The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hutchison Whampoa “has fallen miserably short” on Grand Bahama, a well-known attorney yesterday urging it to “step up to the plate” and correct the “management disasters” that have resulted in many of its investments failing.

Delivering a withering assessment of the Hong Kong-headquartered conglomerate’s performance, Carey Leonard said much of its Bahamian difficulties had resulted from “micro management” by a head office 9,000 miles away.

The Callenders & Co attorney, addressing a Grand Bahama Chamber of Commerce luncheon, said Hutchison Whampoa’s resort and real estate investments had heavily underperformed, when compared to Nassau-based developments such as Atlantis and Albany.

And Mr Leonard also questioned whether Lucayan Service Company (LUSCO) was using the service charges, paid by Freeport businesses and residents, to finance construction of the Grand Lucayan Waterway bridge - a move that would boost land values for another Hutchison-controlled entity, Grand Bahama Development Company (Devco).

Pointing out that Hutchison Whampoa was “in a position to make or break” the Grand Bahama economy through its extensive investments, Mr Leonard said: “I want much more. I want Hutchison Whampoa to be a good corporate citizen.

“To date, Hutchison Whampoa has fallen miserably short of what it can, and should, deliver to Grand Bahama in the terms of their management and, in some instances, the quality of their operations.”

Mr Leonard exempted Hutchison Whampoa’s Bahamas-based management from blame, adding: “It is Hutchison Whampoa’s Board of Directors that decides our fate. All the decisions are made outside of Freeport, outside of the Bahamas, in Hong Kong where Hutchison Whampoa is located.

“Hutchison Whampoa must take responsibility for much of the unemployment and hardship currently experienced by Grand Bahamians. Hutchison Whampoa’s Hong Kong management must take responsibility, as they are the ones who make the decisions 9,000 miles away. Nothing gets done here without Hutchison Whampoa’s Hong Kong management’s approval.”

As Grand Bahama’s largest investor, and one with management control of key infrastructure assets that it owns 50/50 with Port Group Ltd - notably the airport and Freeport Harbour Company - Hutchison’s success is inextricably linked with the island’s economic and social well-being.

And the biggest losers to-date from its under-performance to-date, Mr Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, suggested were the Bahamas and Bahamian people.

Had the Hong Kong conglomerate’s investments hit their full potential, “there would be thousands and thousands more people employed on Grand Bahama, and the Government would have millions and millions more in revenue”.

Noting that Hutchison Whampoa had been present on Grand Bahama for almost 20 years, having arrived in 1995, Mr Leonard described its failure to properly market the Grand Lucayan as setting the stage for a “hotel debacle”.

He questioned, in particular, why Hutchison Whampoa had not marketed the resort to the huge tourist market in its Asian backyard, and its failure to position the Grand Lucayan as a golf tourism destination.

“Compared to the $500 million Kerzner spent, it is clear that Kerzner got much better value for the $500 million on the first phase of Atlantis at Paradise Island than Hutchison Whampoa did for its $400 million on Our Lucaya,” Mr Leonard said.

“In addition to getting poor value for their money, Hutchison Whampoa failed to properly market Our Lucaya. This has had a knock-on effect on the number of passengers passing through our airport.

“Unlike the Bahamas Princess, who supported Laker Bahamas Airways, which brought up to 400,000 tourists to our island each year, Hutchison Whampoa has sat back and done nothing. Bahamas Princess supported not only 1,100 employees (almost the same number as Hutchison Whampoa’s Our Lucaya), but its guests also supported the International Bazaar and thus all the businesses and all those employed in those businesses.”

On the golf front, Mr Leonard said the four courses within a 10-minute drive of the Grand Lucayan all remained under-used.

“Each course then needed over 10,000 additional rounds a year, that’s how underutilised they were and are,” he added.

He pointed out that 300 visiting golfers, when their gambling and dining were taken into account, “are some of the best visitors Grand Bahama could want”.

Mr Leonard said that, on a week-long visit, these gofers would produce 1500 room nights per week and 300 rounds per golf course.

“What I am saying is that it is time for Hutchison Whampoa to step up to the plate and make Our [Grand] Lucaya a success,” he said, suggesting that the conglomerate “cut their losses and sell” the property if it was unable to effect a turnaround.

Mr Leonard said it was the same with Grand Bahama International Airport, which had a runway 900 feet longer than Boston’s Logan International Airport.

“It is an airport with great potential, potential that has yet to be realised, maybe even recognised, by those that control it in Hutchison Whampoa’s Hong Kong management,” he added, suggesting it was perfectly positioned to act as an air cargo hub between the Americas and Europe.

Yet Mr Leonard suggested that Hutchison Whampoa had turned away a “first rate” Fixed Based Operation (FBO) wanting to establish a unit at the airport, opting instead to construct one owned by itself.

“I have been told that they will not sell any property, or give a ground lease for the construction of cargo warehousing,” he added, with the airport’s high costs becoming an obstacle to increasing passenger numbers.

Contrasting this with Atlantis, which generated increased traffic following airport upgrades in New Providence, Mr Leonard said: “Hutchison Whampoa, on the other hand, has failed miserably to deliver the results that would justify what was demanded by them.

“We now have an airport designed for a hotel that has yet to exist........ It seems clear that Hutchison Whampoa’s management must take the blame for the high cost of Grand Bahama International Airport and its failure to reach a fraction of its potential.”

And, despite owning 60,000 to 70,000 acres of land, Mr Leonard said Devco had not initiated any major housing or subdivision developments for 10 years - something that could have added “millions of dollars” and jobs to Grand Bahama.

“Every other company made efforts to sell and when we look at Albany, on New Providence, we can see that a determined effort can have a positive effect,” Mr Leonard said.

“ And let us not forget that when Hutchison Whampoa‘s Hong Kong management had taken waterfront property off the market that Shoreline was able to sell theirs and at million dollar price tags.”

Mr Leonard said he “hoped” LUSCO was not involved in the financing or construction of the Grand Lucayan Waterway bridge, as media reports had suggested.

He also turned his attention to the 742-acre, duty-free SeaAir Business Centre, which Hutchison Whampoa had planned to develop as a logistics/transhipment/distribution hub from 20 years ago.

“Yet after nearly 20 years in existence under the management of Hutchison Whampoa’s Hong Kong management team, we see only one business, VTrade’ And then neither VTrade nor their predecessors, International Distributors, were brought here by Hutchison Whampoa,” Mr Leonard said.

“There has been no proper marketing, and no money has been spent on the development of infrastructure, which is required if anyone is to make a go of the area. Twenty years have passed and absolutely nothing has been done.

“After 20 years one would expect to see at least 20 or 30 businesses at the least, and over 100 if it had been done successfully. But what do we have after 20 years? One small operation.

Mr Leonard said Hutchison Whampoa’s two most successful Grand Bahama investments, the Freeport Container Port and Freeport Harbour Company, could also have been more successful and bigger profit generators.

“Yes the Harbour makes money, but any idiot could make money with the number and type of ships that call at Freeport Harbour,” the Callenders & Co attorney argued.

“Just imagine what some good management could do with an asset like that. Think of all the extra income it could earn.... Instead they are laying off staff and, I am told, capping wages.”

Mr Leonard questioned why Hutchison Whampoa shareholders had not queried the lack of dividends, and investment returns, coming from Grand Bahama.

To remedy the situation, he suggested that Hong Kong cease its “micro management”, and instead appoint the right executives on the ground in Grand Bahama to take its investments forward.