The $10 million initial public offering (IPO) is a "sure bet", according to the company's CEO, with everyday Bahamians coming in at the same price as the original investors two years ago.
The IPO, heralded as the first of its kind, offers 20 percent of the APD Limited's share capital to the general public. Priced at $10 per share, with a minimal purchase of 50 shares, or $500, Michael Maura Jr. said the offering is "something everyone can benefit from".
"It's the first time this kind of partnership has been done," he told Guardian Business. "The nature of the partnership is what makes it so unique. There are a whole bunch of Bahamians who can own a piece. It's something everyone can benefit from. They are getting a better deal - coming in at the same price as the original stakeholders two years ago."
The IPO first went on sale Dec. 16 and remains on the block until Jan. 31, 2012. The buying period can be extended if deemed necessary, according to the prospectus. Speaking to a crowd at the newly constructed Gladstone Freight Terminal (GFT), the $15.2 million "glorified parking lot with lights" will serve as a key component to consolidating and revolutionizing the shipping industry in The Bahamas. Spanning 100,000 square feet, the GFT complements the $82 million Nassau Container Port (NCP) at Arawak Cay by offering a secure facility to process, distribute and collect imported goods.
While not altogether glamourous, it makes the $10 IPO possible through an efficient, coordinated and practical approach. APD Limited holds a 20-year "exclusivity" agreement with the government for the Arawak Cay Port, whereby no other container terminals can be built on New Providence or Paradise Island from the date of final completion. It also holds a 25-year land lease on the GFT.
According to the Memorandum of Understanding, the "government acknowledged that APD must provide a competitive return to the investing public". APD is permitted to make adjustments to fees and tariffs "as may be required" to maintain an IRR of no less than 10 percent. The APD has also been granted a winding-down period of five years if the government decides to not renew the land lease agreements.
What this translates into, according to Maura, is a sure bet. "If you want to go to Paradise Island, for example, you have to drive across the bridge and pay a toll," he said. "This project is similar. We have a 20- year agreement and during that time you must pay APD. For as long as we have residents and business, we will charge for the right to bring projects in and out. It's a sure bet."
Kenwood Kerr, the CEO of Providence Advisors Ltd., pointed out that around 80 percent of international trade still occurs through shipping. He called the IPO a "long-term opportunity" for both individuals and institutional investors. Meanwhile, everyday investors will be coming in at the same price as the original stakeholders two years earlier. According to Kerr, that translates into a 15 to 20 percent discount, "because of environmental impact assessments, research, engineering works, and factors of that nature".
Incurring these risks and hurdles represents a value, he said. Down the road, the Providence CEO anticipated an annual return of 5.5 to six percent per year. Maura called the investment an "effective savings account" for Bahamians. Although the APD is expected to be functioning by January 2012, it will not be fully operational until June.
No individual shareholder of Arawak Cay Port Development Holdings Limited (ACPDH) owns or controls more than 15 percent of APD Limited, the prospectus said. The ACPDH includes 19 entities, and by the conclusion of the IPO, it will control a 40 percent stake in the venture. The government owns 40 percent of the pie, with the remaining 20 percent controlled by the general public.
Construction of $82 million Arawak Cay port remains on budget, according to top executives, but has fallen months behind schedule. The company is still in the process of removing the remaining two water reservoirs on site, Maura told Guardian Business. Logistics with the Water and Sewerage Corporation, particularly concerning the delivery of water from Andros, took longer than expected to finalize.
The final site of the GFT also took longer than expected to select by the government, he added, and it cost an additional $2 million to build roads and establish a hydro system in the remote location. And finally, dredging in the Arawak Cay harbor hit considerable snags, as crews encountered significant and unexpected resistance in the rock bed, requiring the services of a foreign blasting company to clear the space. The dredging was first expected to be completed by August, but only finished around one month ago.
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