The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Prime Minister Perry Christie yesterday confirmed that Mediterranean Shipping Company (MSC) is in talks to acquire the Grand Bahama Port Authority (GBPA), although the Government has not set any timeline for the existing owners to exit.

Mr Christie, unveiling the agreement on reforms to Freeport’s governance and investment regimes, also disclosed that MSC was in discussions with the Government about ‘home porting’ its cruise ships in the city.

Tribune Business previously revealed exclusively that the Government was pushing MSC to acquire the GBPA, and that it the privately-owned shipping company was eyeing ‘home porting’ in Freeport.

Mr Christie, meanwhile, said the discussions with MSC had gone beyond cruise ships to consider other potential business ventures for Freeport, including a logistics centre and shipping container repair facility.

“Positive talks have been held with MSC regarding the Container Port expansion in Freeport, the establishment in Grand Bahama of one of their world-famous training academies, expanding opportunities for Bahamian crews on their ships, and their interest in other major investments in Grand Bahama, including the logistics centre, a container repair facility, home porting of cruise ships and airport upgrades,” the Prime Minister told the House of Assembly.

“Discussions have also been taking place between MSC and Sarah St. George, representing the St George and Hayward families, on the possible acquisition of their shares in the Grand Bahama Port Authority and Port Group of Companies.”

The nature of the Prime Minister’s comments indicates that no deal between MSC and the GBPA’s two shareholder families seems imminent.

And he set no timeline for the St Georges and Haywards to exit, even though the Hawksbill Creek Agreement Review Committee recommended that they be given one year to finds a buyer/equity investors in return for the Government extending Freeport’s expiring tax incentives for 20 years.

The GBPA, in the Memorandum of Understanding (MoU) agreed with the Government on April 26, is only committed to “use its best endeavours to continue to attract investment to Grand Bahama”.

This includes “the introduction of new equity investor(s), including but not limited to, a sale for fair market value of the whole, or part, of the GBPA and its affiliate companies”.

Thus the Christie administration appears to have backed away from forcing the existing GBPA owners to exit, even though the expiring investment incentives - and claims that the Port had failed to reimburse the Government for deficits it had incurred in Freeport, as it is obligated to do under the Hawksbill Creek Agreement - gave it plenty of leverage.

The Government appears to have recognised that a ‘forced’ GBPA sale may have sent the wrong message to other international investors, even though many Freeport residents and businesses feel that ‘new blood’ and capital is needed in ‘The Pink Building’ to revive Freeport.

Via the MoU, the Government has already agreed to extend from May 5 the expiring real property, capital gains and income tax exemptions for the 20-year duration recommended by its Committee.

However, the nature of that investment regime is set to change (see other article on Page 1B) to become performance-based, with real property tax also set to be imposed on foreigners owning more than five acres of undeveloped land.

Mr Christie argued yesterday that Freeport was effectively being subsidised by other parts of the Bahamas, with the Government incurring “a larger primary deficit” than anywhere else in the country.

“In spite of the broad and generous concessions which apply to the Port area, and not to other parts of the Bahamas, Freeport’s economy has been stagnant, with Government expenditure exceeding revenues,” the Prime Minister said.

“It appears that the Government is running a larger primary deficit in Freeport than in the country overall. In fact, the Freeport deficit is being funded by other parts of the Bahamas, which without the tax and infrastructure advantages of Freeport, are experiencing significant economic growth through foreign direct investment (FDI).

“It is germane to this whole exercise to bear in mind that the Port Authority and, by extension, its licensees, received the benefits of land grants at nominal cost and extraordinary concessions for carrying out the development and other related obligations set out in the Hawksbill Creek Agreement.”

The MoU commits the GBPA to “use its best endeavours” to address the issue of the Government’s alleged Freeport ‘deficits’, and the two sides are undertaking an accounting exercise for the years 2011-2015 that is likely to be completed soon.

“The Hawksbill Creek Agreement provides a mechanism for reimbursement of any Government operating deficit,” Mr Christie said.

“The Government is now working with the Grand Bahama Port Authority to resolve any potential liabilities in a way that recognises the Government’s legitimate right to make claims under the HCA, and yet maintains focus on the need to move forward with unlocking new investments and job creation in Freeport, and meeting the social and infrastructural needs of the community.”

The MoU stipulates that the issue must be resolved before the Government names its two director appointees to the GBPA Board.