National Enterprises : 27 Jan 2023 – National Enterprises Limited – 2022 Annual Report

NATIONAL ENTERPRISES LIMITED - ANNUAL REPORT 2022

COMPANY OVERVIEW

National Enterprises Limited (NEL) is an investment holding company incorporated on August 27, 1999 by the Government of the Republic of Trinidad and Tobago. NEL was formed to consolidate the Government's shareholding in selected State Enterprises and facilitate public offerings on the Trinidad and Tobago Stock Exchange.

NEL has invested in industries that drive the economy of Trinidad and Tobago: natural gas and energy-based manufacturing, telecommunications, power generation, and the marketing and manufacturing of basic foods.

NEL holds significant shareholding in the following companies:

• NGC NGL Company Limited (NGC NGL);
• NGC Trinidad and Tobago LNG Limited (NGC LNG);
• Telecommunications Services of Trinidad and Tobago Limited (TSTT);
• Trinidad Nitrogen Co. Limited (TRINGEN);
• National Flour Mills Limited (NFM);
• NEL Power Holdings Limited (NPHL); and
• Pan West Engineers and Constructors, LLC (Pan West).

Through NEL, individual and corporate investors can share in the financial stability and staying power of these enterprises. Today, over 5,000 citizens who will continue to benefit from our consistent dividend payments own 100 million of the 600 million issued shares in NEL.

MISSION

NEL's Mission is to provide investors with income and capital growth through a diversified and sustainable portfolio, and to broaden national participation in capital markets.

VISION

NEL's Vision is to contribute to the sustainable development of the economy of Trinidad and Tobago through a balanced, focused and proactive investment approach geared towards the preservation and enhancement of shareholder value.

TABLE OF CONTENTS

NATIONAL ENTERPRISES LIMITED ANNUAL REPORT 2022

•	Chairman's Statement	2
•	Corporate Information	5
• Chairman and Board of Directors	6-7
• General Manager and Manager, Investment & Accounting	8
•	Directors' Report	9
•	General Manager's Statement	10
•	NEL's Group Structure	13
•	Investee Companies	14
• Substantial and Directors' Interests	22
• Statement of Management's Responsibilities	24
•	Independent Auditors' Report	25
• Statement of Financial Position	29
• Statement of Comprehensive Income	30
• Statement of Changes in Equity	31
• Statement of Cash Flows	32
• Notes to the Financial Statements	33
•	Management Proxy Circular	65
•	Form of Proxy	67
• Notice of Annual Meeting	69
• Change of Address Form	71

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THE CHAIRMAN'S

S T A T E M E N T

NATIONAL ENTERPRISES LIMITED ANNUAL REPORT 2022

Ingrid L-A Lashley

Chairman

The calendar year 2022 marked an economic environment that was rapidly transitioning from the depths of the COVID-19 crisis. Adjusting to sustained robust energy prices and a supply chain crisis due to the conflict in Ukraine, inflationary pressures and the threat of yet another highly transmissible, albeit not as virulent, strain of the coronavirus, the year was marked by uncertainty and turmoil. Against this backdrop, I am pleased to report that National Enterprises Limited (NEL) delivered strong performance as we seek ways to deliver value to our shareholders.

As we look at the relevant local, regional and international macroeconomic trends that impact our decisions and resultant performance, we highlight some of the challenges and opportunities that must be considered for the upcoming fiscal year.

Local and Regional Economy

Trinidad and Tobago has traversed the path to recovery in 2022 driven by surging energy prices throughout 2021 and for the most part of 2022. Energy revenues for fiscal year ended September 30, 2022 was $29 Billion versus an average of $19 Billion for the preceding five years. Investment into upstream exploration and production is estimated atUS$5 Billion for the period 2022 to 2026. Between 2021 and 2022, royalties and profits to the Government of the Republic of Trinidad and Tobago (GORTT) increased by an estimated 205%.

Trinidad and Tobago's economy contracted by 4.2% in the last quarter of 2021 according to the Central Statistical Office. However, the International Monetary Fund (IMF) projects annual growth at a rate of 3.4% for the period 2022 to 2025. The Inter-

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THE CHAIRMAN'S

S T A T E M E N T

NATIONAL ENTERPRISES LIMITED ANNUAL REPORT 2022

American Development Bank (IDB) further project that debt to GDP levels are expected to decline from 80% in 2020 to 63.6% in 2024.

According to the Central Bank of Trinidad and Tobago (CBTT), Trinidad and Tobago experienced 6.2% inflation, characterized by increasing inflationary pressures from global supply chain issues, fuel and food increases. Food inflation was recorded at 11.6%.

As of the first quarter of 2022, real GDP had increased by 2.2% in the non-energy sector. Digital transformation has also been cited by GORTT as a priority goal for the emergence of a digital society with a fully functioning digital economy. The underlying significance of GORTT's digital initiatives is highlighted by the US$250 Million loan received from CAF Development Bank of Latin America to accelerate the digitization process in the state and productive sectors.

At the regional level, the IDB forecasts that high levels of food and fuel prices, along with rising international interest rates will lead to economic slowdowns on a regional basis. The annual inflation rate in Caribbean countries in 2022 was 8% compared to 12.5% for Latin America.

Local Energy Sector

The removal of fuel subsidies announced in the 2023 National Budget for the fiscal year October 1, 2022 to September 30, 2023, would reduce total fuel subsidies from US$390 Million (approximately 5% of total expenditure) in the fiscal year 2022 to US$320 Million in the comparative period for 2023.

Upstream investment is estimated to be US$5 Billion for the period 2022 to 2026. Agreements signed with bpTT and Shell T&T for the restructuring of Atlantic LNG together with GORTT and the National Gas Company Limited (NGC) have positioned Trinidad and Tobago to get a larger stake and share of revenues as well as a more in-depth role in the marketing and commercial arrangements for Liquified Natural Gas (LNG). Trinidad and Tobago Electricity Commission (T&TEC) has also signed

a Power Purchase Agreement with consortium partners, bpTT, Lightsource bp and Shell T&T for the development of the country's first utility scale solar photovoltaic project.

GORTT has been granted approval for a license from the United States Government to complete development in the Dragon Field which is located in Venezuelan waters. This development has the potential to deliver an additional 350 million cubic feet of gas when the pipeline is completed in a couple years from now. This will be a much welcomed boost to the availability of natural gas for use by the downstream petrochemical producers at Point Lisas as well as for the export of LNG and Natural Gas Liquids (NGLs).

One of GORTT's main stated goals is to become a major provider of clean fuel. NewGen Energy Ltd.'s $250 Million hydrogen production facility in Point Lisas aims to help Trinidad and Tobago become a first-mover hydrogen differentiator and is expected to provide new carbon-neutral and green hydrogen feedstock with construction estimated to begin in 2025.

Global Economy

The IMF World Economic Outlook has reported a slowing of global economic growth from 6.1% in 2021 to 3.2% in 2022 and 2.7% in 2023. Global inflation is forecasted at 8.8% in 2022 but is expected to decline to 6.5% in 2023 and 4.1% in 2024. The United States of America (USA) registered an inflation rate of 4.7% in the face of repeated action by the US Federal Reserve hiking the US Federal Funds rate.

The IDB estimates that natural gas prices in 2022 averaged twice that of 2019's prices. It is projected that prices will be at least 30% above pre-pandemic levels until 2025. Global energy consumption is predicted to grow by just 1.3% in 2023, according to The Economist Intelligence Unit (EIU) due to factors including geo-political forces like the Russia/Ukraine war, extreme weather, waning gas supplies and high energy prices. The transition to clean energy will also see energy companies and governments facing conflicting pressures to maximise returns

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