POINTE BLANCHE--The audited financial statements for St. Maarten Harbour Group of Companies produced by PricewaterhouseCoopers are part of the annual reporting that the government-owned company has to present in good order to the shareholder, which is the Government of St. Maarten, and are "part and parcel of good corporate governance," according to a statement from the Harbour Group issued Friday after the group's financial statements were leaked to the press.
"I have taken note of a story in the print media with respect to the purchase of cranes for Port St. Maarten. The way some stories have been written seems to want to discredit the Harbour Group of Companies and suggest that something is amiss. This is very unfortunate, as our strategic partners also read these baseless stories," said Harbour Group Chief Executive Officer Mark Mingo on Friday.
"The Harbour Group of Companies has a responsibility towards its shareholder. We live up to our corporate responsibilities. At the same time, we have to look at the interests of our partners who we have strategic agreements with. The supervisory board and management have to live up to non-disclosure agreements and protect the intellectual property of the Harbour Group.
"The Harbour Group has been transparent with the shareholder. There is an open line of communication. If there are those who feel that the current structure needs to be changed for whatever reasons, then let's have that discussion. The Harbour Group, as an NV company with a concession on behalf of the shareholder, has commercial interests and must protect those interests on behalf of its shareholder and take the necessary risks where necessary in line with responsible corporate decision-making."
Two cranes are required for the cargo operations to be executed in an optimal fashion. The acquisition of a second crane was to bring cargo operations up to par, close to international operating standards. The crane operation at the port employs 10 local certified operators and supervisors.
St. Maarten Crane Corporation purchased a crane, HMK 260 E, in 2002. A resolution was passed by the St. Maarten Harbour Holding Company Supervisory Board in May 2009.
"The purchase of the crane was based on the deplorable service at that time being rendered. There were only seven container movements per hour and after the harbour group purchased this crane and another one, this more than doubled to 18 moves per hour, while the international average is 25," Mingo said.
A second crane was purchased based on Port St. Maarten's strategic port development plan to increase cargo operations. St. Maarten is a hub in the Northeastern Caribbean – a transit port – especially for Saba and St. Eustatius.
"The purchase of the crane five years ago was based on meeting the cargo needs and requirements of modern day St. Maarten. At that time compared to 2002, cargo ships have more than doubled in size and carry more containers. Investments were also made in the expansion of our cargo facility in order to accommodate these international trends and developments," Mingo said.
The cost of one crane for US $1.4 million and the second one for 2.585 euros, based on the exchange rate at that time of approximately 1.36 euros, comes out to more than US $3.4 million. The second crane is "top of the line" with all the latest features based on five years ago.
"The difference in the price is clear and legitimate when you look at the currency exchange rate and also the crane being the latest model and more modern than the old one. There is no issue here, but common sense," Mingo said.
He explained that if the Harbour Group had not made the necessary investments in equipment and infrastructure, it would have had an impact on the cost of living for consumers. Ships would have to remain in port longer, resulting in more fees being paid by the cargo line, which then would be translated into higher shipping cost. These different factors have to be taken into consideration.
"In every link there is an effect and we looked at that carefully and properly planned our strategic investments accordingly, taking the small factors into consideration, so it does not impact the cost of living and the cost of doing business on the island.
"Another aspect that must be looked at is the provisioning of cruise ships, and the investments in equipment and infrastructure go hand in hand with cruise, as I pointed out, the links and chain of business activity. One has to look at the entire picture and not just take out little things to create something where there is nothing," Mingo explained.
With respect to the funding provided offshore and the interests rates: "Firstly, interest rates back in 2009 were around eight and nine per cent. Today, things are different, where you can get a loan at lower interest," Mingo said.
"Funding offshore, we are a commercial company under the law and we look out for the best interests of the shareholder. Our tax advisor advised us about Octavio Holdings Inc.
"According to the resolution authorizing the purchase of the crane, it says, securing the financing of the new Mobile Crane with local financiers WIB and RBTT, and despite their respective firm offers, it turned out that those financiers were only allowed by their credit committees to grant this loan facility based on a parent guarantee of not only St. Maarten Ports Authority, but as well from the Harbour Holding Company."
Also, the financing from Gottwald, the crane company, was reviewed, but the overall terms and conditions were not favourable and a parent guarantee from Harbour Holding also was required. A third party financier, Octavio Holdings S.A. Panama, was willing to provide a loan without the guarantee of Harbour Holding.
The terms and conditions of this loan are more or less in line with the conditions of the local financiers. However, the interest is a little higher (eight instead of seven per cent, which was acceptable, as the lender was accepting less securities and collateral and was willing to finance up to 100 per cent of the acquisition price, whilst the local financiers only wanted to finance 80 per cent. Furthermore, the interest was fixed for the term of the loan, whilst the local financiers were willing to fix the interest only for a period up to three years.
Mingo said, "I would like to reiterate that investments in equipment and infrastructure are made based on our strategic plan that is approved by the Supervisory Board and shareholder. We don't pick things out of the sky at a whim, we plan ahead and that is why we have been so successful and are ahead of the competition."