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It's a loan, says Port Authority - Royal Caribbean to be repaid US$102m investment in Falmouth pier
published: Friday | November 21, 2008


Noel Hylton, president of the Port Authority of Jamaica.

The US$102 million that Royal Caribbean Cruise Lines Limited (RCCL) is fronting on the Falmouth cruise pier project will not give the American company an equity stake in the port, the Port Authority of Jamaica has said.

The funds representing 45.5 per cent of the total project cost of US$224 million is, according to PAJ president and chairman Noel Hylton, a loan to be repaid on a negotiated schedule.

"There is no joint venture agreement. We will, however, be working closely with each other. RCCL will have no equity in the harbour-side works, the contract for which was signed on Friday (November 7), but will rather be providing a loan," said Hylton via email.

Repayment

"The matter of repayment is well under consideration; it is expected to take place over an extended period."

The Falmouth project is broken down into two components: the marine works, which includes the pier and terminal building; and the land side project "which will feature a variety of business entities to be housed in structures", including shops, entertainment and restaurants that mimic Georgian style architecture. It is understood that some of the work to be done by Royal Caribbean could include renovation of historic structures at Hampden Wharf and Tharpe House.

"Royal Caribbean Cruise Lines is responsible for the development of the land side, while the Port Authority will be responsible for the development of the marine works," Hylton said.

The Port Authority has also turned to banks and the PetroCaribe Fund for financing of its US$122 million portion of the project, but Hylton is keeping those talks close to the chest, saying they were 'confidential'.

"It is not an opportune time to discuss the present state of the negotiations, until we are in a position to come up with some indicative understanding with the institutions," said Hylton.

Debt financing

But here again, he said the PAJ would not be taking on an equity partner and that all the negotiations were for debt financing.

Jamaica gets between 1.1 million and 1.3 million cruise visitors per year, but has experienced a decline in business in the last two years.

In 2207, ship calls were down by 22.7 per cent to 435 berthings at the island's three ports and passenger visits by 11.8 per cent to 1.18 million. Between January and September of this year, business has fallen off by 9.4 per cent in ship calls to 298 and a 8.9 per cent decline in passenger visits which totalled 819,000 in the nine-month period, down from 898,000 a year ago.

Tourism Minister Edmund Bartlett also referenced the decline in cruise visits in a speech he gave in London at the World Travel Market two weeks ago, but said the Falmouth pier was part of the answer to rebuilding business.

"In our efforts to grow our cruise ship arrivals, the new and expanded facilities will be key to attracting more cruise ship companies and to increasing visits by existing ones," said Bartlett.

New ships

Royal Caribbean, under the deal it has with the Port Authority, has guaranteed 400,000 passenger visits to the new port over 20 years, or 10,000 passengers per year. Its new Genesis class of ships will come off the production line next year, as well as the megaliner Oasis of the Seas which will call in May 2010.

"These gigantic vessels are 1,180 feet in length with over 564,000 tonnage, and can carry 5,400 passengers. Positioning us for heavy traffic, the Falmouth pier is being configured to host two vessels simultaneously," said Bartlett.

Asked how many ship calls the PAJ estimates it will take to bring the port to profitability, Hylton said passenger visits were more pertinent to that analysis, but he did not specify those numbers.

He did say, however, that payback on the investment was expected in 12 to 15 years.

business@gleanerjm.com


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