CNMI

IPI gets project extension as profit/revenue plunge

Imperial Pacific’s luxury casino project on the island of Saipan continues to struggle, with early excitement generated by staggering levels of VIP turnover fizzling amidst customer debts and construction delays.

IPI opened its new casino last year, moving operations from a temporary facility that had been operating out of a shopping mall. From a handful of tables in the mall, the company was averaging monthly VIP rolling volume of more than $2 billion. At the end of its first full year of operation in 2016, it reported $32.36 billion in rolling volume, more than the $28.8 billion reported by Sands China’s flagship Venetian Macau the same year.

The Hong Kong-listed company was counting on the draw of an idyllic South Sea location, visa-free access for Mainland Chinese and relative proximity by air to Japan, Korea, China and Hong Kong to pull in the big spenders. And for a while, it appeared to be succeeding.

However, a series of factors, including a devastating typhoon and a shortage of workers, led to construction delays. Its hotel was scheduled to have opened in the second half of last year, though was still only about 69 percent complete as of the revised deadline of end-August.

It has now been granted an extension to complete the initial gaming facility to no later than February 28, 2021.

IPI blamed the “drastic reduction and non-availability of sufficient skilled and qualified construction labor, locally in Saipan and mainland USA.”

In return for the extension, IPI has agreed to submit a Construction Milestone Schedule, a list of pending tasks and projected completion dates, as well as quarterly reports on detailed progress.

The company has also promised to give a US$500,000 donation to the Commonwealth Healthcare Corporation in consideration for the revised Implementation Schedule.

Furthermore, should IPI miss the 2021 deadline, the company will be required to pay liquidated damages of US$5,000 per day for each day the project is past the deadline.

While it struggles to complete the project, its balance sheet has also turned sour. Cracks appeared in its 2017 results, when strong top-line growth was undermined by sharply rising bad debts, to which it was fully exposed due to direct credit extended to VIP clients.

Its most recent set of results show efforts to tighten its credit policies, though at a cost. For the six months to end June, IPI’s profit plunged 91.3 percent to HK$79 million (US$10.1 million), with revenue dropping from HK$4.5 billion in 17H1 to HK$2.2 billion in 18H1. VIP table games rolling fell 48.9 percent to HK$100.3 billion.

The company blamed the impact of the FIFA World Cup and the tightening of marker credits.

Tourism numbers to the South Pacific islands were also lower in the period, falling 8.8 percent to 304,640 due to a temporary schedule adjustment of flights from Japan and Korea.

Koreans account for 48.4 percent of total visitors, with Mainland China making up 38 percent, with growth of 5.2 percent in the first half.

The rapid completion of more and higher end accommodation is seen as key if IPI is to attract the economies of scale to drive revenue. IPI is currently putting up high rollers in villas and yachts, while pushing to finish its hotel.

The company has hired nearly 600 foreign construction workers from the Philippines and has added a night shift in an attempt to speed progress, which it says is better than it was in the second half of last year.

Alter City license suspended

Alter City Group, which was planning to build a resort on the island of Tinian, has had its license suspended due to a failure to pay the annual fee, local media reports.

Under the casino license agreement, ACG is required to pay a license fee of $500,000 every year for 40 years, Tinian Casino Gaming Control Commission Executive Director William Cing was cited as saying. The company “has not done anything yet on the property since they broke ground years ago,” he added.

The company is having difficulty in raising finance to complete the billion dollar project, according to the reports.

CNMI to use casino tax to replace Medicaid

The Commonwealth of Northern Mariana Islands is planning to use a chunk of the revenue it obtains from its casino industry to replace the Medicaid program once it expires.

According to House of Representatives vice speaker Janet U. Maratita (R-Saipan), she recently introduced a bill that would allocate 10 percent of the Casino Business Gross Revenue Tax to keeping local Medicaid alive.

Maratita said she is aware of how vital the Medicaid program is—how many families rely on it—and intends to plan ahead.