The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Bahama Port Authority (GBPA) “no longer has the capital” to fulfill all its development obligations because of successive decades of asset-stripping, the Government’s advisers have concluded.

The Hawksbill Creek Agreement Review Committee, in its June 2015 report to the Christie administration, effectively confirmed that the GBPA functions as a ‘regulatory shell’, and lacks the revenues/cash flow to meet its municipal functions.

The report, released this week, said the transfer of Freeport’s key productive and infrastructure assets to the GBPA’s Port Group Ltd affiliate had left the former unable to meet the terms of the Hawksbill Creek Agreement.

“The GBPA has been stripped of most of the assets it held during times of more active development, starting with the sale of the Wallace Groves interests,” the Committee said.

“Consequently, though the GBPA is the counterparty to the Hawksbill Creek Agreement, it does not have the capital base to pursue the development objectives outlined in the Hawksbill Creek Agreement.”

Such a conclusion will not come as a surprise to informed observers, and Tribune Business has reported for years how the ‘asset stripping’ referred to by the Committee had left the GBPA as a ‘pale shadow’ of its former self.

Key assets, such as the Grand Bahama Development Company (DEVCO); Freeport Harbour Company; Grand Bahama Airport Company; and all the land development, utility and services companies have been transferred to Port Group Ltd. And further equity stakes in several of the businesses have been sold to Hutchison Whampoa, along with management rights.

“The intent of the Hawksbill Creek Agreement was such that GBPA would be an entity able to carry out all municipal and regulatory functions in Freeport,” the Committee said.

“Meeting that expectation requires capital. Given that the GBPA has sold all of its assets, it no longer has the capital to do so. Moreover, GBPA itself stated that the revenues earned by GBPA today fall short of what is needed for basic maintenance, in light of outstanding receivables.”

Without its former operating assets, the GBPA’s role is now largely to oversee the collection of service fees, business licences and permitting fees, plus be responsible for regulation, investment promotion and capital/maintenance expenditure on infrastructure.

“The GBPA’s current finances are opaque and difficult to understand,” the Committee said of the quasi-governmental authority.

“For example, service charges are collected and used in support of municipal services, including road maintenance and other infrastructure. However, the Committee understands that such service charges are included in the conveyance for land sold by Port Group Ltd.

“If that is so, Port Group Ltd companies ought to have the legal right to collect the service charges and not the GBPA. A full understanding would require detailed information on GBPA and Port Group Ltd’s sources and use of funds, which was not provided to the Committee.”

The GBPA has likely been subsidised for many years by its shareholders taking profits generated by Port Group Ltd.

However, these concerns raised by the Committee - and the attendant lack of transparency - appear to have been behind several commitments given by the GBPA in the April 26 Memorandum of Understanding (MoU) with the Government.

The GBPA, and the Hayward and St George families, agreed to “use best endeavours” to “maintain sufficient working capital” so as to fulfill their Hawksbill Creek Agreement mandate.

Besides “agreeing a mechanism to enhance transparency in relation to the GBPA’s financial affairs, including GBPA’s working capital, revenues and expenses”, the MoU requires the Port to “address questions” about its capital position - including cross-subsidies and repayment of shareholder loans - “as soon as reasonably practicable”.

The Committee, meanwhile, said many land sales were “likely against the spirit” of the Hawksbill Creek Agreement because they were sold without development conditions attached, contributing to the numerous vacant properties in Freeport.