognise that any admittance of the liabilities can trigger termination,” she said, referring to the marketing agreement.

Andrew Simpson, president and CEO of CCA Capital Partners, which was then engaged as a consultant to CAP, responded days later, suggesting that Noble was in breach of the agreement from September last year when it was signed, and urged swift action.

“We are of the opinion that CAP is currently in a severely compromised position to stay in the existing marketing agreement,” Simpson warned.

“Given the time lag of the occurrence of these breaches, we are exposed as a management team to severe criticisms in the event that something goes wrong at this point,” he continued before requesting a meeting to “figure out the best way to mitigate” the issues raised.

Simpson declined a request for an interview, citing confidentiality agreements he signed.

livern.barrett@gleanerjm.com