Port Authority was ordered to release document by 27 January
George Town MLA Ellio Solomon blasted the leaking of an April 2011 letter written by a KPMG consultant that weighs George Town cruise berthing proposals by GLF Construction Company and ‘Developer B’ – presumably China Harbour Engineering Company.
The memo to the Port Authority of the Cayman Islands Board of Directors raised concerns about several aspects of China Harbour’s proposal, including increased passenger fees, no guarantees from cruise lines and the effective removal of the Port Authority from daily operations of the cruise port.
Mr. Solomon disputed the information on which KPMG made its analysis, noting that the Port Authority Board requested the report on 18 April, 2011, a full month before the Board first met with China Harbour.
“I have serious concerns about where [the Board] would have gotten these numbers from in the first place,” said Mr. Solomon, who is leading port negotiations with China Harbour.
Unknown source, ‘authentic’ document
An unknown source placed the KPMG report and GLF port plans on the windshield of a Caymanian Compass journalist’s car in the Cayman Free Press parking lot Saturday, 21 January.
“I can confirm that the document is authentic,” said Roy McTaggart, managing partner at KPMG Cayman Islands.
Port Authority Board Chairman John Henry Ebanks said, “I have no comments to make other than that if you pursue it, you’re barking up the wrong tree.”
A China Harbour representative said it would not be appropriate to comment without first discussing the matter with the Port Authority. Mr. Ebanks said he was not advised of any plans for such a discussion.
Mr. Solomon said, “It’s an inappropriate use of a document because someone is trying to tie it into existing negotiations, and I consider that to be reckless and irresponsible. It jeopardises the negotiations that the government has with China Harbour.”
On 13 December, Information Commissioner Jennifer Dilbert ordered the Port Authority to release records, including the KPMG memo, it had sought to withhold from a Freedom of Information applicant. The records were due to be released Friday, 27 January. On Friday, the Information Commissioner’s Office announced that the applicant no longer required the records to be released: “[A]lthough technically the Port Authority is not in compliance with her order, Mrs. Dilbert has confirmed that in the circumstances she would not be certifying to the Grand Court the failure of the Authority to comply with her decision.”
KPMG letter
The “Private and confidential” letter to the Port Authority Board signed by KPMG’s Henk de Zeeuw is dated 20 April, 2011 – one day after attorney Daniel Priestley determined the government might not have had the legal standing to terminate its framework agreement with the GLF/Royal Construction team.
On 12 and 14 April, Premier McKeeva Bush received letters from GLF laying out the company’s plan to secure project funding from Citibank and private equity firms. Mr. Bush cancelled the framework agreement on 14 April, writing, “GLF has not demonstrated any positive proof that it is able to finance the port expansion project”.
The KPMG memo states GLF and Citigroup had been set to formally present the terms of the bond issue on 15 April.
The same day Mr. Bush ended the GLF agreement, West Bay MLA Cline Glidden Jr. – who was heading up port negotiations with GLF – emailed fellow ruling party members expressing his support for GLF’s plans. The KPMG memo states that on 18 April the Port Authority Board asked KPMG for opinions on “a potential change of developer” for the project.
The memo prefaces a comparison of proposals from GLF and China Harbour – called ‘Developer B’ – by saying the terms of China Harbour’s proposal were “verbally relayed to us” by the Port Authority Board.
“It wasn’t as if they were handed it in writing,” Mr. Solomon said.
The memo stresses there was “insufficient information” about China Harbour’s plans to form a detailed recommendation.
On 24 June, the Port Authority Board recommended that government re-establish negotiations with GLF. On 25 June, Mr. Bush called the Board in for a meeting, resulting in the resignations of Chairman Stefan Baraud and Deputy Chairman Woody Foster, and the termination of Noel March’s appointment to the Board. Mr. Foster’s replacement Nick Freeland resigned in October, citing personal conflicts with Mr. Ebanks.
Mr. Solomon said the KPMG memo shows Mr. Bush had valid reasons to shake up the Board.
“I think perhaps we can see now that those actions are clearly justified,” he said.
Project comparison
The memo says GLF planned to design, build and finance a two-finger pier in George Town and improve cargo facilities. The cost was US$175 million with two options for financing, with a concession period of 30 years if one pier was built and 25 years for two piers. The terms included a guaranteed minimum number of passengers from Carnival Cruise Lines and Royal Caribbean Cruise Lines.
Meanwhile, China Harbour proposed to design, build, finance, manage and operate a two-finger pier in George Town, improve cargo facilities, upgrade Spotts Jetty, build a pier near the Turtle Farm and provide a “Cash injection for the Turtle Farm”. The cost was unknown, but China Harbour would self-finance the project. There were no minimum passenger guarantees.
Mr. Solomon said he was not aware of any proposed cash injection for the Turtle Farm.
The memo highlights China Harbour’s plan to manage and operate the facility, saying that “could have a significant impact on the control of the Government over the Tourism industry and therefore on the economy of the Cayman Islands.”
Mr. de Zeeuw wrote that it seems the extra components of China Harbour’s proposal would be funded by hiked passenger fees. The memo states GLF had proposed passenger fees of either US$17.26 or US$18.85, compared to a US$35 fee from China Harbour – making Cayman’s fees the highest in the Caribbean. Without passenger guarantees, “There is a potential risk that cruise lines will reduce the number of port calls to Grand Cayman or avoid it altogether in response to a significant increase in fees,” he said.
The memo states the Port Authority and GLF had “tentatively agreed” with Carnival and Royal Caribbean for minimum annual passenger volumes of 500,000 and 250,000 passengers, respectively, for 20 years. (There were about 1.4 million cruise arrivals in Grand Cayman in 2011.)
Current negotiations
Mr. Solomon said the US$35 fee amount was outlandish and unfounded. “Such a proposal is totally unbelievable. No one has ever mentioned a figure like that. It is undoable. It is impossible,” he said. “China Harbour’s fees are not going to be anywhere in the region of US$35, based on the negotiations we have today. They are even below the charges outlined in the document that GLF wanted to charge.”
He said the government and China Harbour do not have passenger guarantees from Carnival or Royal Caribbean, but that the government already has a guarantee from the Florida-Caribbean Cruise Association for 1.2 million passengers per year.
Mr. Solomon said China Harbour’s plans call for two finger piers that together could accommodate at least two Genesis-class cruise ships. China Harbour is committing to doing dock works by the Turtle Farm and studying the feasibility of cruising for Cayman Brac.
He said the government and China Harbour have hashed out all the terms of the final framework agreement, which is now in the hands of the government’s legal team. At the same time, KPMG is receiving data in order to do a business case analysis.
He said local contractors will perform all vertical work on the upland element of the cruise port, as well as Spotts improvements. He said at least 75 to 80 per cent of the workers on the George Town port will be local.
He said Chinese workers will rent local facilities, not live in temporary work camps. The government technically has until the end of March to have the agreement signed, but Mr. Solomon said he aims to have it done by mid-to-late February. Work on Spotts will begin as soon as the agreement is signed and will take eight months.
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One thing this government and every future government must be prepared to expect is the leaking of documents by local deep throats. Perhaps one will get caught and made an example of but it is a sign of the times.