The Tribune

• Minister: They ‘understand urgency’ on Grand Lucayan

• Admits ‘tough task’ to raise $50m-$60m for airport

• Govt ‘couldn’t conceive’ anyone else buying gateway

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday said Hutchison Whampoa is “ratcheting up their game” to enable protracted negotiations for the Grand Lucayan’s sale to finally conclude.

Dionisio D’Aguilar, minister of tourism and aviation, told Tribune Business that the Hong Kong-headquartered conglomerate “understands the urgency” to facilitate the hotel deal by reaching agreement with the ITM Group/Royal Caribbean joint venture for Freeport Harbour’s redevelopment.

“I’m advised that it’s imminent,” the minister said of the harbour agreement. “The local company [Freeport Harbour Company] is almost completely done with its negotiations with ITM and Royal Caribbean Cruise Lines. It’s very close. I’m advised that it will then be to Hong Kong for the final blessing.

“I’ve been advised they [Hutchison] understand the urgency that the government is applying, and are now ratcheting up their game to make it a reality.” Tribune Business has long reported that ITM/Royal Caribbean, and their Holistica joint venture, will not close the Grand Lucayan’s purchase until they have sealed the harbour’s redevelopment.

Closing on one before the other would give either Freeport Harbour Company, which is 50 percent owned and managed by Hutchison Whampoa, or the government the power and negotiating leverage to squeeze more concessions from ITM/Royal Caribbean knowing that the joint venture will be increasingly desperate to wrap up negotiations on the last component for its project.

The Grand Bahama Port Authority’s (GBPA) Port Group Ltd affiliate owns the remaining 50 percent in Freeport Harbour Company, whose agreement is vital to enabling the expansion of cruise ship berths and development of a water-based adventure park that will accompany a revived Grand Lucayan.

Mr D’Aguilar’s assessment was echoed by Kwasi Thompson, minister of state for Grand Bahama, who told yesterday’s Grand Bahama Business Outlook conference: “I am pleased to report that Hutchison and Royal Caribbean/ITM Group have reported progress in their agreement to create a new cruise port. The Government is also working to finalise the hotel portion.”

One source, speaking on condition of anonymity, told this newspaper: “The important thing is that Royal Caribbean is coming to buy the hotel. I think within 30 days it might be done. Hutchison is going to sign the deal. It hasn’t been signed yet, but it’s going to be done in a few weeks.”

Mr D’Aguilar declined to be drawn on a timeline for completing all negotiations, given that the initial agreements were signed in early March 2020 just before the COVID-19 pandemic devastated the Bahamian and world economies, including the cruise industry. This newspaper, though, understands that a 30-day closing may be too optimistic and that early to mid-summer is more realistic.

The tourism minister, meanwhile, admitted that the Government and private sector partner that will ultimately be selected to manage Grand Bahama International Airport face “a tough task” to raise the $50m-$60m in capital required to revive the Hurricane Dorian-devastated gateway.

Speaking following yesterday’s formal signing that saw the Government take over the 2,500 airport’s ownership, Mr D’Aguilar said: “We don’t want to buy the airport and come to a dead stop. We have to ascertain how to proceed.

“The Inter-American Development Bank (IDB) has provided some funding to hire LeighFisher, an airport consultant that will help us to craft a request for proposal (RFP) to engage an investor capable of entering a private-private partnership, raise funds and operate the airport.”

That RFP is due to be issued within the next 60-90 days, but Mr D’Aguilar declined to be drawn on criticisms that Hutchison Whampoa has been able to off-load its two non-performing Grand Bahama assets, the airport and the Grand Lucayan, on to the Government and Bahamian taxpayer together with their associated costs and liabilities.

The taxpayer has already kicked-in more than $100m to keep the Grand Lucayan afloat since the Government bought it in September 2018, but Mr D’Aguilar said of the airport: “I think that on the face of it the Government got a good deal.

“They got an operational asset for around $1m, and based on what has been invested in 11,000 feet of runway and ramps, the Freeport Harbour Company/Hutchison brought the airport back - not to its past glory, but they operationalised it.”

He then conceded: “Airports cost tens of millions of dollars to operate. While the immediate outlay might be considered a good deal, we are in a for a tough task to raise the money to reconstruct and rebuild the airport for the island of Grand Bahama.

“But we couldn’t conceive anyone else buying that airport. It had to be the Government. The vast majority of airports, ports and ports of entry around the world are all owned by the Government.”

The magnitude of that task is illustrated by the fact Grand Bahama International Airport is presently generating minimal cash flow due to the lack of airlift, hotel rooms and tourism activity on the island.

While much of that is driven by Dorian and the COVID-19 pandemic, figures released yesterday showed less than 4,000 arrivals for each of January, February and March 2021, which will generate nowhere near enough revenue to service the $50m-$60m debt financing that will fund the airport’s redevelopment.

“We need to build something that accommodates US pre-clearance,” Mr D’Aguilar said. “Grand Bahama had pre-clearance before Nassau. It had it for a considerable period of time, and was one of the few airports that had it. We want it rebuilt, and will build whatever we need to build to ensure pre-clearance returns to Grand Bahama.”

Mr D’Aguilar said neither the Airport Authority, nor the eventual operator of Grand Bahama International Airport, will be subject to GBPA licence fees. Companies operating within the airport, such as retailers and restaurants, will also be exempt from these for five years with the possibility of a further five-year extension.

The Prime Minister, in his address at the airport handover, said the Government will pay $1m towards staff severance costs as they transition to Airport Authority ownership.

“The Freeport Harbour Company has invested $1.6m to convert the Fixed Based Operation or FBO into a new temporary terminal, and has been subsidising the monthly operating costs of this facility,” Dr Hubert Minnis said. “After the transfer date, and until the new PPP is identified through the RFP process, the Government has committed to continue to carry these costs.”

The Government is also investing $1.5m to rebuild the Customs Warehouse, carry-out elevator and make structural repairs to the Air Traffic Control Tower, plus secure office space for the airport management team and airlines.