KCT concession has minimal impact on government debt, says AG
Eight months into the 30-year concession agreement for the Kingston Container Terminal (KCT), Auditor General Pamela Monroe Ellis has assessed that the public-private partnership (PPP) contains only minimal contingent liability to the Jamaican Government.
At the same time, she has recommended that the Ministry of Finance and the Public Service, along with the Port Authority of Jamaica, ensure effective monitoring of the project to mitigate against the risk of any implicit contingent liabilities being realised.
In an independent assessment report tabled in Parliament on March 14, Monroe Ellis noted that KCT achieved financial close during the first quarter of fiscal year 2016/17, and the concessionaire Kingston Freeport Terminal Limited took over the operation on July 1, 2016.
The Financial Administration and Audit Act requires the auditor general to certify that a PPP involves only minimum contingent liability accruing to the government.
"In keeping with this mandate, I assessed the contingent liability exposure of the Kingston Container Terminal by examining its activities over the medium term," Monroe Ellis said.
She said that based on her assessment, using the International Monetary Fund/World Bank public private partnership fiscal risk assessment model, "I have assessed that the KCT PPP arrangement contains only minimal contingent liability."
The auditor general also noted that as a user-pay PPP the concessionaire possesses responsibilities for most of the 11 risks categories identified.
Under the Public Bodies Management and Accountability Act (PBMA), the indebtedness of the user-pay partnership is not counted as part of the public debt. But if the likelihood of a contingent liability arises for the public body involved in the arrangement, then the liability is quantified and added to the public debt.
PRINCIPLES FOR PPPS
The Jamaican PPP policy, approved by Cabinet in 2012, sets out the principles that should guide decision-making by ministries, departments and agencies utilising PPPs to improve infrastructure and the delivery of public services.
The concession entered into by the Government to finance, design, build, operate and transfer the KCT was in line with projected business due to the expansion of the Panama Canal, which was expected to bring significant changes within the regional shipping industry.
Monroe Ellis noted that under the terms of the agreement for the operation of KCT, the concessionaire is solely responsible for financing the implementation of the concession and may use the agreement as security for obtaining financing.
Loan financing amounted to US$265 million with the rest of the capital works financing to be sourced from equity and internally generated funds of the concessionaire.
Financing, for the phase-one works was finalised through a consortium of financial institutions led by the Inter-American Development Bank.
The facilities mature in June 2031 with a moratorium up to May 2020 and bear both variable and fixed interest with repayment in US dollars. The end of the loan moratorium coincides with the end of phase-one construction works.