The Tribune

• Taxpayer ‘saddled’ with Hutchison/Port ‘loss maker’

• Yet former owners retaining ‘jewels in the crown’

• Ex-GBPA attorney: Harbour ‘missed opportunity’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has “rolled over and played” dead by permitting Hutchison Whampoa to dump all its loss-making assets on the Bahamian taxpayer, a prominent attorney argued yesterday.

Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, told Tribune Business that the extent of Grand Bahama International Airport’s operating losses over the past two-and-a-half years was further evidence that the Hong Kong-based conglomerate had retained its “jewels in the crown” while offloading liabilities it no longer wished to retain.

Having sold the Grand Lucayan to the government for $65m in early September 2018, Hutchison Whampoa has now completed its second disposal by handing Freeport’s main aviation gateway over to the government via a deal structure that Mr Leonard described as “potentially fatal” to hopes of fulfilling the city’s potential as a transshipment, distribution and logistics hub.

He reiterated his previous argument that the government should have purchased Freeport Harbour Company, the airport’s parent, by compulsory acquisition if needed from 50/50 owners, Hutchison and the Grand Bahama Port Authority’s Port Group Ltd, along with the 741-acre Sea Air Business Centre (SABC).

Without these two assets, Mr Leonard suggested that Dionisio D’Aguilar, minister of tourism and aviation, will struggle to fulfill his ambitions for transforming Grand Bahama International Airport into an aviation cargo hub and profit centre that stands in stark contrast to the $13.3m worth of operating losses incurred from 2019 onwards.

Voicing surprise at the $200m price tag for the “comprehensive redevelopment” of Grand Bahama International Airport, and suggesting that this might include the required investment to develop a cargo hub, he told this newspaper: “I’m sure that includes the cargo centre and everything like that.

“Because the government has decided not to compulsorily acquire the harbour and the Sea Air Business Centre, you can forget that cargo thing. That’s the very reason I suggested the government buy Freeport Harbour Company. I wonder how much profit the Harbour Company had last year, even with the airport?”

Tribune Business revealed yesterday how, based on its audited and unaudited financial statements, Grand Bahama Airport Company suffered an operating loss (based on earnings before interest, taxation, depreciation and amortisation or EBITDA) of $5.567m during the 2019 calendar year.

Some $9.608m in revenues were dwarfed by $15.1276m in total operating expenses, of which $3.69m related to staff costs and $11.486m to non-labour expenses. Those figures likely resulted from the catastrophic damage that Hurricane Dorian inflicted on Grand Bahama International Airport, and its closure to income-generating commercial and private aviation traffic for several months.

And the COVID-19 pandemic, with the closure of international and domestic aviation traffic for a significant portion of last year, was probably the major contributing factor that plunged Grand Bahama Airport Company into a further $6.663m operating loss for 2020.

Total revenues, both aeronautical and non-aeronautical, dropped by almost two-thirds year-over-year to $3.046m, while total operating expenses were down by more than one-third at $9.708m. However, the ‘red ink’ continued to mount with a further $1.105m worth of operating losses during the first four months of 2021 to end-April.

As a result, Grand Bahama International Airport has collectively generated some $13.3m worth of operating losses in the near two-and-a-half years immediately prior to its acquisition by the Government, which closed on June 1. Further multi-million dollar taxpayer subsidies may well be required to ensure the facility remains a “going concern” until a private sector developer is found to take over all responsibilities.

Summing up the airport deal’s immediate consequences for Bahamian taxpayers, Mr Leonard blasted: “The Government has saddled the people with a loss-maker because they’re too scared to do anything with Hutchison. 

“The unfortunate thing is both governments continue to bow at the feet of Hutchison, and as long as they bow at the feet of Hutchison, the people of Grand Bahama suffer. When you buy a company, it’s the seller who’s responsible to pay off the staff, not the buyer. Everything you look at, they’ve literally rolled over and played dead....

“I’m very concerned that the people have been saddled with a loss maker that I feel was unnecessary had the Government done a compulsory acquisition of the harbour. We’ve taken on all the money losers from Hutchison and left it with the real money, the jewel in the crown,” he continued.

“They continue to get all the cream. DevCo (The Grand Bahama Development Company) pays no real property taxes. In days gone by we didn’t mind that as Devco and Hutchison were responsible for laying some money out, but now they pay no taxes and make the money. It’s very discouraging, and I don’t think you’re likely to see much happening in Grand Bahama.”

Hutchison’s key Grand Bahama assets are Freeport Container Port and the Freeport Harbour Company, while DevCo has frequently been accused of “land banking” with its 70,000-plus acre holdings. Mr Leonard’s reference to staff payments alludes to the fact that the Government contributed $1m, or 50 percent, of the severance and benefits payouts to airport staff during the ownership transition.

Acknowledging the Government’s strained fiscal position, he nevertheless said that if it had acquired the Harbour Company and Sea Air Business Centre it would have established the control over transportation costs and related taxation that was required for a vertically-integrated transshipment and cargo hub also featuring the airport.

Asserting that an opportunity has been “completely missed”, Mr Leonard added: “It could be fatal. It really is extremely damaging. You’ll wind up in negotiations with Hutchison and you will never, ever get going.” He also asserted that a $50m-$60m investment to rebuild Grand Bahama International Airport “makes more sense” than the new $200m price tag.

The Government, in defence of its position, will likely argue it had no choice but to take over the airport given that Hutchison and the GBPA had signalled early on they had no intention of investing the significant sums necessary to rebuild an aviation gateway that is vital to Freeport’s survival as a city and economy.

While the Government has sought to place much of the focus on the $1 purchase price, many observers believe that Hutchison and the GBPA have effectively been allowed to abandon their developmental obligations to Freeport under the Hawksbill Creek Agreement by offloading a loss-making asset on to taxpayers while retaining all the profitable ones.

And there have been suggestions that the airport’s Dorian insurance claim payout may have been as high as $25m, a sum that the former owners have been allowed to keep rather than invest in the rebuilding.