The Nation GAIN

Tuesday, November 9, 2010

Shell to finalise operations

By Jithendra Antonio

Although the Government sealed the agreement on Shell this week by buying back 51 percent of Shell Gas Lanka Ltd. and 100 percent of Shell Terminals Lanka Ltd. (STLL) for US $ 63 million, the actual deal will only be finalised by November 15, a top official said

“Shell and the Government of Sri Lanka hope to complete the deal as soon as possible, and this is expected by November 15,” said outgoing chairman/managing director of Shell Gas Sri Lanka (SGLL), Walter Sanchez, responding to a question by The Bottom Line.

Sanchez, however, declined to say whether the deal is profitable for Royal Dutch Shell PLC for US $ 63 million stating, “This information is commercially sensitive information and cannot be shared.”

He said that since this is a share sale, all staff working for SGLL, STLL will be transferred to the new buyer but under the same terms and conditions.

As to whether Shell would continue to provide its expertise with any assistance to the local management, Sanchez was of the view that Shell believes it has developed a professional, cost efficient LPG business with strong growth opportunities run by a competent and well trained workforce in the country.

However, when The Bottom Line queried about the issue between the Royal Dutch PLC and its existing island wide distributors in the country who were asking for a payout from the Dutch multinational before its exit, Sanchez said that ‘given this is a sale of shares in the company, the contracts between the distributors with the company will remain in place as at completion of the share sale and will continue to be governed in accordance with their terms’.

BoI allays fears over licences

The Board of Investment (BoI) will continue to issue licences during the run-up to the upcoming Budget-2011 despite rumoured otherwise.

It is highly speculated that following the budget, concessions under BoI Act will be strictly limited for thrust sectors or other strategic investments over RS. 500 million.

However, under the provisions of the BoI Act, the government is restricted in retracting concessions already awarded, high ranking official told The Bottom line.

“A crucial meeting was held on Thursday, where it was informed that under regulations relating to BoI, it cannot withdraw concessions nor hold back approvals. The Act is designed to protect investors and their investments from ad-hoc policy decisions. Investors can take legal action if the BoI contravenes these regulations,” he said.

Foreign investments in the country are safeguarded by Investment Protection Agreements (IPAs) signed with 20 odd countries. Sri Lanka’s constitution guarantees the safety of FDIs through these IPAs while Sri Lanka is a founder member of the Multilateral Investment Guarantee Agency (MIGA).

Furthermore, according to Article 157 of the 1978 Constitution, BoI agreements enjoy the force of law while no legislative, executive or administrative action can be taken to contravene the provisions of a bilateral investment agreement otherwise than in the interests of national security, it is leant.

“It was also mentioned that BoI was the only other than the Mahaweli Authority Act, powerful enough to safeguard such contractual interests,”

Asked how budget proposals will be applicable, he said that BoI cannot hold back projects once approved.

“If an investor starts a project either under Section 16 or 17 of the BoI Act, he has to be accorded terms and conditions which are effective on that particular date,”

Recently, issuing a statement, it refuted the notion that the “Board of Investment (BoI) had suspended the acceptance of investment applications for new projects pending the 2011 Budget” and scoffed at “speculation surrounding the continuance of BoI concessions granted”.

“BoI continues to entertain and accept new applications for investments. Priority has however, been given to the processing of investment applications to the thrust sectors that have been identified, namely tourism, agriculture, fisheries and dairy, education and training, IT & BPO, infrastructure and port and aviation related development.”

Reaffirming The Bottom Line lead story carried a fortnight ago, BoI said that the “current emphasis has also been on attracting high value investments in keeping in line with the evolving strategy for investment promotion arising from the newer opportunities of the country with the return of peace and stability.”

“The BoI reassures all investors that all contractual obligations entered with the Board of Investment will continue to be honoured.”

Economic Development Minister Basil Rajapaksa has meanwhile, ordered a complete revamp of BoI and the updating of the country’s investment laws and regulations, starting with the BoI Act.

Many from the Presidential Commission on Tax to Asian Development Bank (ADB), have been calling for the rationalisation of BoI’s concessions regime while the investor community at large had been advocating a ‘one-stop-shop’ for investors.

Although Sri Lanka had an ambitious target of US $1 billion FDIs for 2010, BoI saw only US $ 208 million flowing into the country during the first six months of 2010. (SF)

CPC to insist on Rs20bn payback

Subsidised fuels: Furnace oil alone incurs Rs780m loss monthly

State-run Ceylon Petroleum Corporation (CPC) is to request the Treasury to pay back fuel oil subsidy dues running into over rupees twenty billion incurred during the last 24 months.

The Bottom Line learns that a memorandum of cabinet is in the process of being formulated by the Petroleum Resources and Petroleum Resources Development Ministry, appealing either to reimburse losses incurred since November 2008, due to non-payment of subsidy by the Treasury or to set off against taxes due from the CPC.

“The ministry is in the process of calculating the exact amount of losses for the period from 2008 November to 2010 December. In November 2008 the subsidy was withdrawn, and so we have been importing fuel oil at a cost of Rs 52 per litre and selling it to Ceylon Electricity Board (CEB) plus other Independent Power Producers (IPPs) for Rs26. Due to this, the CPC made a loss of Rs12bn during 2009,” a high ranking ministry official said.

Following vehement protests by CPC in the wake of global oil prices going up, it received the government green light to increase the price to Rs40, though still short of Rs15. From furnace (fuel) oil sales, CPC lost a staggering Rs780m each month, he added.

“At present, CPC is importing nearly 30m litres (30,000 tonnes) of low-sulphur fuel oil at an average cost of Rs68 and selling it to Kerawalapitya Combined Cycle Power Plant for Rs52. Losing Rs16 a litre we are incurring a staggering Rs480m loss a month. For other thermal power plants, (CEB and IPPs) we are bringing down nearly 20 million litres (20,000 tonnes) of high-sulphur fuel oil at Rs55 and selling at Rs40 a litre. Losing Rs15 a litre, the CPC is burdened with a nearly Rs300m loss each month,” this official said.

Currently, CPC is making a marginal profit from petrol sales while incurring a marginal loss from both kerosene and diesel fuels.

“If this goes on we will never be able to turnaround CPC and it will soon go bankrupt. What’s more, this is not due to our fault but due to the fault of CEB. What they want is to make profits on their part at the cost of CPC.”

Many had been advocating a cost-reflective pricing mechanism devoid of political interference if the country was to make state entities like the CPC viable to contribute to the growth of the country and move towards a global energy hub.

“Except for the Kerawalapitiya agreement, all other contracts with CEB and IPPs have the clause that CPC will sell fuel at ‘CPC’s retail price or government-decided price’. This is where all troubles begin. Sri Lanka can never become an energy hub if you don’t make CPC profitable. Privatisation is unnecessary, but you need to have an unwavering cost-based pricing system,” this official added.

BSkyB reaches target of 10 million customers

British Sky Broadcasting has reached its target of 10 million customers. As of 30 September, the pay-TV operator had a total of 10 million customers, including 3.15 million Sky+ HD customers, 2.80 million Sky Broadband and 2.55 million Sky Talk customers.

Tune Hotels to welcome 2011 with 2 New Hotels

12 sen promotional rate for all Tune Hotels in Malaysia
Petaling Jaya, 09 November 2010 – To cater to the increasing demands and travel needs from tourists and business travellers, Tune Hotels has opened booking for its 2 new hotels in Bintulu, Sarawak that is slated for opening on 3 January 2011, and Kota Bharu, Kelantan that will open for business on 23 January 2011.
To celebrate the opening of the 2 brand new hotels, Tune Hotels is offering rooms from as low as 12 sen (RM0.12) for its Malaysian hotels; from Rp12,000 for its Bali hotels and from GBP25 for its London hotel.
The low rates are applicable for stay periods from 1 September – 30 November 2011 for all Tune Hotels’ existing hotels. For the new hotel in Bintulu promotional stay periods are from 3 January – 30 November 2011 while for Kota Bharu it is from 23 January – 30 November 2011.
Guests are able to book this low rate from 9 – 20 November 2010 which is available exclusively online on www.tunehotels.com.
Mark Lankester, Group CEO of Tune Hotels, says: “Increasing the number of our hotels reiterates our commitment to increasing our network of hotels to have 100 hotels in major cities globally providing 5-star beds at incredible value and affordability. The introduction of the 101-room Bintulu hotel and 173 room Kota Bharu hotel will further add value to savvy travelers, both business and tourists alike, who are keen to adopt the pay-as-you-use concept we provide and for us to serve more people in our home of Malaysia.”

“2011 is the start of a great new year for us and our guests. We’ve kept focused on ensuring that we remain true to our guests and deliver great new hotels in great central locations at great prices. Kota Bharu and Bintulu are really exciting for us as one is the first Tune Hotel in Kelantan and the other is our second Tune Hotel in Sarawak.”

The opening of Bintulu and Kota Bharu brings Tune Hotels’ number of operating properties in Malaysia to 9, and 12 globally. Tune Hotels’ existing hotels in Malaysia are located in Kuala Lumpur, KLIA-LCCT Airport, Kota Damansara, Penang, Johor Bahru, Kuching and Kota Kinabalu; Kuta and Legian in Bali, Indonesia and one in London, England.

Since Tune Hotels was first launched in Kuala Lumpur, Malaysia, in 2007, more than 900,000 guests have stayed in one of its properties, currently totalling 10 hotels located in Kuala Lumpur, Kota Kinabalu, Kuching, KLIA-LCCT Airport, Penang, Danga Bay, Johor and Kota Damansara in Malaysia, Kuta – Bali and Double Six, Legian - Bali in Indonesia and London in United Kingdom.

SLT reaches 200,000 ADSL Broadband customer milestone

Sri Lanka Telecom (SLT), the nation’s number one integrated telecommunications service provider and the leading broadband services provider in the country is proud to announce that 200,000 Sri Lankan homes and businesses (including entrepreneurs, small, medium & large organizations) now access broadband services via ADSL 2+ technology on SLT’s island wide Broadband network. This achievement represents more than 70% of Sri Lanka’s total broadband consumer base and over 20% of SLT Megaline (PSTN/wireline) telephone customer base.

The company has succeeded in achieving its target for the year 2010 ahead of time, mainly due to the recently concluded island-wide broadband campaign, “SLT Broadband Twenty20 Promotion”.
Mr. P.E. D. A. Silva of PULASTIGAMA (situated in Polonnaruwa District), was the 200,000th customer to be connected with SLT Broadband services. The SLT broadband service was already activated for him by enabling broadband access through the Entrée package.
This attractive broadband promotional campaign was SLT’s response to the huge demand for ADSL broadband services that has arisen from all parts of the country and is also an attempt by the company to popularize broadband services among all Sri Lankans by providing them access to information and entertainment contents whenever they want. During year 2010, a total of 80,000 new customers got connected with SLT Broadband services for High-speed internet and IPTV (PeoTV) services. Customers have benefitted greatly from ADSL broadband due to its ALWAYS ON connection, higher speed, reliability and uninterrupted service provided by wireline with benefits of cost savings and affordability. The ability to make and receive calls simultaneously while browsing the internet are among the great values it offers. Furthermore, through SLT Broadband, customers receive access to multiple services of voice, broadband internet & TV/multimedia and all other benefits through a single wireline connection. SLT started offering IPTV through its broadband platform in year 2008 and has succeeded in covering almost all the provinces in the country.
Customers have the freedom and flexibility to choose from a wide selection of broadband plans at affordable prices to meet their individual needs. Services include downstream speeds of up to 4 Mbps for SLT Broadband internet customers. For customers with a wireline home/business telephone, SLT provides a broadband connection starting at Rs. 500/= per month without a connection fee. SLT Broadband services provides high speed internet access (downstream) through seven different packages: Entrée (512Kbps - Volume based), Home (512Kbps - Unlimited), Xcite (1Mbps - Unlimited), Office (2Mbps - Unlimited), Office 1IP (2Mbps – Unlimited, 1Static IP), Xcel (4Mbps - Unlimited) and Xcel 1IP (4Mbps – Unlimited, 1Static IP). The Entrée package has a huge demand and is considered as the internet surfers’ initial choice. Office, Office 1IP, Xcel and Xcel 1IP packages have been especially designed to suit the requirements of small and medium sized enterprises. The popularity of Wi-Fi (wireless internet zones) services in home and office environments also has grown tremendously. Customers prefer to access information using their Wi-Fi enabled smartphones, laptops, netbooks and other devices that provides them greater freedom easily. Therefore customers can decide to have a wireless ADSL modem or router at their home or office to create a wireless internet zone at any time if they have an ADSL broadband connection.
SLT Broadband uniquely offers its customers unparalleled services coupled with the unmatched reliability and robustness provided by its superior wireline technology, ADSL/ADSL 2+. With the range of different broadband internet packages on offer, SLT customers can enjoy a host of value added services such as VoIP services, IPTV, Time Shift TV (TSTV), Video on Demand (VoD), e-learning as well as gaming. The company’s IPTV (SLT PeoTV) services are pioneering IP based TV broadcasting services in Sri Lanka.
SLT has continuously carried out its broadband rollout throughout the island to cater to the broadband demand of the company’s valuable consumers. During this year, SLT has expanded and upgraded its broadband infrastructure by reaching areas away from main cities like; Hingurana, Pottuvil, Uhana (in AMPARA), Badalkumbura, Bibila, Mahiyanganaya (in BADULLA), Dummalasooriya, Kalpitiya, Palavi, Udappu (in CHILAW), Beliaththa, Walasmulla, Weeraketiya (in HAMBANTOTA), Chavakachcheri, Kilinochchi, Kopay, Manipai, Shithankarni (in JAFFNA), Bopitiya, Gonagalpura, Megahatenna, Moragahahena (in KALUTARA), Akkareipattu, Thirukkovil (in KALMUNAI), Walawela, Udasgiriya, Pallepola (in MATALE), Hanguranketha, Hatharaliyadda, Galaha, Medawela, Rikilagaskada (in KANDY), Ambanpitiya, Hiriwadunna, Ganethenna, Molagoda, Kotiyakumbura, Randiwela, Undugoda, Uthuwankanda, Uyanwatte (in KEGALLE), Dambadeniya, Digampitiya, Galgamuwa, Mahawa, Melsiripura, Narampola, Bandarakoswatta, Ingaradaula, Kandanegedara, Kobeigane (in KURUNEGALE), Ayagama, Kalawana, Nivitigala, Rakwana (in RATNAPURA), Kanthale, Medirigiriya, Wathumulla, Buttala …....etc..
These has brought about numerous infrastructure developments including laying fibre optic cables, copper network expansion, upgrade exchange capacities, add more switching capacities, copper line quality improvements and ISP bandwidth upgrades among many others.
SLT expanded its fibre optic information superhighway to the Northern Peninsula in Sri Lanka very recently, as part of its continuing network investment to support the growing demand for communication services, following the end of the conflict. Quick deployment of the Broadband infrastructure in the Northern Peninsula has provided the company with great opportunities to serve the newly opened up markets of the Northern and Eastern provinces., This fibre optic cable project connects Mannar, Vavuniya, Trincomalee and Jaffna along the A9 main road. In addition new telephone exchanges at Mankulam and Mulathivu, located in the Northern part of Sri Lanka, will enhance basic communication facilities and Broadband coverage for customers in the areas.

Gold climbs to all-time highs above $1,400/oz

Gold powered to an all-time high above $1,400 an ounce on Monday, despite a bounce in the dollar, as investors sought an inflation hedge from the Federal Reserve's massive bond-buying programme.

Gold has risen almost 6 percent since just before the Federal Reserve detailed its plans last Wednesday to buy $600 billion worth of Treasuries to revive the economy.

Palladium rose 3 percent to break above $700 an ounce for the first time since April 2001, and silver also gained 3 percent to its third consecutive 30-year high on the back of speculative buying after gold's midday rally.

"As long as (investors) feel like there is no other recourse except buying precious metals, gold is going to keep going up," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.

In early trade, gold looked set to drop following its largest two-day gain in a year at the end of last week, but remained near record highs even as the dollar rallied against the euro on renewed budget problems in Ireland.

Spot gold rose 0.8 percent to $1,406.10 an ounce at 12:31 p.m. EST (1731 GMT), after setting a record at $1,407. U.S. December gold futures climbed $7.30 an ounce at $1,405.

Underlying support helped lift the metal after comments from World Bank president Robert Zoellick in the Financial Times calling for leading economies to consider readopting a modified global gold standard to guide currency movements, although most analysts deemed it unrealistic.

"Gold could potentially play a small role in the overall framework, but I don't think we are in a position to go back to a gold standard," said commodities strategist Nic Brown of Natixis.

"The world economy has moved too far from there and it would need to be one that was built around a more inclusive range of currencies," he said.

Zoellick called for a system that "is likely to need to involve the dollar, the euro, the yen, the pound and (yuan) that moves towards internationalization and then an open capital account."

"I can imagine what he meant was asset inflation as measured by the gold price should be an indicator that should be considered by the central banks when they make their interest-rate decisions," said LBBW analyst Thorsten Proettel. The consensus among precious metals analysts was that the gold market is also simply too small to absorb such demand.

"Unlike the World Bank, we do not believe that a form of the gold standard will return. Very simply, there is not enough gold supply in the world for the metal to perform in this role," said Edel Tully, precious metals strategist at UBS.

Evidence of a cooling in investor interest in gold put the price under pressure earlier in the session, with holdings of gold in the SPRD Gold Trust falling.

Silver hit a fresh 30-year peak at $27.63 an ounce and traded up 3.2 percent at $27.47 an ounce, and palladium surged 3.4 percent to $710.72, up for a fourth day in a row, while platinum eased 0.1 percent at $1,764.49 an ounce, marking a second successive day of declines. (Reuters)