The Tribune

By NATARIO McKENZIE Tribune Business Reporter nmckenzie@tribunemedia.net THE Arawak Port Development Company's (APD) guaranteed 10 per cent internal rate of return (IRR) could ultimately mean lower costs for consumers if shipping volumes pick up as a result of projects such as Baha Mar, the company's chief executive saying the IRR provides a "fair return" to investors. While some have expressed concerns about APD's guaranteed 10 per cent IRR, Michael Maura told Tribune Business that it was meant to provide the company with the ability to make money, and not burden the consumer from a cost perspective. Mr Maura said: "What the internal rate of return of 10 per cent does is it provides a fair return to the company but, at the same time, it limits what the company can earn. Ten per cent is by no means excessive." Noting that shipping volumes related to the $2.6 billion Baha Mar development were not included in APD's financial projections, Mr Maura added: "Let's say Baha Mar volumes cause the port to receive 10 per cent more volume than it had initially envisioned. "That 10 per cent is going to have to pay landing charges, gates charges and all the rest of it. A good portion of that money will fall to the bottom line. What will then happen is that the tariff will have to be adjusted down to consider this unanticipated increase in volume. "That's a good thing for all of us because that would mean that the shipping companies would charge less, and our hope would be they would charge their customers less. The 10 per cent is meant to provide the company with the ability to make money, invest in the business to ensure that we are operating efficiently and effectively, that our technology can remain on par with other ports around the world, but that we don't necessarily burden the consumer from a cost perspective." Regarding APD's new tariff structure, and subsequent rate increases by some shipping companies, Mr Maura said carriers would use the port relocation as a justification to increase their rates. He explained: "The carriers are going to use relocation as a justification to increase rates. The shipping companies have lost a lot of money; they have had the ocean freight rates they charge in Nassau decline by as much as 50 per cent in some cases. They now have to relocate to Arawak Cay, where there is a substantial change occurring for those carriers that have been using Arawak Cay all along." "When you spend $83 million, it's going to have an impact on something. The port fees overall will represent a small increase to those shipping companies. The carriers are looking for an opportunity to try and get this money back. They definitely cannot afford to absorb this increase that comes their way as a result of their relocation to Arawak Cay. They can't afford to do that because they have been losing money all along. "I think all shipping companies will attempt to get their rates up, and they will use the port as justification for doing so. It's important for everybody to understand that they have been paying port fees all along. Even if you were to read our tariff, that's not the incremental cost they are going to experience as a result of coming to Arawak Cay." Last week, Atlantic Caribbean Lines (ACL) announced fee increases to offset the costs associated with its move to the new Arawak Cay port. Crowley has also announced fee increases associated with its move to Arawak Cay.