The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known QC yesterday urged the Government to require that Hutchison Whampoa and the Port Group of Companies sell 50 per cent of Freeport’s profit-making assets in return for renewal of their tax breaks.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the Minnis administration should use its promised repeal of the Grand Bahama (Port Area) Investment Incentives Act 2016 to reverse what he termed “Bahamianisation turned inside out”.

Pointing out that only foreigners currently own Freeport’s key economic infrastructure and profit-making assets, Mr Smith said the Government had an opportunity to require that 50 per cent equity stakes be sold off to the Grand Bahama Port Authority’s (GBPA) licensees and property owners.

He argued that this would give all licensees a vested interest in the city’s success, and help ensure that monies were retained in Freeport to develop infrastructure and promote its development.

“I urge the Government to negotiate opportunities for Freeport residents and licensees to benefit from the profits derived by the Port Group and Hutchison’s operations in Freeport in exchange for giving them tax exemptions upon the repeal of the Grand Bahama Investment Incentives Act,” Mr Smith told Tribune Business.

“It was always envisaged under the Hawksbill Creek Agreement that the Port Group of Companies would own and operate utilities, promote and develop Freeport, and regulate the Port area.

“In fact, the Hawksbill Creek Agreement provided for what was called a transfer agreement to a local authority, which would be owned by licensees and residents of Freeport, thus giving them control over their future and destiny.”

The clause Mr Smith referred to requires four-fifths of GBPA licensees to consent to the transfer of its quasi-governmental and regulatory powers to a newly-created local authority, which they would own and control.

However, the GBPA has effectively become a regulatory shell, with the Callenders & Co attorney - the GBPA’s former in-house attorney - conceding that “successive governments” had permitted its owners, the Hayward and St George families, to ‘strip’ it of key assets and transfer them to Port Group Ltd.

Subsequently, Port Group Ltd sold off stakes in its “income and profitable” assets, such as Sanitation Services and Grand Bahama Utilities. The majority - Grand Bahama Development Company, Freeport Harbour Company and Grand Bahama International Airport Company - were sold to Hutchison Whampoa, which gained a 50 per cent equity stake and management control.

“The Port Authority is simply now a regulatory government function,” Mr Smith told Tribune Business. “Port Group Ltd, that is the Hayward and St George families, continues to derive huge profits in partnership with Hutchison, and yet Freeport’s infrastructure is collapsing and degrading into a ghetto.

“The Port Authority will say it’s because it doesn’t have the income. But there was a time when all the income from service charges, license fees, the water company, harbour and airport were all combined in one pot that was used to build infrastructure, promote and develop Freeport, maintain it and keep the magic of this city.”

To reverse this situation, Mr Smith suggested: “The Government should now insist that within at least two years that GB Utilities, DevCo, the Harbour Company, Airport Company and Sanitation Services should offer at least 50 per cent of their shares to Freeport licensees and property owners.”

He argued that these two groups, together with the GBPA and Hutchison, would have “a mutual and vested interest in ensuring everyone’s success, instead of just allowing Hutchison and Port Group Ltd to make profits off the top of all activities and put nothing back into Freeport’s infrastructure, maintenance and development”.

Mr Smith told Tribune Business his proposal was “not as outlandish” as it seems, as Hutchison and the companies it has split into are listed on the Hong Kong Stock Exchange. And the GBPA, in its initial guise as Intercontinental Diversified Corporation (IDC) decades ago, was listed on the New York Stock Exchange with shareholders that included the Government of the Bahamas.

However, the Callenders & Co partner pointed out that IDC’s New York listing occurred when many of Freeport’s licensees and properties were foreign-owned. Now, with Bahamians in the majority, they were being prevented by exchange control regulations and the absence of any local listings on BISX from investing in their city’s productive, profit-making assets.

“It is ironic that Bahamians who are licensees and property owners are being deprived of participating in the success of Freeport’s,” Mr Smith told Tribune Business. “It’s perverse. It’s Bahamianisation turned inside out. Only foreigners can profit from Freeport’s success, not licensees and landowners.”

Only ICD Utilities, the BISX-listed entity that owns 50 per cent of Grand Bahama Power Company, allows Bahamian investors to participate in Freeport’s key infrastructure assets. Yet Bahamians own less than 20 per cent of GB Power Company, with the majority controlled by Canadian utility, Emera.

“I urge the new Government, in negotiations with Port Group and Hutchison, to ensure that two things happen,” Mr Smith told Tribune Business. “One, that licensees and landowners have a say in Freeport’s future through ownership in these companies. 

“Secondly, that they have the economic opportunity to profit from Freeport’s future. A repositioning and re-negotiation of the Grand Bahama Investment Incentives Act should be an opportunity for everybody to benefit who has a vested interest in Freeport’s future, not just Hutchison and Port Group Ltd.”