Q&A with Matt Idiens Chief Executive Officer at Rose Petroleum PLC (LON:ROSE)

Rose Petroleum PLC (LON:ROSE) Chief Executive Officer Matt Idiens caught up with DirectorsTalk to discuss their tendering process win in Cuba

 

Q1: Now this morning we saw that Rose Gypsum Limited has won a tendering process today, quite an exciting announcement, is there any indication how long the negotiation process will take?

A1: Well as we announced before, we’ve been working on Cuba for a few months now and as a result of that we’ve built a team, we obviously started Rose Gypsum as a subsidiary, a wholly-owned subsidiary, and we now have a good strong technical team and as a result of that have put forward a strong tender which has won and has taken through to the next round. To say how long it’s going to take is difficult, I know that Cuba is in a hurry to get this done, they have a large resource there of gypsum which hasn’t been utilised really properly to date, they import a significant amount of plasterboard and bags of plaster for the construction industry and obviously when you have a deposit that they do have you want to use that, that’s just common sense. So they are in a hurry to get it done, there is a process that we have to go through which is a strict process, deadlines etc. to be met and we are back out there the middle of July for continuing the negotiations but as to putting a date on it, it’s very difficult to say.

 

Q2: So what sort of structure would a deal look like?

A2: Well there are three ways of investing in Cuba, Rule 118 which came in, I think, in 2014 allows three forms, you can be 100% wholly-owned foreign company, you can do a joint venture or you can do an international economic agreement. The international economic agreement is the one we’re going for which basically allows you to own everything you invest into the country, it’s kind of a joint venture but it’s really a contractual agreement where you supply the machinery, which is what we’re doing, and then you get a percentage of the revenues, whether that’s 50% or 60% or whatever percentage you can agree to for the term of the contract which can be 11 to sort of 20 years, depending on the negotiations. At that point the Cuba party does have a right to first right of refusal to acquire the machinery which obviously you don’t really want to move out or you can extend the contract.

 

Q3: What sets Rose’s tender apart from others? Why do you think Rose was selected?

A3: We have, as I mentioned earlier, built a very good technical team, we’re working with a German engineering company and an Italian engineering company to provide the technology, both of which are the leaders in their various skill sets so working with them we have put forward a very good proposal which has priced very well and I think we meet the requirements of the government which obviously is the key to winning any tender.

 

Q4: Can you quantify the potential size of the market?

A4: So the construction industry in Cuba is booming at the moment, I think that’s obvious for anyone to see, tourism is growing very rapidly, I think last year they had 1.5 million visitors and then this year up to May I think they had 3 million visitors so it’s just growing exponentially. Building hotels and the redevelopment of certain areas is a priority for them and at the moment they import everything and as I said before, when you’ve got a domestic deposit that you can utilise it’s much cheaper for them to be able to do it internally rather than import. So the market is big and at the moment, and I’m not saying that will last forever, we would be the only producer if we were successful in the negotiations.

 

Q5: So if the deal goes through, what would Rose need to do next?

A5: Well we have done the basic engineering, it’s detailed engineering on the plant, it’s important to point out that you know everyone says ‘you’re jumping into gypsum’, one has to remember that we have had, for the last ten odd years, the milling operation in Mexico which is obviously the same language, Spanish, and it’s a very similar process in a way. It’s quite basic, you take the ore you run it through your crushing machinery, mill it and then run it through a forming plant which generates your panels, and that’s just for the panels otherwise you just take the plaster in the raw form and bag it. Obviously it’s slightly more complicated than that but the reality is it’s not that much different to our existing operations in Mexico therefore we’ve done this before really is what I’m trying to say in a long and winded way. So the process is quite easy to do and once we win the contract we then have to start immediately on the final designs and then obviously construction and we would hope to be producing within 12 months of signing the contract.

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