• Moves to claim against GBPA for ‘devastating’ costs

• Chair slams high salinity levels as ‘anatomy of failure’

• Paid $1.2m to GB Utility under govt’s ownership

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government-owned Grand Lucayan yesterday said it is seeking almost $3m in compensation from the Grand Bahama Port Authority (GBPA) for “the exorbitant loss and damage” caused by poor quality water.

Michael Scott QC, chairman of Lucayan Renewal Holdings, the special purpose vehicle (SPV) that owns the resort, said it planned “to mount a claim” against the GBPA and its Grand Bahama Utility Company (GBUC) affiliate over “devastating” repair and equipment replacement costs incurred since the government acquired the hotel almost three years ago.

His July 26, 2021, letter to Philcher Grant, the GBPA’s director of group corporate affairs and government relations, repeated assertions that damage to the Grand Lucayan’s air conditioning (A/C) chillers and internal plumbing had been caused by a Grand Bahama Utility Company water supply that was “more than five times’ the safe or acceptable level of salinity”.

Noting that this was based on test results and analysis of water samples by NALCO Labs, Mr Scott blasted “an anatomy of failure” over what he described as “the abysmal and unsatisfactory waterworks in Freeport”. He also questioned why there had been so few complaints, given that the impact to the Grand Lucayan’s plumbing and A/C systems indicated residents and other businesses were likely to be equally impacted.

Hitting back at assertions by Ian Rolle, the GBPA’s president, that his concerns were “disingenuous”, the Grand Lucayan chairman told Ms Grant: “The object of this letter to you is to mount a claim for compensation for the exorbitant loss and damage sustained by the hotel as a result of the distribution of salty running water in the internal plumbing system.”

He added that the resort’s claim went “beyond systems damage” to include “consequential loss resulting from business interruption”, as every time the A/C network shut down, the Grand Lucayan has to transfer its guests across the street to the Pelican Bay property.

“The seminal cause of this infrastructural corrosion and degradation is the high chloride content of the water supplied by Grand Bahama Utility Company,” Mr Scott continued.

“Operationally, the Grand Lucayan resort has been severely disadvantaged since the passage of Hurricane Dorian nearly two years ago. The saline and chloride content in the water provided by Grand Bahama Utility Company has been tested by chemists, NALCO Labs, and determined to contain more than five times’ the safe or acceptable level of salinity in the water allocation.

“As a result, the remedial cost has been devastating. Our costs include business interruption, repair and replacement of equipment, and monies paid for essentially unusable water since September 11, 2018, have been almost $3m. In point of fact, the precise cost of $2.967m.”

The claim thus dates back some two-and-three-quarter years to when the Government first acquired the Grand Lucayan, and is not just confined to the post-Hurricane Dorian period when storm surges had resulted in salt water contamination of the wellfields relied upon by the Grand Bahama Utility Company.

The compensation demand also comes amid the Government’s protracted effort to sell the Grand Lucayan to the ITM/Royal Caribbean joint venture. Talks are still ongoing some 17 months after the sales agreement was first signed, the deal having been disrupted by the COVID pandemic, with no indication as to when it will close.

The laboratory tests and analysis of the Grand Lucayan’s water supply samples found that the level of total dissolved solids (TDS) it contained was relatively high, and sufficient to produce what it described as “hard water” conditions.

“Hard water has the effect of leaving deposits and film on heating and plumbing fixtures, and on the inside of hot water pipes and boilers, air condition chillers and cooling towers plates, thus reducing efficiency and effectiveness of these equipment,” the report found, adding that a filtration system would be unable to cope with the amount of TDS that was detected.

Mr Scott said he and his fellow Lucayan Renewal Holdings directors “embrace the view that all of this loss and damage could have been avoided had GB Utility supplied a reasonably safe potable distribution of water through its systems network so that the plumbing infrastructure of the hotel could have avoided this acute degradation”.

Arguing that the Grand Lucayan was “entitled to expect a water allocation which was commercially reliable” given the price it was paying, Mr Scott argued that the GBPA and its water affiliate had breached their “contractual and public duty of care” given the former’s quasi-governmental status.

GBPA officials could not be reached for comment before press time last night, but Mr Scott offered to send its owners - the Hayward and St George families - and senior management executives a copy of the NALCO Labs report.

“It’s incredible that no one has actually complained about this,” he told Tribune Business. “The Port Authority is a quasi-governmental authority, and they owe the public a duty of care. Nobody is standing up and speaking out about this.

“We’ve had chillers constantly breaking down, and revere osmosis plants giving up. I’m tired of it. Every time it happens we have to shut the hotel and walk people across the street [to the Pelican Bay].” Mr Scott said the Grand Lucayan had paid $1.2m for water since the Government acquired the resort from Hutchison Whampoa, with the monthly average standing at around $40,000.

“Our chemical analysts said it’s basically cheaper for us to go and pipe the sea, get salt water and run it through a reverse osmosis plant as opposed to the thousands of dollars we are paying,” he added.

The Grand Lucayan chair argued that if the GBPA and its shareholders are “serious about creating a first-class infrastructure” they would have invested in a commercially viable reverse osmosis system to replace the wellfields much earlier than they did.

“People have got to say enough is enough,” Mr Scott said. “It’s time for them [the GBPA] to take this seriously and stop skirting the issue. If they are charging fees for these services, they have to make the necessary capital expenditure. Quite frankly, the shareholders of the GBPA have to stop treating this like an overseas colony to extract licence and service charges from. They actually have to put something back.” 

Ian Rolle, the GBPA’s president, in responding to Mr Scott’s first blast, last week said Grand Bahama Utility Company was not liable for any damages to personal property because it had been impacted by an “Act of God”.

That was Hurricane Dorian, whose storm surge inundated Grand Bahama Utility Company’s wellfields in September 2019. Mr Rolle’s statement, though, did not deny or address Mr Scott’s concerns directly, although he pointed to the utility’s provision of 1,000 gallons of water daily to the Grand Lucayan at no cost.

“While the Grand Bahama Utility Company (GBUC) remains sensitive to the significant damage caused by Hurricane Dorian on Grand Bahama, the impact to the water table and salt intrusion was a direct result of the storm. Therefore, we are not liable for any direct or consequential damages to personal property as it relates to this Act of God,” he said.

“We have taken measures to lessen the impact to the Grand Lucayan and other impacted customers by providing a 25 per cent discount on water bills. Additionally, Grand Bahama Utility Company on a daily basis provides 1,000 gallons of potable water at no additional cost to the Grand Lucayan.”

Mr Rolle’s statement focused heavily on the measures that Grand Bahama Utility Company is taking to rectify the situation. “We have provided comprehensive updates on the progression of our $5m reverse osmosis system that is slated to be commissioned at the end of August 2021, barring no shipping delays,” he added.

“We understand and take very seriously the concerns of residents as it relates to water potability. We also continue to significantly progress our safety plan to have full island-wide potability by the end of August 2021.

“A key factor for this is the commissioning of our three million gallon reverse osmosis plant, which represents a $5m investment. This investment will not only restore water potability to the remaining 30 percent of customers across Grand Bahama, but will also ensure that Grand Bahamians will never again be without potable water for a prolonged period.”