The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Arawak Cay Port’s container throughput volumes are “about 10 per cent” ahead of forecasts for the first half of its 2013 financial year, making tariff cuts a distinct possibility with a further Baha Mar-related boost expected by March.

Arawak Port Development Company’s (APD) 2012 annual report, released last week, while confirming that the $90 million investment required to construct the Nassau Container Port (NCP) had sparked a rise in charges imposed on shipping carriers, said it anticipated a further increase in container throughput volumes.

Analysing APD’s performance for 2012 and the year-to-date, the annual report revealed: “NCP’s TEU [twenty-foot equipment unit] volumes as at December 2012 are tracking about 10 per cent above forecast.

“We expect that the Baha Mar volumes will result in additional TEU volumes that may translate into ,and contribute, to positive returns. Management expects that the increased Baha Mar volumes will begin in March of 2013.”

The report acknowledged that any increase in container throughput volumes going through NCP, especially if they pushed it above projections, “offers the potential for a reduction in the port tariff and, therefore, a reduction in fees assessed to the various carriers”. Above all, this - if it is passed on - could reduce costs for Bahamian businesses and consumers.

These ‘possibilities’ are linked to the economic model established in the Memorandum of Understanding (MoU) between the Government and APD’s private sector shareholders, which states that the company can adjust fees and tariffs to ensure it generates a minimum internal rate of return (IRR) of 10 per cent.

Higher returns from better-than-expected volumes would thus enable APD to adjust its various port tariffs and fees downwards, and still hit its 10 per cent IRR minimum.

Looking forward, APD’s annual report suggested that increased container import volumes associated with the $2.6 billion Baha Mar development at Cable Beach could force it to increase its operating hours, and require terminal operators to hire extra personnel.

Noting that the BISX-listed port owner/operator was always looking to boost productivity and efficiency, and reduce operating costs, APD’s annual report said: “In the recent months, APD has successfully reduced vessel turn times by over 25 per cent, which has provided carriers with the possibility for improved vessel utilisation and/ or lower fuel consumption.

“The bulk material segment has seen improved efficiencies due to the NCP organisational structure and the elimination of the historic ‘free for all’ which used to exist on Arawak Cay. The 30,000 ton bulk material vessels are able to access the berth on a timely basis, reducing the possibility of hefty demurrage charges.

“The break bulk operations of Betty K have also realised tangible benefits in terms of a significant reduction in damage to cargo. Furthermore, vessel operations are far more productive and customers are able to collect their cargo in a more timely fashion.”

APD added that it was working with the Government and Port Department to relocate bulk vehicle carriers from Prince George Wharf to Arawak Cay during 2013.

This, the company added, was designed to remove the “traffic conflict” caused by several hundred new and used automobile imports arriving on New Providence and disembarking cruise ship passengers.

And, at the request of the Ministry of Finance, APD had also offered Bahamas Customs warehouse space within its inland $15.2 million Gladstone Freight Terminal.

“The warehouse bay would allow Bahamas Customs to auction cargo that is not duty paid and has remained in the warehouse beyond an acceptable period of time,” APD’s annual report said.

“The close proximity of the Customs warehouse bay to warehouse operators serving Crowley, Mediterranean Shipping Company, Tropical and other carriers provides each operator with the ability to regularly clear their warehouse of cargo older than one week and transfer this cargo to the Customs bay.

“The consistent adherence to this process would benefit the Public Treasury, in that importers would be encouraged to clear their goods within the permitted free time.”

APD added that once it completed its first full year of operations at end-June 2013, it was “conservatively forecasting” it would pay the Government a collective $3.8 million in lease fees, licences and taxes.

The BISX-listed firm also projected that construction work on its main administrative building was set to be completed by December 2013, while the BEC substation on Arawak Cay was “well underway”.

Looking back at 2012, APD said that while Atlantic Caribbean Line (ACL) had gone out of business, and G&G discontinued serving Nassau in favour of concentrating on the Family Islands, the 7.5 per cent of total containerised cargo volumes that they represented had been absorbed by the five remaining shipping companies.

And, while APD had suffered a $2.239 million net loss for the year to end-June 2012, the company reminded its investors - including the 20 per cent equity stake held by the Bahamian public - that this was normal for an entity in its start-up phase.

Indeed, if the results for the three months to-end September 2012 are anything to go by, the future for APD and its investors looks bright.

The company generated $1.517 million in total comprehensive income for the period, and $2.038 million in operating income, from a $6.546 million revenue base. This put the company firmly in the black.

Also encouraging was that many key operating variables were ahead of projections for the last quarter of the 2012 financial year, the period when NCP’s operations begun.

“Our actual TEU volumes during the operating period from April 2012 to June 2012 were 15,300, which were 7.7 per cent higher than our forecasted volumes of 14,196 TEUs for the same period,” APD said.

“Our actual bulk ton volumes during the operating period from April 2012 to June 2012 were 236,992 short tons, which were approximately 21 per cent higher than our forecasted volumes of 196,078 short tons.”

As for revenue performance, the APD annual report said: “Our actual revenues of $7.236 million for the period ended June 30, 2012, were $1.221 million or 20.3 per cent higher than our forecasted revenues of $6.015 million.

“Our actual operating expenses of $9.075 million for the period ended June 30, 2012, were $644,026 or 7.6 per cent higher than our forecasted expenses of $8.431 million

“Our overall net operating loss of $2.239 million was 453,711 or 16.85 per cent lower than our forecasted operating loss of $2.693 million.”

With one eye beyond its NCP facility, APD’s annual report said it was “well positioned” to help the Government with developing ports throughout the Family Islands, as this was vital to their economic development.

“APD can provide the funding, construction and operational expertise to bring island port infrastructure into the 21st century,” the annual report said.

“With more than 1,167 feet of berthing space, a 28-foot draft, and Liebherr 320 mobile harbour cranes, the Nassau Container Port offers carriers the ability to increase vessel utilisation, expand the variety of vessels deployed to Nassau, maximise container utilisation by loading to the unit capacity, and include Nassau in a vessel string dependent on ships, which historically were unable to berth along the wharfs in the Nassau Harbour.

“Moreover, the introduction of the Liebherr cranes has afforded Baha Mar and its carrier of choice the ability to import specialised and unique items that require cranes capable of lifting 100 tons from the ship. The combination of Port technology, Port design, Customs oversight, APD administration and carrier flexibility offers a winning formula for years to come.”