October 22, 2020

CHINA CASH REVEALED

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Cruise plan will net almost $1b over 49 years 

Sun Ziyu, president and chairman of China Harbour Engineering Company.

China will earn nearly $830 million from the George Town cruise port during the 49-year life of the project, while Cayman garners nearly $202 million, although neither figure includes retail operations.

More than one-third of Chinese revenues, however, will repay the principal and interest on the loan, in the neighbourhood of $300 million, that will fund the redevelopment, which is not guaranteed by the Cayman Islands government. China would also pay for the three-month environmental assessment.

The revenue projections are based on Florida Caribbean Cruise Association (FCCA) annual guarantees of 1.2 million passengers each year, and an estimated per-head landing fee of $17.50, yielding a $21 million annual total.

The figures do not, however, account for average retail expenditure of $95 per passenger. Coupled with FCCA guarantees, tourist spending could reach $114 million per year, divided among outlets both in the Chinese-built “upland” section of the port, extant George Town shops and transport.

The figures come in the wake of estimates by George Town MLA and chief negotiator with Beijing-based international infrastructure giant China Harbour Engineering Company (CHEC) Ellio Solomon, who said the “framework agreement” with the company, now in late stages of negotiation, provided for landing fees similar to the current $16.76 and a 25-year term for the Chinese to earn a return on investment.

Chinese port builders, he said, are unlikely to charge passenger-landing fees much higher than the current $16.76. “I have made sure the fees are within the parameters of what we are currently getting, and significantly less” than alternate proposals ranging between $18 and $35.

The FCAA guarantees are roughly equal to 2011 arrivals, announced yesterday by the Department of Tourism, which reported a December figure of nearly 160,000 cruise passengers — down 9.2% on last December — and an annual figure of 1.4 million, 12.3 % less that 2010’s 1.59 million.

Mr Solomon rejected Wednesday’s leak of a 20 April, 2011 KPMG report comparing plans by previous port contractor Florida-based GLF with CHEC. The five-page document, in response to a Port Authority request, ultimately concludes that insufficient information prevents a proper assessment, but raises warning flags about Chinese intentions.

The report suggests CHEC might seek a $35 passenger-landing fee, a figure Mr Solomon described simply as “irresponsible”.

“There is no shred of evidence for that. Where does that come from?” he asked, saying the Port Authority had not met CHEC by 20 April last year, only six days after Premier McKeeva Bush terminated GLF, saying the company, a subsidiary of Italian builder Grandi Lavori Fincosit, lacked adequate financing.

Aware of the disincentive posed by a $35 passenger fee, Mr Solomon said it “had absolutely no bearing on, is not relevant to, the negotiations”.

While not denying landing fees could rise, he said, however, they were unlikely to increase greatly, and were part of ongoing talks: “I don’t really want to get into it, but we do not want to raise [the fees] too much. They will definitely be less that the $18-plus” proposed by GLF.

The outline agreement, Mr Solomon said, was that CHEC would collect all port revenues, including rentals in the retail portion of the pier, for 25 years, repaying loans and gaining a negotiated profit. During the next 24 years, revenues would be split with the Cayman Islands, China gaining 60%.

Final agreement was still between two weeks and three weeks distant, Mr Solomon said, and was careful when asked if the 24-year revenue-sharing period might be reduced.

“We are in the process of negotiation and we have some preliminary notion of where we are, but KPMG is crunching the numbers and until we have a final design [of the port], we don’t know what the final cost will be,” he said.

“The 49 years is a stake in the ground, and KPMG will evaluate not only the dollar costs, but the risks and benefits involved.”

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