Q1. Fiji Gas Company
Ltd. has been operating for almost five decades
to become Fiji's largest Gas Company. What do you
consider to be the most significant moments in the
evolution of this company?
A1. The company started in 1956 and I guess
we can point out the most significant moments back
in 1964 when we went from purchasing gas and cylinders
in small tanks into delivering gas by tanker, we
were purchasing gas from Mobil oil company at that
time. The next significant fact occurred when Origin
Energy purchased 50% of our company and the joint
venture was born in 1972. From that moment we started
developing the two ocean terminals that we own,
one in Suva and one Lautoka. By that time our contract
with Mobil expired and them and us continued separately
in the gas business.
Q2. What is the shareholding structure of Fiji
Gas today?
A2. Fiji Gas is not a public company, it is
a private company and the shareholding structure
is divided in about 46 shareholders. Origin Energy
is he largest shareholder with 51% of the company
and the next two largest are the Unit Trust of Fiji
followed by our family. My grandfather started the
company and my father retired eighteen months ago,
Kontiki managed the sale of his shares in Fiji Gas.
Yasana Hldings is another significant shareholder.
Q2. Fiji gas doesn't only distribute gas but
also equipment and you provide other installation
and maintenance services too. Could you give us
a brief outlook of the current core business of
Fiji Gas and your client profile?
A2. Primarily we supply and distribute gas,
that is 80% our business, the other staff is basically
simply to support that supply and distribution.
The business is split about 50-50 between domestic
supply and what we al commercial clientele, our
corporate clients. This configuration has changed
over the years, when the company started we were
predominantly servicing a domestic clientele. We
started selling appliances in 1956 because at that
time there was no gas industry here. We saw that
in order to build a base and an industry you first
have to sell the equipment because nobody else was
selling it.
Q3. Where do you see the potential growth of
Fiji Gas business?
A3. We have been wondering for last 47 years
when the growth was going to stop but it hasn't.
Our consumption goes up over two times the GDP,
the GDP is growing 2% a year and we are growing
4%.
Q4. Do you have any investment project for
the near future?
A4. Not really. We are probably the most progressive
gas company in the Pacific. Origin has gas companies
in other nine South Pacific countries. We're certainly,
by far, the leader in that network. I would say
that my business is in advance as compared to the
one in New Caledonia and Tahiti. Fiji Gas owns the
gas operation in Tonga since 1986. We are not thinking
to expand to other countries at the moment as our
joint venture partner is already established in
most of those areas.
Q5. Fiji Gas works closely with overseas consultants
from Australia and has the support of companies
from Germany or New Zealand. What has Fiji Gas
added to those partners and what has Fiji Gas
gained from these relations?
A5. Fiji is a small country so we import all
the technology. We have to partner to companies
to have access to the equipment and this is the
way a lot of things have been developed in the last
10 years. We have always been focused on being a
heavy supplier of gas so we have been working loosely
with a whole range of suppliers of equipment and
business related companies. These are not exclusive
agreements but we have always recognized that overtime
things change so we were the agents of Australian
"Chef stoves" since 1965. As the market
changes, other players came into the market and
we did not want to be the warehouse of their operations
in Fiji so we decided to offer a more varied option
to our customers.
Q6. Tourism is meant o play a vital role in
the Fiji economy in the following years. Is this
where you see more future growth for Fiji Gas?
A6. Of course. There is a very direct relationship
between Fiji Gas and the Hotel Industry. We work
at very early stages with development of hotels.
They know that there is a major financial advantage
with us as compared to the cost of electricity here
so they are maximizing their investments. (…)
Q7. Being an energy company and operating in
a place like Fiji, what is your environmental
policy?
A7. I think this is one of the big advantages
that we have. We are very environmentally friendly.
We operate our thermals, our facilities and all
our installations applying Australian and New Zealand
standards. We are externally audited on general
operations, safety procedures.
Q8. The association with your overseas partner,
Origin Energy has brought expertise and investment
crucial for the growth of Fiji Gas. What is your
strategy to attract future partners in investments,
know-how and business development?
A8. Origin is a very big company and not they
are just concentrating on gas. They have a large
retail and wholesale of electricity operation in
display. Their operations are not just reduced to
gas. Obviously, when we have a dominant shareholder
like that, initiatives have to be run by the joint
venture board, three members from Origin and three
members from the local shareholders. In terms of
investments, when we put money in a project it tends
to be quite picky. We work closely with Tabua Investments
at Denarau Island where we have a license to carry
out the circulation of gas, it is around 400,000
FJD and it will be fully funded by Fiji Gas with
the objective of providing a state of the art gas
distribution network.
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Q9. After the events
of May 2000 Fiji has earned a very negative image
amongst foreign investors. How did you see your
international relations affected with the coup?
A9. Obviously it was a concern for everybody
but our overseas partners have been here before,
they have been with us though 1987 and although
there was concern with the crisis they continued
with the operations. What happens is that the market
immediately deflates, suddenly you loose 50% or
more of your tourists and this is a sector where
we are highly exposed. So we obviously had to bring
the operation down. Projects that were in the pipeline
were put on hold and the purchases were lowered.
Q10. Year 2000 was not good a year for companies
in Fiji in their financial results, what was the
effect on Fiji Gas?
A10. Our financial year ends in June so from
July 1999 to June 2000 our profits were really good
and we registered record in sales. Year 2001 was
obviously worst as there was a dramatic drop in
the sales. But now things are picking up.
Q11. Is Fiji Gas financially recovered?
A11. No. It is a pretty tough market, a very
competitive market. We are back to pre coup levels
in terms of revenue but not in terms of net profit.
In 2002, our revenue was around 16 million FJD,
about the same as in 1999.
Q12. What are your expectations for 2003?
A12. I am afraid I don't share the government's
optimism of 5.7 % growth for the next year. I think
that part of that is due to the low levels of investment
in terms of Foreign Direct Investment. There are
number of hotel projects that are just sitting there
and the reason none of them have started yet is
basically due to the risk rate in Fiji, which is
quite high. None of these investors are prepared
to absorb the whole of the risk. Some of these projects
are held up because usually the offshore lenders
are asking for protection to minimize the risk,
they want a foreign exchange cover. You have a lot
of liquidity in the financial system and, unfortunately,
more than 50% of those funds are locked up in one
institution, in the FNPF. Somehow, we have to mobilize
this massive fund, those 500 million dollars sitting
there. Currently, the majority of this money is
going to unproductive investments in the government.
Most of it is going to finance the government's
expenditure. The perception of the country risk
has changed. Al the projects coming up to proceed
are waiting for substantial funding from abroad,
either in debt or in equity. In equity, a number
of investors have sort of mitigated this a bit by
selling time-shares and little packages to people
who are prepared to get that little risk but it
is a very small proportion. In the debt funding
they are finding more difficulties. They have to
spend US dollars to buy assets in Fiji in Fiji dollars
so somehow they are trying to reduce that exposure.
Q13. Increasing FDI is a must in Fiji and a
very ambitious target of 25% of GDP investments
has been set. What is your opinion concerning
this issue?
A13. Even that is low. If you look at other
countries like Malaysia, Singapore and other countries,
the long term target is in excess of that 25%. If
you look around here you will see that there has
been a substantial under investment in the past
years. Water problems, electricity problems, etc.
The government has not taken the hard decisions
in terms of the size of the civil service and in
terms of the size of the public sector because the
public sector is very large. About 70% of the (…).
Unfortunately, it takes hard decisions to address
these issues. They are not popular decisions. (off
the record you can see that this is a very populist
government (…). The easy decision was to increase
the VAT, the hard decision is to reduce the size
of civil service. There are 24,000 civil servants,
that makes 20% of (…). In New Zealand, with
four times the population, there are 18,000 civil
servants.) I was on the FIRCA for four years and
I can say we are struggling with the tax collection.
We are implementing new technology systems (…)
but Government must stay out of business (…).
There has been only one success story of corporatisation,
Airports Fiji Ltd., and this has been a relative
success.
Q14. In the global competitive economy we live in
today, what is the main challenge Fiji has to face
in the race for FDI?
A14. You have to free up the liquidity in the
financial system so that we can use that to mitigate
the country risk rate (…). We cannot afford
50% of the resources to go to the public service
(…) But Fiji has great potential. All we have
to do is to translate that potential into reality.
The challenge is to actually produce something out
of all that potential. Primarily what you have right
now are local minor investors in the tourism industry,
some "life style" investors like that
Australian man who just bought the $10 million island.
You have got a lot of these little operations starting
up but it is a small global growth. Big investors
have got to reduce the risk by offshore supply of
funds. But investors have a lot of places to choose,
Fiji investors have to concentrate here so if Fiji
investors start trusting in Fiji the rest of the
world will.
Q15. Our readers like always to know more about
who is behind a company or an institution, could
tell us more about your professional and personal
background?
A15. I have worked in a couple of industries.
I started as an apprentice in Fiji Gas back in 1968
and I have also worked as a prospector for a couple
of years, working for a Canadian mining exploration
company. I still have quite an interest in the mining
sector, I am the Chairman of the Fiji Employers
and Mining Council. (…)number of other interesting
prospects to develop (…). I have worked with
the government in a number of reform processes,
I was counselor for the Fiji Institute of technology
during the transition from a government institution
to s (…), I was the Chairman of the (…)
preparation committee for CAFF (…) Civil Aviation
Authority Act (…) that lead to the formation
of Airports Fiji Ltd., the commercial arm. I was
the first chairman of AFL. Geo Pacific has very
exciting prospects of gold across the western side
of the Island, with four volcanic craters across
it. Each one of them is potentially (…) one
of them in Vatukoula (…) Rakiraki. There is
also interesting potential for gas or oil. Oil explorations
(…). Whaqt countries need is a diverse portfolio
of investments in sectors and industries that are
productive. This something should be encouraging
that. I was also in the set up of the CMDA. I sat
on the steering committee when it came in existence.(…)
FIRCA genesis (…). I am probably going to get
involved in one of the hotels developments in (…).
It is going to be interesting because (…).
It has been a great challenge for me to run for
twenty years a successful gas company and I still
enjoy what I do.
Winne cannot be held responsible for unedited
transcription.
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MR. HARVEY
PROBERT
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