Tuesday, December 20, 2011
Tuesday, December 20, 2011
Dec. 19/11 (NATARIO McKENZIE) THE ARAWAK CAY port is projecting to generate between $4.918 million to $5.761 million in operating income between 2013-2015, its chief executive saying it expected to enjoy a significant boost in container throughput volumes from the $2.6 billion Baha Mar project.
Unveiling the $10 million initial public offering (IPO) for the Nassau Container Port’s holding company, Arawak Port Development (APD) chief executive, Michael Maura Jr, said the company’s annual revenues could fluctuate between $25 and 27 million over the next three years.
Mr Maura said the Government, in the Memorandum of Understanding (MoU) signed with the 19 private sector shipping industry companies, had sought to strike a balance between investor returns and minimising shipping costs and associated tariffs for the Bahamian business community and general public. The MoU, he said, permits APD to earn an investment return rate of between 10 to 12 per cent.
“Income streams are driven by the number of containers landing, the amount of bulk material coming from cement vessels, the break bulk cargo and the number of cars coming to Nassau,” Mr Maura said.
“We, at the end of the day, had to come up with a revenue number which, multiplied by cargo volumes, allowed us to cover our operating costs and provide the public and our owners essentially with a 10 per cent return. Our gross revenues will fluctuate between $25 million, going into $27 million, over next three years. Our operating income is in the range of $5 to $6 million.
He added: “We are actually using just a little shy of 60,0000 TEUs (Twenty-foot Equivalent Unit or a 20-foot shipping container) as our first full year of operations.
“I believe that when Baha Mar kicks in and it really starts moving, we are going to see our volumes exceed that. The Government, through the MOU, has permitted the company to earn a rate of return between 10 and 12 per cent. That rate over return is based on traffic,” Mr Maura explained.
“In good times, what is likely to happen is we see a spike in volume. When they increase, it means we are generating more revenue. In those periods of time, what our traffic amendment model does is it looks to bring our returns back down to a level of 10 to 12 per cent, so the company does not generate super profits.
“In situations when you have a market decline, when you see a shortfall, the tariff amendment model will allow the company to increase tariffs to allow us to get back to that 10 to 12 per cent range. You do have the seasonal spikes. We have just come through three difficult years, and we are about to approach three to four very strong years.”
Mr Maura told Tribune Business that discussions on how best to make 20 per cent of the company available to Bahamian institutional and retail investors led to the delay of the $10 million IPO’s launch.
APD and its financial advisers/placement agents, CFAL and Providence Advisors, had initially hoped to launch the IPO in late September/early October. But Mr Maura told Tribune Business that discussions between the Government and private sector on how to structure the IPO had delayed it.
“Basically what was happening was that the Government and the private sector shareholders were having discussions on how to make the 20 per cent of the company available,” Mr Maura said.
“There were two possibilities. One possibility was to take the equity which had already been purchased by the Government and the private sector, and basically have each entity sell 20 per cent of their holdings to the public.”
Mr Maura noted that when APD was incorporated two years ago, it had five million in authorised shares, but only 4 million was issued, leaving one million shares unused.
“What ended up happening is the company has issued that million and when people buy those shares it represents 20 per cent equity in the company,” Mr Maura said.
When asked as to how he felt investor appetite would be towards the offering, Mr Maura said that while many persons may have already decided on how to spend their cash this Christmas, APD had decided to leave the offering open until the end of Januaryn 2012.
“There are some who have already figured how to spend their money this Christmas,” he conceded.
“What we have tried to do is hold it open long enough until January 31. If you want to give your kids something special, buy them some shares in the port. This, in my opinion, is a once in a lifetime opportunity. People are able to buy shares in this company for the original price the founding shareholders bought it for, and the founding shareholders took the risk. Basically you have to spend $10 just like they did.”
In terms of the company’s proposed private placement, scheduled for next year, Mr Maura told Tribune Business: “Based on the financial structure of the company, we have $40 million in equity and a $43 million bridge loan facility makes up an $83 million budget.
“What is envisioned is that next summer what we are going to basically pay off that loan and convert that to bonds and preference shares, where the institutional investors will come and pick up that.”
The $43 million will be targeted at specific investors only. It will replace the $43 million bank loan intended to finance the Arawak Cay port’s construction.