A recommendation was made to the government’s elected members to sign the main agreement with GLF Construction Corporation to build Cayman’s cruise ship berthing facility in George Town Harbour.
West Bay MLA Cline Glidden Jr., who headed up the government’s negotiations with GLF on the port project, sent an email to all other elected members of the United Democratic Party on 14 April, 2011, outlining the position with GLF.
“Please see below the latest document from GLF demonstrating their ability to completely finance the Port project,” he stated.
The email explained that GLF had laid out two options for financing, including one with “traditional financing provided by a reputable institution, Citi Group”. That option would have required commitments from the cruise lines.
“They have also provided an alternative which shows their ability to acquire financing without the cruise ship guarantees. They also included a commitment from the company in the amount of the $39 million dollars of equity required.”
Mr. Glidden went on to praise GLF for their efforts.
“They have again reasonably, in my opinion, requested that they have gone as far as can be expected without the existence of a formal commitment from the government by the way of the main agreement, which is what was expected and anticipated from the very beginning,” he wrote. “I think that it is obvious that GLF has stepped in and in a very short four-month period has taken the project to the required stage where there is now an acceptable plan to the cruise lines and an acceptable plan to the financial institutions, which are willing to finance the project.
“My recommendation is that we approve the main agreement which allows the project to be started as soon as possible.”
Commenting on Saturday, Premier McKeeva Bush said he knew nothing of Mr. Glidden’s email from 14 April, which was sent to his government email address. “I didn’t see the letter,” he said.
The same date of Mr. Glidden’s letter, Premier McKeeva Bush wrote to GLF cancelling the framework agreement, citing as a reason that “GLF has not demonstrated any positive proof that it is able to finance the port expansion project at the George Town Port, Grand Cayman.”
In Mr. Bush’s termination letter, he referred to a letter he had received from GLF on 12 April that he said stated the company had “secured the commitment letter for the full project financing from Citibank as well as from the private equity firms”.
“However, in our view, this does not present proof of access to the necessary financing, sufficient to warrant that the definitive agreement may be executed”.
He indicated in the letter that the government was “prepared to entertain GLF’s continued interest in being a participant in this development as the opportunity arises” but said GLF would “no longer have exclusivity on the project”. Less than two months later, Mr. Bush announced he had signed a ministerial memorandum of understanding concerning the port project with China Harbour Engineering Company, a Chinese state-owned entity. Asked for comment on Saturday, Glidden said he stood by his recommendation.
“It was what I thought was the correct decision at the time.”
Glidden said he had spent two years trying to negotiate a deal on the cruise ship berthing facility, first with DECCO and then with GLF. Both times he said the negotiations advanced to a stage where he recommended the signing of a formal agreement, but both times the government decided against doing so.
Less than a week after Mr. Bush’s letter to GLF cancelling the framework agreement, the Port Authority sought legal advice on the matter from Daniel Priestley of the law firm Priestleys.
Among the points made by Mr. Priestley in his legal opinion of 19 April was that the government might not have had the legal standing to terminate the framework agreement.
“The framework agreement does not require GLF to have secured its funding; the framework agreement merely imposes an obligation on GLF to have a plan for funding,” Mr. Priestley wrote. “In view of the content of [the 12 April and 14 April letters from GLF to the Cayman Islands Government] it appears that GLF does indeed have a plan for funding, in which case it is questionable whether the ground cited for purporting to terminate the framework agreement is valid.” In laying out the salient facts earlier in the letter, Mr. Priestley said he had been informed that an approach had been made from a “business concern based in China” to carry out the port project.
He later referred to a clause in the framework agreement that did not allow either of the parties to the agreement to solicit or initiate discussions, proposals or offers with regard to the port project. “The reference in [Mr. Bush’s letter of 12 April terminating GLF] to withdrawing GLF’s exclusivity in connection with the project carries with it a possible implication that there is an interested party with whom certain discussions may have taken place in breach of the requirements … of the framework agreement.”
At the Fidelity Cayman Business Outlook conference in January 2011, Mr. Bush said he intended to sign a memorandum of understanding with regard to dredging and creating a mega yacht facility in the North Sound, a plan that was later abandoned because of public outcry. However, Mr. Bush also said at the time that if the negotiations for the cruise berthing facility didn’t lead to a definitive agreement, the Chinese group was prepared to take that on as well, lending credence that the possibility had been discussed months before GLF was terminated.
Mr. Priestley also commented on the value for money aspect of the project, as required by the Public Management and Finance Law. “Whilst there is an element of subjectivity in a value for money assessment, it does seem to me that GLF have taken this requirement seriously and that every effort has been and is being taken by GLF to keep the costs of the project to a minimum whilst maintaining an acceptable standard of quality of construction, and protecting the terrestrial and marine environments both during construction and when the expanded port becomes operational.”
Port board turmoil
Regardless of Mr. Glidden’s recommendations and Mr. Priestley’s advice, the government proceeded with engaging China Harbour.
After receiving Mr. Priestley’s opinion and learning of the MOU with China Harbour, the Port Authority Board met on Friday, 24 June, and made a recommendation to the government that it reestablish negotiations with the GLF/Royal Construction team with regard to building the cruise ship berthing project.
The following day, Premier Bush called the Board into another meeting and said “he’d lost confidence with some of the board members’ ability to be impartial” with matters dealing with the cruise berthing facility and that he would be changing some of the members. Deputy Chairman Woody Foster resigned from the board during that Saturday meeting. Chairman Stefan Baraud subsequently also resigned and Noel March’s appointment was terminated by the government.
Settlement with GLF
Last week, CITN reported that the Cayman Islands Government had reached a settlement with GLF, seemingly for breach of contract, for $3.5 million to $4 million.
Premier McKeeva Bush strenuously denied on Saturday that there was a settlement with GLF.
“They’re talking to us and we’re talking to them, but there’s no settlement and I don’t know if there will be one,” he said. “When I’m ready to make a statement, I will make a statement, but not before.”
Mr. Bush said the media reports of a settlement were just people trying to make trouble.
“What these people are doing now is trying to embarrass the government and trying to cause problems for the country,” he said. “They are twisting things to make them look more than what they are.” Howard Finlason of Royal Construction Ltd, GLF’s joint venture partner on the port project, said in a written statement Saturday he knew nothing of a settlement between GLF and the government relating to the port project.
“In addition, Royal Construction is not a part of any ongoing negotiations and/or discussions with the Cayman Islands government relating to a settlement,” he said. “Our desire is still to see the project awarded to GLF/Royal, which we believe to be the best team to get this facility built quickly and economically, for the good of our beloved Cayman Islands.”
Mr. Finlason said as recently as September, Royal Construction had received written confirmation from GLF that it was still interested in building the Port facility and the funding was still available, but that it would only proceed if it had the full support of the Cayman Islands government.
“Based on recent statements and press reports confirming the premier’s decision to complete a deal with China Harbour Engineering Company, it is apparent that this support is not forthcoming.”