The government is expected to collect a minimum of $2.5 million per year from Global Port Holdings (GPH) for its leasing of the Port of Nassau once construction is complete, according to the heads of agreement (HOA) that was tabled in the House of Assembly on Tuesday.
The annual lease charge will be calculated on the basis of $0.50 per passenger movement plus value-added tax (VAT) and no less than $2 million during the construction period, increasing to $2.5 million once the construction phase is complete.
GPH is eyeing the first quarter of 2020 to break ground on the $250 million redevelopment project.
Minister of Tourism and Aviation Dionisio D’Aguilar tabled the HOA during debate on the Harbour Dues (Amendment) Bill 2019, which sets up a new fee structure for cruise ships that dock at the cruise port. The bill paves the way for GPH to implement a passenger facility charge at a minimum of US$3.00 per passenger and a port facility charge at a minimum of $5.50 per cruise line, payable to the operators of the port, which would retain those charges. GPH would pay the government 12 percent value-added tax (VAT) for each passenger facility charge, which amounts to $0.36 per passenger.
D’Aguilar told Guardian Business yesterday that once operational, the government would collect in the area of $3.5 million annually from GPH.
The government collected $10.8 million during the 2018/2019 fiscal period from tonnage dues, wharf and port dues, private piers/abutments/docks, other port dues, harbor dues and pierage dues – $2.6 million of which was generated by the Port of Nassau, according to D’Aguilar.
“We don’t have any money coming in from the port. Right now, we have $2.5 million, I think the good member, the minister of transport, Bamboo Town said roughly $2.6 million is coming in. I know in my ministry, the Ministry of Tourism… is spending roughly $2 million every year on security and maintenance to Festival Place, fixing this up and fixing that up. So now with this deal signed, I get it back. I don’t have to spend the $2 million no more, the port could take care of that,” D’Aguilar said in Parliament on Tuesday.
“You will see the $2 million to $3 million in rent coming in, then you will see the VAT on the passenger facility charge.”
The HOA also details the tax incentives, waivers and benefits granted to GPH over the span of the 25-year concession.
The government has agreed to exempt GPH from paying all customs duties and excise tax in respect of all materials for work on the new port and the construction plant for the new port. GPH will also not pay any real property taxes or any other taxes imposed on real property for an initial period of 10 years and then a further period of 10 years.
The government also agreed to defer VAT on imported construction material and equipment and imported goods for the duration of the agreement.
“In addition to the foregoing, GOB (government of The Bahamas) will facilitate the grant of exemptions from customs and import duties which would otherwise be applicable to the importation of the company’s or any contractor’s equipment to be used for the purposes of carrying out any work at the port,” the HOA states.
“GOB will facilitate the grant of exemptions and renewals thereof during the term [of the agreement] as may be available under and in accordance with the Hotels Encouragement Act, the City of Nassau Revitalization Act and any other laws.”
GPH has indicated that it intends to make an equity offering for investment in the port available by the third quarter of 2021.
The HOA detailed that the Bahamas Investment Fund (BIF) – which would own 49 percent of the port – will initiate the public offering to Bahamians and Bahamian residents in two classes of investor shares, Class A and Class B.
This would be shared on a “bottom-up” basis designed to achieve the widest public participation by approximately 20,000 investors.
“There will be an equity investor class and debt investor class. Class A investor shares will represent an investment in equity and the Class B investor shares will represent an investment in debt. The minimum investment for the Class A investor shares will be $1,000 and for the Class B investor shares the minimum investment will be $50,000,” the HOA states.
Up until the public offering, BIF will have a board of directors comprised of three board members – one to be appointed by GPH, one to be appointed by the government and the third to be nominated and appointed by the mutual agreement of the government and GPH.
“After the public offering the shareholders of BIF shall nominate and appoint such Bahamian citizens to serve on its board as they deem fit, but subject to and in compliance with its corporate governance documents and relevant laws,” the HOA states.
The company is looking at a 70/30 debt-to-equity ratio.