Friday, November 8, 2019
By NEIL HARTNELL
Tribune Business Editor
An ex-Grand Bahama Port Authority (GBPA) attorney yesterday urged the government to buy Freeport Harbour Company as well as the island’s airport to prevent “an enormous drain” on the Treasury.
Carey Leonard, now with the Callenders & Co law firm, told Tribune Business that the government “must not get suckered into just buying” the loss-making Grand Bahama International Airport from its current owners, Hutchison Whampoa and the GBPA’s Port Group Ltd affiliate.
Speaking after the government this week confirmed it is mulling the airport’s purchase, Mr Leonard argued that acquiring it together with the Freeport Harbour Company in a package deal would provide sufficient earnings to avoid having to turn to the taxpayer for further multi-million dollar subsidies.
With the airport widely regarded as a loss-maker, he explained that Freeport Harbour Company’s existing income streams would help “compensate” for that and the estimated $20m-$40m worth of post-Dorian repairs required at the island’s main gateway.
And Mr Leonard suggested that acquiring the harbour owner/operator would provide the prospect of increased near-term profitability if the $100m Carnival port and ITM Group/Royal Caribbean joint venture at the Grand Lucayan take-off as they promise increased fee income from more cruise ship calls.
“I think it’s really, really important that we push the government,” Mr Leonard told this newspaper. “They must not get suckered into just buying the airport. They’ve got to take the harbour as well. They might as well get it now while it’s still functioning properly rather than wait for it to disintegrate.
“I believe the harbour should do well with all the cruise ships coming in, and that will compensate and subsidise the airport until we get it up and running without draining the government. My concern is that if they just get the airport that will place an enormous drain on the Public Treasury. I just don’t want them to be satisfied on buying the airport alone.
Freeport Harbour Company, which is owned 50/50 by Hutchison Whampoa and Port Group Ltd, is the immediate parent for Grand Bahama International Airport Company. While Mr Leonard is not alone in his strategy, other private sector executives having expressed similar sentiments to Tribune Business, the government has given no indication it wants a package deal for both entities.
However, the ex-GBPA in-house attorney yesterday argued there were sound financial reasons for the Government to pursue a dual acquisition approach even though both Hutchison Whampoa and the GBPA’s shareholders, the Hayward and St George families, will be reluctant to let go of the harbour.
“It has to be profitable with all the shipping going on in there,” Mr Leonard added of the Harbour Company. “You have container ships coming into use the Container Port, the cruise ships, and ships coming into the Shipyard and Buckeye (the former BORCO terminal).
“Looking forward, Royal Caribbean has been very vocal as to what it wants to do with the harbour. It should make the harbour very profitable as you’re talking about a large number of cruise ships coming in.”
Mr Leonard said the agreement reached with Hutchison Whampoa by the former Christie administration, whereby it consented to relinquish its port monopoly on Grand Bahama to facilitate Carnival’s port, also committed the cruise line to make payments to the Harbour Company in return.
“That’s another reason why I think the Government should include the harbour now,” he told Tribune Business. “It’s for a public purpose. It’s to ensure that at the harbour we don’t have a disaster like we have at the airport right now.
“Government should, in its own mind, decide how quickly they are going to do this because if they negotiate with Hutchison, Hutchison will negotiate them to death and try and hold you to ransom. Do a compulsory acquisition and then argue over the value, if you must, in court. Deal with that afterwards. Just get the thing out of the hands of the current operator.”
Hutchison Whampoa’s decision not to restore the Grand Lucayan in Hurricane Matthew’s aftermath, and instead pocket the insurance proceeds from the storm-related claim, has left many Freeport and Grand Bahama resident sceptical that it will invest the necessary sums to restore the island’s airport gateway.
“What I’m saying is that if the airport is not worth very much, it’s got to be a drag on the balance sheet of the Harbour Company,” Mr Leonard told Tribune Business. “Now is the time to buy the Harbour Company with the airport. The airport is the main drain, it will cost millions to fix up, and you need the harbour to compensate or there will be a tremendous drain on the Treasury.
“Now’s the time to do it. Let’s deal with the airport and harbour. Get it out the way in one go. Find a good airport operator and harbour operator. It’s an extremely urgent public requirement that these two ports be acquired by the Government. The airport has literally killed tourism, and all they have to do is make a mistake at the harbour and both tourism as well as the industrial area will be affected. It’s too valuable for us to ignore. It’s important to get both.”
Prominent businessmen such as Magnus Alnebeck, the Pelican Bay hotel’s general manager, together with Michael Scott, the Hotel Corporation and Grand Lucayan chairman, have previously urged the Government to acquire Grand Bahama International Airport given that the island’s tourism and industrial business model “won’t work” if it is unable to receive international airlift.
While Freeport’s stopover tourism product is still moribund in Dorian’s wake, the airport - and associated airlift - are set to assume greater importance in the coming months due to the development of Carnival’s $100m cruise port and the proposed ITM Group/Royal Caribbean joint venture that includes the $195m first phase acquisition of the Grand Lucayan and harbour redevelopment.
Dionisio D’Aguilar, minister of tourism and aviation, confirmed the government is mulling the airport’s acquisition earlier this week after blasting Hutchison Whampoa’s failure to “demonstrate an effort” to urgently restore it to its pre-Dorian state.
Disclosing that it will likely cost between $20-$40m to rebuild the airport terminal and associated facilities, Mr D’Aguilar pledged that the Government will not make any purchase decision “on the fly”.
He promised that, rather than rush into a deal as it was accused of doing over the Grand Lucayan, the Government will first determine how to make the airport profitable before it commits the Bahamian taxpayer to another potentially risky multi-million dollar outlay.