The Tribune

• Says 35% of economy depends on Prince George Wharf

• Nassau Cruise Port chief eyes tripling mega yacht berths

• Redevelopment costs increase again to reach $322.5m

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

NASSAU Cruise Port's success was yesterday branded "mission critical" for The Bahamas with 35 percent of the country's economy dependent on a facility that has generated $12.383m in net profits even before its official opening.

The offering memorandum for the Prince George Wharf operator's $134m bond refinancing asserted that The Bahamas' major cruise port of entry was responsible for more than one-third of the country's gross domestic product (GDP) given that some 70 percent of all tourists arrived via its berths and piers.

And, as New Providence's sole cruise port, and with the passenger facility charges adjusted for inflation on an annual basis, Nassau Cruise Port's virtually guaranteed revenue streams are already translating into bottom line profits even though the redevelopment - now priced at $322.5m, as opposed to $300m - has yet to be completed ahead of its end-May opening.

The cruise port's unaudited financials for the nine months to end-December 2022, which were attached to the offering memorandum, show a net profit of $12.383m as compared to just $210,520 for the same period in 2021. The latter was when the cruise lines had just resumed sailing following the COVID-19 pandemic, with adjusted EBITDA (operating income) growing more than eight-fold year-over-year from $1.806m to $15.968m for the final nine months of 2022.

Michael Maura, Nassau Cruise Port's chief executive, yesterday described the facility as "a national asset" and revealed to Tribune Business that it is exploring whether to triple its mega yacht capacity from three vessels to nine.

"We are looking at the possibility of adding mega yacht slips," he disclosed. "Right now we have approximately 750 lineal feet of mega yacht berths, and we are looking at constructing some finger piers to accommodate an additional six yachts. That will be on the eastern side." The proposed extra piers would be "just steps away" from the retail, food and beverage and entertainment facilities offered by Nassau Cruise Port.

Setting out the cruise port's virtues to the select group of institutional and high net worth investors participating in the private $134m bond refinancing, the offering memorandum said: "The success of the port is mission critical for the country. Seventy percent of visitors to The Bahamas arrive through this port, compared to 30 percent via airport, and tourism generates 50 percent of GDP and is responsible for 50 percent of the island’s employment.

"Put simply, 35 percent of the Bahamas GDP and the livelihoods of a material portion of the population depends on the success of this project. Given geographic proximity to the US, cultural depth and diversity of on-island experiences, Nassau is the centrepiece of all major cruise lines’ Caribbean routes and a 'must stop' location. Fifty-one percent of all Caribbean cruises’ passengers visit The Bahamas and, of those, 71 percent visit Nassau."

Mr Maura yesterday said Nassau Cruise Port also benefits from improved yields, as it has the ability to raise its port and passenger facility charges in line with inflation as measured by the US Bureau of Labour Statistics (BLS) consumer price inflation index. A 6.8 percent fee increase was implemented on New Year's Day, 2023, and a further 7.1 percent rise is due to take effect on January 1, 2024.

"There are material cost increases we incur, but it gives us the benefit of increasing revenue line items," he added. With the number of cruise passengers visiting Nassau set to increase steadily in coming years, the cruise port's revenue streams are thus set for a similar boost.

"Our confirmed bookings that we have for this year, 2023, are 4.2m, and next year confirmed bookings are 4.6m," Mr Maura said. "We're very, very solid. Very strong. These are all based off confirmed berth requests. It was about a year ago that we began to get the benefit of our first six-ship day on the marine side.

"We realised the benefit of berth six in March 2022. From the standpoint of having six ships in port, we have had well over 30 occurrences since. Our marine investments are already paying for themselves. The country sees that very clearly on days when we have more than 25,000 visitors, and they're moving through downtown, getting into taxis, having their hair braided and going to the Straw Market.

"Nassau Cruise Port is the busiest transit port in the world. The yield from that additional berth has been extremely positive. The fact is that had we not built that six berth we would not have achieved the 28,554 [daily record], which we will break. That has everything to do with the strong growth anticipated."

Cruise passenger numbers are forecast to steadily increase from 2024's 4.6m to reach 8.5m annual visitors by 2050. "Considering the completion of construction and the redevelopment of the Port, Nassau Cruise Port forecasts cruise traffic to increase at a comparatively higher annual growth rate of 10 percent, 8 percent and 6 percent in 2024, 2025 and 2026, respectively," the offering memorandum said

"This is due to utilisation of additional berthing capacity of the port and a revitalised port and Nassau downtown area attracting more passengers. After the phase of comparatively higher growth, Nassau Cruise Port expects that the port’s traffic will grow at 2.1 percent per annum from 2027 to 2050."

Nassau Cruise Port's redevelopment costs have increased by $72.5m, or 29 percent, beyond the original $250m budget estimate. That was subsequently increased to $300m, before reaching new heights in the offering memorandum. Besides $216.9m in construction costs, which account for 67.3 percent or two-thirds of total spend, some $43.2m in development, design, engineering and inspection costs have also been incurred.

With total development costs standing at just over $260m, some $58.5m in financing expenses, including interest payments, a debt service reserve account and other financing expenses have also contributed to the $322.5m total. "We do incur approximately $17.5m in interest expenses annually," Mr Maura confirmed.

The offering memorandum added: "The estimated initial capital investment of the project is $322.5m. EPC (civil works and infrastructure) cost for the redevelopment of the port is anticipated to be $216.9m, which includes marine, upland, mechanical, electrical and plumbing (MEP) and foundation works.

"All environmental permitting for ongoing works has been obtained from the relevant Bahamian authorities, and 30 percent of all energy for operating the port will be derived from renewable sources, primarily via distributed solar generation."

Revenue from the passenger facility and port charges is projected to account for 78.2 percent, or three-quarters, of the port's income streams in 2025 with a further 8.9 percent generated by "ancillary services" such as water sales, garbage collection and cleaning services. Retail revenues will comprise 13 percent of all income streams in 2025, eventually rising from $7.7m that year to $8.4m in 2030.

During that six-year period, Nassau Cruise Port's total revenues are forecast to rise by $20.1m or around one-third, growing from $60.4m to $80.5m. "The project aims at positively repositioning Nassau both to consumers and, equally important, the cruise lines," the offering memorandum said.

"The short-term goal will be ensuring that cruise line expectations match those of the local community, while the long-term objective will be to reposition Nassau as a marquee port amongst Caribbean itineraries. The strategic goal will be to transform Nassau from a supply-driven destination into a demand-driven destination in the Caribbean."