The Grand Lucayan is facing a demand for $532,282 plus loss of income over accusations it left two rented AC chillers “inoperable” due to the poor quality of its water supply.

Trane US, the Florida-based entity that supplied the now “damaged” equipment, in a February 3, 2025, lawsuit filed in the federal courts is asserting that the Bahamian taxpayer-owned resort breached their rental agreement by failing to properly install and maintain the chillers, plus return them “in good working condition”.

The Grand Bahama-based resort, which is currently the subject of negotiations to sell it to a $10bn Miami-based developer is also accused of failing to pay for either repairs to the chillers or their replacement. As a result, Trane is also claiming for loss of income due to its inability to lease them to other clients.

And it is alleging that the damage to the chillers was caused by the Grand Lucayan using a water supply whose salinity/chloride levels were more than 12 times’ higher than the recommended amount. Julian Russell, chairman of Lucayan Renewal Holdings, the special purpose vehicle that owns the resort on the Government’s behalf, declined to comment on the lawsuit when contacted by Tribune Business yesterday.

The basis for Trane’s claim dates back to when the Minnis administration was in office. This newspaper reported on July 20, 2021, on how the Grand Lucayan was forced to close for seven to ten days due to an inferior water supply that “rotted our chillers” and left the resort without air conditioning.

Michael Scott KC, who was Mr Russell’s predecessor, slammed the closure as “a disgrace” and disclosed that the Grand Lucayan was set to invest around $500,000 in installing a reverse osmosis plant to produce its own water as the quality of Grand Bahama Utility Company’s (GBUC) supply cannot be trusted.

Revealing that the Grand Lucayan was then paying the Grand Bahama Port Authority (GBPA) owned utility $40,000 per month for water, he told Tribune Business that the high salinity levels in this supply were responsible for corroding the resort’s chillers and thus shutting down its A/C systems.

Further details are disclosed by Trane’s lawsuit. It revealed that around one year after the Minnis administration invested $65m to acquire the Grand Lucayan from Hutchison Whampoa’s real estate arm to avert its threatened closure, the resort agreed on October 15, 2019, to temporarily rent one of its 1,000-ton water-cooled chillers to support the AC system.

The deal was signed by Veronica Clarke, the Grand Lucayan’s manager, and the chiller was duly delivered on October 31, 2019. “On or about February 4, 2021, Trane responded to a service call to evaluate the first rental chiller because it was not operating properly,” the lawsuit alleged.

“Upon evaluation of the first rental chiller, Trane’s technician found extreme scaling and fouling of the condenser tubes. The technician was unable to adequately fix the first rental chiller. Due to the inoperability of the first rental chiller, Lucayan [Renewal Holdings] insisted that Trane supply a replacement 1,000-ton water-cooled chiller.

“The first rental chiller was returned to Trane with significant corrosive damage that rendered it unusable and irreparable. Trane agreed to provide a second chiller to [the Grand] Lucayan while it evaluated the cause of failure of the first rental chiller at its repair facility in Florida.”

The second temporary rental chiller was shipped to the Grand Bahama resort on March 4, 2021, with the same terms and conditions as in the original agreement remaining in effect. “On or about July 7, 2021, Trane responded to a service call to evaluate the second rental chiller that was not operating,” the Florida-based company alleged.

“The Trane technician found a tripped oil pump circuit breaker and later confirmed a grounded oil pump motor. The Trane technician also found indications of condenser water intrusion into the refrigerant side of the chiller from fouled condenser water tubes.

“The second rental chiller was removed from the Grand Lucayan’s facility on July 8, 2021. The second rental chiller was returned to Trane with significant corrosive damage that rendered it unusable and irreparable.”

While Trane was investigating the damage to the first chiller, it alleged that Nalco Water, an independent third-party consultant, was conducting an investigation into the Grand Lucayan’s water quality in April 2021. “Nalco Water found that the chlorides in the water were high and concluded that the chlorides were making the system susceptible to corrosion,” Trane alleged.

“Nalco Water highly recommended the Grand Lucayan invest in a reverse osmosis plant to supply process water because the chloride levels on make-up water was about 1,010ppm (parts per million). According to Nalco, the recommended limit for chloride levels by any chiller provider is normally 40-80ppm.

“Trane notified Grand Lucayan that it was necessary that they address the water treatment on Grand Lucayan’s property and install/repair the reverse osmosis system.... On October 17, 2022, Trane retained an engineering company, SEA, to investigate, research and test the first rental chiller and the second rental chiller to determine the cause of damage.

“SEA examined the rental chillers, securing samples of the chillers’ tubes for evaluation. SEA conducted an examination of the tubes from the rental chillers. SEA reviewed the Nalco Water report, which detailed the Grand Lucayan’s water quality during the period when the rental chillers were located on Grand Lucayan’s property.

“SEA ultimately concluded that Grand Lucayan’s use of contaminated water led to the corrosion of tubes that caused the rental chillers to fail.” Trane further claimed that, as part of the $24,000 per month rental agreement, the Grand Lucayan was supposed to operate the chillers in accordance with procedures laid down by the manufacturer and allow necessary maintenance by qualified personnel.

“Lucayan [Renewal Holdings] was contractually obligated to return the rental chillers in good working condition, less normal wear and tear,” Trane alleged.”Lucayan failed to operate the rental chillers in compliance with the installation, operation and maintenance manual for the rental chillers, as required by the rental agreement.

“Specifically, Lucayan used untreated and/or improperly treated water for the rental chillers. Lucayan knew, or should have known, that the water it was using for the rental chillers were untreated and/or improperly treated.” Trane added that the cost to replace the chillers is $532,282, which it is now seeking to recover from the Grand Bahama resort’s owner, plus loss of income from not being able to rent them out.

While Trane’s legal action is unlikely to disrupt the Grand Lucayan’s potential sale to US-based developer, Concord Wilshire, it represents a further potential exposure for Bahamian taxpayers apart from the initial $65m acquisition cost and continuing annual subsidies to cover the property’s operating losses.

The 2024-2025 Budget provides a $17m subsidy for the resort and its immediate holding company, Lucayan Renewal Holdings, which matches the current fiscal year’s allocation. However, the $17m provided for the 2023-2024 Budget year was virtually exhausted at end-March 2024, with some $16.632m having been spent, meaning that Bahamian taxpayers will almost certainly incur cost overruns.

And, given that the Government provided Lucayan Renewal Holdings with $17.882m in the 2022-2023 fiscal year, the resort is set to cost taxpayers close to $54m by the time the upcoming fiscal year closes at end-June 2025. Given this subsidy run rate, taxpayer exposure to the Grand Lucayan now likely exceeds $200m with much of this sum unlikely to be recovered via a sale.

Ian Rolle, the GBPA’s president, blamed an “act of God” for the Grand Lucayan’s water woes when he replied to Mr Scott in 2021. That was Hurricane Dorian, whose storm surge inundated Grand Bahama Utility Company’s wellfields in September 2019. 

“We find it very unfortunate and disingenuous that the Grand Lucayan, with whom we have engaged in ongoing communication and continue to serve, would take this route to communicate with us,” Mr Rolle said.

“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.

“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.”