From Cayman Islands Chamber of Commerce

The Chamber Council met with the Hon. Moses Kirkconnell, Minister for District Administration, Tourism and Transport and Stran Bodden, Chief Officer in the Ministry during their monthly meeting on 8th August and received an update on the proposed cruise berthing project. The Minister shared details of the proposed project and the Council asked a series of questions about the process thus far, the estimated construction cost, project financing, ownership, economic benefit and the cargo expansion plans.

Business Case and general approach

The Minister said Baird and Royal Haskoning DHV estimated the cost of construction to be CI$156 million/US$180million. The Ministry of Tourism, however, does anticipate an increase in the cost since the proposed positioning of the piers have been moved into deeper water to minimise dredging and to reduce the environmental impact. There will be an additional cost to upgrade and redevelop the cargo pier but the Ministry is trying to include the cargo upgrade as part of the overall port redevelopment plans.

Government has approached the cruise lines to finance the piers using the Design-Build-Finance-Maintain (DBFM) model. DBFM is the type of public-private partnership agreement particularly suited to large scale infrastructure projects and is one of the financial protocols favoured for construction of the cruise berthing piers. The DBFM formula will not only fund construction of the piers but will ensure they are owned by the people of the Cayman Islands within a reasonable period and operated by the Port Authority. The Minister said the negotiations are still ongoing and no deal or decision has been made with any cruise line or entity to finance construction of the piers and expand the cargo port.

The tender process to date

The Minister said the pre-qualification tenders for the proposed cruise berthing project was initiated in May 2017 based on the results of the national election which included plans to move ahead with the redevelopment of the port. An expression of interest tender to DBFM the project was released worldwide, and eleven firms submitted an interest to bid for the project by the 30th July 2017 deadline. The 11 submissions were analysed by KPMG which is handling the procurement process and nine were pre-qualified. These firms were sent an invite to submit outline solutions by 30th November 2017. The nine firms were invited to Cayman in February 2018 to ask questions and to visit the site and to meet with Ministry officials. The firms were invited to submit their DBFM bids by 16th March 2018.

The Ministry received five submissions and after review three were shortlisted. The Invitation to Submit Final Tender (ISFT) will be sent to these firms this month with a submission deadline for the end of November 2018. The Chief Officer said the plan is to award the final DBFM contract at the end of this year. The project is expected to commence in the first half of next year with permitting applications submitted in the first and second quarter with works commencing in the third quarter of 2019. Construction is estimated to take between 3-4 years and would include the construction of two piers to accommodate four berths and a redeveloped cargo facility. During the construction period, it is expected to be some disruption of cruise and cargo activities, but the Ministry and Port Authority will work to minimise any delays.

The Minister said the country needs to build the piers and expand the cargo port. In financial terms, a partnership with the cruise lines will make construction of the cruise piers viable and affordable and will safeguard the future and sustainability of the Cayman Islands cruise industry. He did not believe that the construction of the cruise piers would become a long-term liability into the future. “All of our efforts are directed at ensuring the berthing facility is owned by the people of the Cayman Islands in 25 years – not 50 or 99 as had previously been proposed,” he said.

Economic & Environmental Impact

Addressing the environmental concerns that have been expressed in the public, he said the Government has spent more than CI$3 million on an Environmental Impact Assessment that confirmed that there would be no adverse impact on Seven Mile Beach. The Assessment states “The project will not result in any significant impact on Seven Mile Beach, as no significant sediment transport occurs between George Town Habour and Seven Mile Beach.” (Source: Baird & Associates Environmental Statement – Non- Technical Summary)

He said the economic benefit to the Cayman Islands will be substantial. He quoted the outline business case report prepared by PwC in 2015: “the estimated economic benefits of the CBF (cruise berthing facility) now exceed the costs associated with the damage to the reef under the low and high environmental scenarios. Further, if BREA’s scenarios for increased spend per passenger with the CBF are taken into account the net benefits increase substantially.” He assured the Council that the retail operations on the port will remain the same with the square footage that currently exists. He said the plan is to move cruise passengers into George Town so that they spend more time and money supporting businesses in town, and taking tours further East to Pedro St. James, Botanic Park, Crystal Caves and Rum Point. Plans also call for the revitalization of George Town to take place in tandem with the port redevelopment project.

The estimated economic impact from constructing the cruise piers is expected to increase from US$115 million (1 million cruise passengers) without the piers to US$460 million (estimate 2.3 million cruise passengers) with the piers annually. Based on the 2015 Business Research & Economic Advisors (BREA) report, the average per passenger cruise spend in the Cayman Islands is CI$28.75 per hour or US$115 per visit (four hours). Cruise passenger spending is expected to increase to US$230 per visit once the cruise piers are operational.

The Minister said an important part of the port redevelopment project is the expansion of the cargo facilities which he said are severely constrained on both sides by the cruise operations at the Royal Watler Cruise Terminal and at the North Terminal. Increases in population is driving a corresponding increase in the amount of cargo imported to satisfy the demand for imports from food to building materials and supplies. Growth in the tourism sector with several more properties in various stages of development will outpace the port’s ability to meet the rising demand for cargo and aggregate within a few years if we do not act soon, he said.

Conflict of Interest Concern

Addressing allegations of conflict of interest with respect to the piers, the Minister assured the Council that he does not own or operate any businesses or commercial entities in Grand Cayman. He said he reported his list of assets on the public register which confirms that he owns one, two-bedroom apartment in Grand Cayman which he resides in when in Grand Cayman.

The Council thanked the Minister and Chief Officer for sharing details of the project and asked them to keep the Chamber advised of further developments as they become available so that the Council can provide the membership with reliable and accurate information about the project and its economic benefits to the community. The Council also encouraged the Ministry to provide as much information as possible to the public.

This meeting summary updates the Council’s position statement on the proposed cruise berthing project released in 2015. https://goo.gl/Lq8EFP

SOURCE: http://web.caymanchamber.ky/wcnews/NewsArticleDisplay.aspx?articleid=4470

IMAGE: Proposed cruise ship berthing image FILE