No payoff yet from DBJ's billion-dollar Harmonisation wager
The officials in charge of state company Harmonisation Limited, which has ambitions of getting into the casino business, have been elusive about the company's finances amid unending delays of the mega-resort project being pursued with private partner Tavistock.
Co-owner of Harmonisation, the Development Bank of Jamaica, DBJ, tells the Financial Gleaner that it has poured $1 billion into the company over time. But the bank said any other comment on Harmonsiation would have to come from executive director Dr Lorna Simmonds.
The investment update from DBJ update followed the release of its most recent financial report, for year ending March 2016. The report indicated that the shareholders of Harmonisation Limited - DBJ and the National Housing Trust - have entered into a new agreement between themselves to cease charging interest on their advances to the company, and issue preference shares to the existing shareholders in the ratio of their outstanding advances.
NHT itself has contributed land to the project, while the Auditor General reported that the housing agency had invested $490,000 in Harmonisation up to 2014, in addition to loans and accrued interest amounting to $1.59 billion???.
Harmonisation Limited was incorporated in April 2003 to execute a master plan developed under the auspices of the DBJ for a 2,300-acre mega resort, called Harmony Cove, one of the centrepieces of which would become a casino.
Harmonisation and global private investment company Tavistock Group, through Tavistock Jamaica Inc, are partners in Harmony Cove Limited - the latter being the vehicle used to bid for development approval and execute the casino resort to be built in Trelawny.
The DBJ lists Harmonisation it as its sole associate company.
The state bank's financials state that advances to the company are unsecured with no fixed repayment date. At the reporting date, the preference shares had not been issued to the shareholders. It is expected that they will be issued when the Joint Venture and Members Agreements come into force, the report said, but offers no other explanation on the parties involved.
It's unclear whether anything has changed in the near two years that have elapsed from the March 2016 reporting date in the DBJ document.
DBJ managing director Milverton Reynolds referred queries to Simmonds and the chairman of Harmonisation, Patrick Hylton, while Hylton in turn referred the Financial Gleaner to Simmonds. However, the executive director is yet to respond.
The Harmony Cove project was supposed to launch construction in July 2016, but it did not have the financing to deliver on the deadline mandated in its development approval. In the wake of the missed deadline, the Ministry of Finance refused to comment on actions it intends to take in regards to the 'integrated resort' approvals granted to two candidates for the casino projects in 2015 - Harmony Cove and Celebration Jamaica - given the programme's failures to date.
A land deal that Celebration was relying on for its resort development fell through this year, and that project is now in further jeopardy with the passing this week of its principal architect, Robert Trotta.
It's unclear whether the Finance Ministry has any type of strategy to rescue the programme.
In the year ending March, DBJ advanced $22 million to Harmonisation. The year before that the advances totalled $68 million.
The report indicates that the long term receivables related to the advances are non interest bearing.
The Harmony Cove project was supposed to be executed in phases, the first of which would require investment of about US$1 billion. The DBJ report estimates the indicative costs of the overall project at US$7.5 billion.
Harmonisation has been chasing after investors to back the project, mostly the Chinese, but has been unable to secure the required capital.
The company made losses of $83 million from continuing operations in fiscal year 2015/16 and $82 million the year before that. It's long term liabilities totalled $2.88 billion at March 2016.
Harmonisation has a Joint Venture Agreement and a Members' Agreement with Tavistock Group Inc to develop Harmony Cove. Tavistock Group owns 51 per cent of Harmony Cove Limited and Harmonisation 49 per cent.
The report also says that the lands owned by Harmonisation Limited were valued at US$45 million for the purpose of their transfer to Harmony Cove under the Joint Venture Agreement with Tavistock, dated September 28, 2006.
"The joint venture agreement with Tavistock Group Inc was amended on February 3, 2009 to reflect contribution by Harmonisation, through its subsidiary, Silver Sands Estate Limited, of additional parcels of lands," the DBJ report said. "In consideration of the transfer of these additional lands, Harmonisation shall be deemed to have subscribed for cumulative preference shares to be issued by Tavistock Group Inc in the amount of US$6,662,460."
The Harmony Cove project is featured on the website of the Office of the Prime Minister, which touts it as a project that would "create a major economic surge on the north coast through direct and indirect job creation, tax revenue and a boost in foreign exchange inflows."