The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government's financial woes "may cause delays" to much-needed infrastructure upgrades unless public-private partnerships (PPPs) are employed, the Deputy Prime Minister has revealed.

K P Turnquest, also minister of finance, confirmed that the Government has hired the Caribbean Development Bank (CDB) to help develop a "properly structured" legal and risk management framework for PPPs after several such arrangements entered into by its predecessor were placed on hold.

Without identifying the specific projects, Mr Turnquest said some of the PPPs agreed by the Christie administration "represent liabilities" for the Government and Bahamian taxpayer despite being financed by private investors.

He implied that this went against the basic PPP philosophy, which is to engage private sector capital to finance the upfront cost of public infrastructure and services at no expense to the Government, describing the former administration's agreements as "ad hoc".

"We have requested assistance from the Caribbean Development Bank (CDB) to develop a proper structure for PPPs to ensure there is fair opportunity, that the cost and return to the Government are sustainable, and that we have a standardised framework in which to engage in these PPPs," Mr Turnquest told Tribune Business.

"We have several of them all underway at the moment, all with different criteria and standards, some of which represent liabilities to the Government."

Mr Turnquest added that the PPPs agreed by the former government lacked "any real, objective criteria as to how they were entered into".

He described them as "ad hoc", and arrangements agreed "on a case by case basis", adding: "We want to bring some structure to the entire process. We're very confident the CDB has the expertise in this area, so we fully expect to get competent advice and direction with respect to this."

The Deputy Prime Minister added that PPPs were a potentially useful tool for addressing the Bahamas' key infrastructure challenges without increasing the debt burden on an already-strained government and Bahamian taxpayer.

"I think it's a fair enough statement to say that without the benefits of PPPs it may cause delays in some of these infrastructure upgrades that need be to done, so to the extent they offer opportunities to move these upgrades forward we're interested in exploring that," he told Tribune Business.

"PPPs can be very effective, particularly where there is income streams to help repay the financing. They provide an opportunity to introduce cheaper financing as well as give Bahamians an opportunity to earn a return in exchange for essential infrastructure.

"As we try to reduce our debt trajectory and borrowing, this can be an effective tool to help us achieve that."

Mr Turnquest was speaking after Ministry of Finance and CDB representatives last week met with private sector executives to discuss the planned PPP legal framework. Among those present were officials from two ongoing Bahamas-based PPPs, Arawak Port Development Company (APD) and the Nassau Airport Development Company (NAD).

Michael Maura, APD's chief executive, told Tribune Business that the Bahamas had little choice but to embrace PPPs because "the Government does not have the money to address the significant infrastructure challenges" this country faces.

He said the CDB's PPP co-ordinator, Brian Samuel, "walked us through a fairly comprehensive look at PPPs in the Caribbean", including what was required to form such an arrangement. "Generally speaking, those projects which offer national benefits are best conditioned for PPPs," Mr Maura added. "They have to speak to national benefits. We went around a discussion of what the Bahamas needs to do create a legal framework to support PPPs.

"We talked about risk, financing and legal recourse. What's going to come out of this is the Government, in close collaboration with the CDB, is going to clarify that framework and engage the private sector throughout the process.

"The Government does not have the money to address the significant infrastructure challenges our country has, and specifically New Providence."

Six PPP contracts entered into by the former government came under heavy fire last year from the Minnis administration, which inherited them upon being elected to office on May 10.

Carl Bethel QC, the Attorney General, told the Senate on June 22 that all were placed under review to determine if the Government was getting value for money and they were in the Bahamian people's best interests.

He identified the contracts as including proposals to "construct an administrative office building on 30 acres of prime agricultural Crown Land on Gladstone Road; reconstruct an administrative office for the administrator and police Station in Harbour Island, entered into with the same company that had agreed to build the Gladstone Road complex".

Mr Bethel said the Memorandums of Understanding (MoUs) for these two projects were combined, adding: "That MOU called for the 30 acres to be granted to the builder by a Crown Grant, so that it could then lease the same land back to the Government. The transfer of title was said to be so as to enable that builder to borrow necessary funds from a Bank to fund the construction."

The Attorney General did not identify the developer involved, but Tribune Business previously revealed Sebas Bastian's Brickell Management Group (BMG) as the private sector partner behind the Harbour Island project.

The other PPPs referred to by Mr Bethel included a new administration complex and police station in Eight Mile Rock; the new General Post Office at the Independence Drive Shopping Plaza; the proposed new Road Traffic Department building on Tonique Williams Highway and Knowles Drive; and contractual works for the Fox Hill Community Centre.

Scott Godet, principal of Scottdale Bedding and National Fence Company, and a major landlord to the Government, is understood to be the principal behind the Post Office PPP. Desmond Bannister, minister of works, subsequently revealed that now-Exuma MP, Chester Cooper, was leading the $24.5 million Road Traffic PPP, while New Providence-based Top Notch Builders is raising $25 million to finance the Eight Mile Rock complex.

Mr Bethel confirmed to Tribune Business that the Eight Mile Rock project had been given the go-ahead, but the fate of the others remains unclear. Mr Turnquest told this newspaper that the Government hoped to get the new PPP framework in place before further such contracts are awarded.

"Any consultation takes some time, but we would like that to be the case," the Deputy Prime Minister said. "We're working towards it as soon as possible.

"We need to have some structure because, at the end of the day, we want to make sure we get value for these projects. We don't want to secure off-balance sheet financing only to put recurrent liabilities on the Bahamian people in terms of recurrent expenditure, and to ensure it doesn't cost us more beyond what we can obtain in commercial terms."