08152023 BUSINESS

‘Don’t price ourselves out’ on corporate income tax

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

BAHAMIAN realtors yesterday said data showing they enjoy near-40 percent gross profit margins is “skewed very far off” as they urged the Government “to be careful we don’t price ourselves out of the market” over corporate income tax.

David Morley, who co-chaired the Bahamas Real Estate Association’s (BREA) committee examining the proposed introduction of corporate income tax, told Tribune Business that hardly any realtors reported gross

profit margins close to the 38 percent identified in the Government’s corporate income tax ‘green paper’. Disclosing that he had “never done so much research in my life”, he added that comparisons of other Caribbean jurisdictions of similar size and with matching gross domestic

Ex-DPM challenges Gov’t on engineer’s BPL report

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

AN ex-deputy prime minister yesterday challenged the Government “in the interests of transparency and accountability” to disclose an engineer’s report justifying the choice of Station A for Bahamas Power & Light’s (BPL) baseload generation.

Desmond Bannister, who held ministerial responsibility for BPL under the Minnis administration, confirmed to Tribune Business that Bahamian engineer,

Lambert Knowles, was hired to assess both Station A’s suitability as the home for the $95m Wartsila engines and to oversee the design/construction of the seven pedestals on which they currently sit.

Speaking after BPL’s generation management yesterday gave a media tour to highlight the Clifton Pier plant’s deficiencies, which they said will cost close to a further $3m to fix, he again accused the Davis administration of “a dismal failure” in not further upgrading Station

SEE PAGE B5

product (GDP) indicators revealed that The Bahamas has “one of the highest overall rates” of real estate taxation when the likes of VAT on conveyances, real property taxes and other levies are combined.

This, Mr Morley argued, means The Bahamas must be wary if it ultimately

chooses to impose a corporate income tax on net profits as an alternative to the turnover-based Business Licence fee. While corporate income tax’s implementation may “level the playing field” between

countries, he added that his “biggest concern” is this could ultimately result in companies existing The Bahamas due to the high cost of doing business and “shocking” ease of doing business.

Confirming that BREA submitted its ‘green paper’ feedback to the Government ten days ago, and in advance of the end-August deadline, Mr Morley said the committee had sought to benchmark its analysis against the likes of Antigua & Barbuda, Barbados, Aruba and St Lucia. These represent the closest comparisons in terms of GDP and population size, with per capita income

also employed for the assessment.

When taxes on mortgages, short-term rentals, real estate sales and real property taxes were combined, he added: “It shows The Bahamas has one of the highest overall rates of those countries... We have some of the highest duties paid on conveyancing in terms of our VAT.

“One of the comments we made to them [the Government] is that if you’re going to introduce corporate income tax at a competitive rate of 15 percent, you have to be careful that we don’t price ourselves out of the

BPL: $3m to resolve Station A deficiencies

By YOURI KEMP Tribune Business Reporter ykemp@tribunemedia.net

First BOB dividend in 11 years ‘a miracle’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

BANK of The Bahamas’

first dividend payment for 11 years was yesterday hailed as “a miracle” by its long-suffering shareholders after it reported its second consecutive year with profits above $11m.

Neil Strachan, the BISX-listed commercial bank’s managing director, in unveiling its results for the 2023 full-year, disclosed it had paid $400,000 in dividends to ordinary

shareholders as of June 15.

“On June 15, 2023, after 11 years of dividends hiatus, the Bank paid dividends of $0.4m to its common shareholders,” he wrote. “The bank’s financial position continues to be strong with total assets of $952m, of which loans and advances net accounted for $372.3m as at June 30, 2023. Total equity closed at $180.9m, with a common equity tier one ratio of 45.2 percent, which is well beyond the Central Bank’s minimum requirement of 18 percent. The bank’s

capital and liquidity positions remain robust.”

Given that the Government and National Insurance Board (NIb) combined own 82.6 percent of Bank of The Bahamas, the majority of this dividend paymentsome $330,400 - will have gone to them. The balance, some $69,600, will have been shared between the remaining 3,000 minority shareholders who will have received an average $23.2 per person or institution.

Banker Lightbourn Realty’s president, who is one of those 3,000, told Tribune Business of the dividend payment: “It’s a miracle that seems to be headed in the right direction. The thing about the bank is that it could throw all those bad loans to Bahamas Resolve and suddenly everything is alright.”

Bank of The Bahamas’ woes, which resulted in two separate government bailouts that saw a combined $267m in government

BAHAMAS Power & Light (BPL) executives yesterday said the building housing New Providence’s baseload generation capacity requires close to $3m in repairs to address deficiencies and prevent it from falling apart.

Anthony Christie, the utility’s director of generation and energy supply, during a media tour of Clifton Pier’s Station A, which is home to the seven Wartsila engines that can collectively supply 132

Mega Watts (MW) of electricity, said the vibrations they create when operating are causing spalling - pieces of concrete to fall from the roof and ceiling.

“In areas where we see spalling and we have some ceiling falling, we are putting up jacks and wood until we can have the structural team come in and do the repairs,” he added. Station A, a 40-plus year-old building, was retrofitted to house BPL’s $95m investment but only five of the seven engines are presently operational with two out of action for maintenance.

The planned structural repairs are expected to take place before year-end 2023

SEE PAGE B3

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

THE Government has enlisted the Inter-American Development Bank’s (IDB) help to assess the risks that climate change poses to “critical transport and energy infrastructure” and the amount of funding needed to mitigate this threat.

The multilateral lender, in documents detailing its $370,000 climate

resilience assessment and mitigation plan for Bahamian public infrastructure, said that “unusually heavy short duration rainfall” - in the absence of hurricanes - is impeding vehicle movements and causing damage through flooding in low-lying areas of New Providence.

“Infrastructure coverage, capacity, quality and resilience are essential to enabling access to opportunities and services, reducing poverty

Nevertheless Mike Lightbourn,

SEE PAGE B2

Coldwell

Bahamas moves on climate change infrastructure threat

and inequality, promoting security and fostering productivity. However, infrastructure assets in The Bahamas are likely to be increasingly severely affected by the increased intensity of climate events and may be unable to accommodate heavy rain and storms,” the IDB warned.

“Recently, The Bahamas has experienced unusually heavy short duration rainfalls where almost 12 inches of rain fell in 24

hours, causing widespread localised flooding of roads, disrupting vehicle movements and causing damage, reducing accessibility to public services, disruption of the provision of public services and reduction in mobility for vulnerable parts of the population that use non-vehicular modes of transportation.”

Simon Wilson, the Ministry of Finance’s financial secretary, echoed these

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DAVID MORLEY

Colina shrugs off COVID travel cover end with 61% profits rise

COLINA Holdings (Bahamas) produced a 61.4 percent comprehensive income increase for its ordinary shareholders during the 2023 first half despite declining premium revenues due to the end of COVID-related travel insurance.

The BISX-listed life and health insurer, unveiling its results for the 2023 second quarter and six months to end-June 2023, revealed that gross premium revenues fell by $12.4m or 14.2 percent year-over-year after the Government ended the pandemic travel insurance initiative in mid-2022.

But, despite gross premium revenues dropping from $87.1m in the 2023 first-half to $74.7m this year, Colina Holdings (Bahamas) delivered a more than-$4m year-over-year increase in total comprehensive income attributable to ordinary shareholders after net investment income soared by 159 percent.

This rose to $26.7m for the 2023 first half, compared to $10.3m for the prior year, due to gains in the value of the life and health insurer’s various investments as opposed to the losses they suffered last year. Total comprehensive

income attributable to ordinary shareholders totalled $11.3m, or $0.46 per ordinary share for the six months ended June 30, 2023, compared to $7m or $0.28 per share for the same period last year.

“Gross premiums for the prior period comprised revenues from a COVID-19 trip interruption product,” said Terence Hilts, Colina Holdings (Bahamas) chairman, in explaining the top-line drop. “The company experienced growth in its other life, health and general insurance lines of business, exclusive of the premiums from the

trip interruption product that was terminated in mid-2022.”

For the 2023 first half, Colina Holdings (Bahamas) generated net income attributable to ordinary shareholders of $8.5m or $0.34 per ordinary share. The net income attributable to ordinary shareholders was $6.4m or $0.26 per ordinary share during the same period in 2022, producing a 20.8 percent year-over-year increase.

Net policyholder benefits paid out during the 2023 first half totalled $44.6m, a 7.7 percent reduction from the prior year’s $48.3m, in

part due to the COVID travel insurance end as well as an improved mortality claims experience relative to 2022.

“During the period, additional net reserves of $17m were booked and they are included in the provision for future policy benefits net of the changes in reinsurance assets at June 30, 2023,” said Mr Hilts. Total assets at June 30, 2023 stood at $886.3m, with invested assets totalling $688.8m, comprising 77.7 percent of the total.

Shareholders’ equity as at June 30, 2023, totalled $217.2m. This sum is net of

Graycliff gains 35th wine ‘Grand Award’

GRAYCLIFF yesterday said it has been awarded the 2023 Wine Spectator Grand Award, marking the 35th consecutive year that the hotel and restaurant has been honoured with this recognition.

Enrico Garzaroli, Graycliff Hotel & Restaurant’s chief executive, reflecting on this achievement, said in a statement:

“This 35th anniversary of winning the Grand Award is an incredibly gratifying milestone for us. It is a testament to the passion and commitment we have for curating an extraordinary wine selection and providing our guests with an unforgettable dining experience.

“Our sommeliers take immense pride in guiding our guests through our vast wine collection, ensuring each selection complements and elevates their culinary journey.” All award winners including Graycliff have been featured in the August 31, 2023, issue of Wine Spectator.

FIRST BOB DIVIDEND IN 11 YEARS ‘A MIRACLE’

FROM PAGE B1

bonds injected into its balance sheet to replace the toxic commercial credit transferred to Bahamas Resolve, also caused a spectacular dilution of the minority shareholders’ collective interest from 49

percent to the current 17.4 percent. This occurred when the Government shareholders picked up the entirety of a $40m rights offering.

It also resulted in a spectacular destruction of shareholder value, although the share price has somewhat recovered to close at

$5.30 last night. While the resumption of dividend payments, albeit small, is certainly noteworthy and Bank of The Bahamas appears to have returned to sustained profitability, elements of its unaudited balance sheet and financials still give rise to concerns.

JOB OPPORTUNITY

Restaurant Manager

Responsible for ensuring the attainment of targeted revenues and and providing appealing restaurant service; managing staff and ensuring the smooth operation of the restaurant.

Essential Duties

• Maintain operations by enforcing company’s policies, standard operating procedures; implement production, productivity, quality, patron- service standards; determine and implement system improvements.

• Maintain patron satisfaction by monitoring, evaluating, and auditing food, beverage, and service.

• Ensure that all food and products are consistently prepared and served according to the restaurant’s recipes, portioning, cooking, and serving standards.

• Maintain a safe, secure, and healthy facility environment by establishing, following, enforcing sanitation standards and procedures; complying with health and legal regulations; maintaining security systems.

• Develop employees by providing ongoing feedback, establishing performance expectations and by conducting performance reviews.

• • Prepare schedules and ensure that the restaurant is staffed for all shifts.

• • Work with C. E.O/C.O. O and Head cook to plan and price menu items.

• Control food cost and usage by following proper requisition of products from storage areas, product storage procedures, standard recipes, and waste control procedures.

• Oversee and ensure that restaurant policies on employee performance appraisals are followed and completed on a timely basis.

• Conduct training for all personnel in conjunction with H.R and Sr. Manager or Regional Manager.

• PHYSICAL REQUIREMENTS

• Flexible and long hours sometimes required.

• Ability to stand during entire shift.

QUALIFICATIONS

Bachelors Degree in Business/ Hospitality or a related feld from an accredited college/university with at least 3 years of proven supervisory/management experience. Please forward your resumes to hr@sapodillabahamas.com

Application deadline 18th August, 2023.

We thank all applicants for their interest, however only shortlisted applicants will be contacted for an interview.

While its non-performing loans, as a percentage of the net credit portfolio, had reduced from 19.49 percent at end-June 2022 to 17.1 percent some 12 months later, the latter remains substantially higher than the industry’s near-8 percent average - meaning it is more than double that of its peers.

And, while it would still be solvent, Bank of The Bahamas would only have $14m in net equity if that last remaining $167m government bond was not included in its balance sheet. The net loan portfolio, in common with other Bahamian commercial banks, was relatively flat yearover-year having expanded by less than $3.5m. With new lending opportunities hard to come by, Bank of The Bahamas has turned to investments in government securities to drive its interest income.

dividend payments to Class ‘A’ preference shareholders totalling $1.2m and Class ‘A’ ordinary shareholders of $4.5m.

“Colina Holdings (Bahamas) remains focused on implementing strategies aimed at fortifying its balance sheet and capital position to provide the company with the flexibility necessary to effectively address the ever-evolving requirements of both policyholders and customers,” said Mr Hilts.

Graycliff’s wine cellar boasts a collection of more than 275,000 bottles and 6,500 selections from 20 countries, which has curated over decades. In 1988, Graycliff made history by becoming the first restaurant outside the US to be honoured with the Grand Award, setting the bar for wine programmes globally.

Wine Spectator’s Restaurant Awards began in 1981 with just 13 restaurants receiving Grand Awards for their wine lists. Graycliff said its continuous presence in this group underscores its dedication to delivering an outstanding wine programme.

To determine the winners, Wine Spectator rigorously assesses each Grand Award candidate, conducting independent, on-site inspections of the wine programme, cellar, service, ambiance and cuisine. More than 30,000 restaurants apply each year.

“The Bank recorded higher total operating income year-to-date,” Mr Strachan wrote, “driven by increased net interest income and non-interest income. This improved performance is attributed to the bank’s investment of its excess liquidity in Treasury bills and government registered stocks, increasing interest income by $2.8m.

“Also contributing to the positive variance was the bank’s growth in its auxiliary revenue streams by $1.1m (10.9 percent) primarily from ATM services, fees and commissions, merchant services and prepaid cards....The bank recorded net income of $11.4m for the year ended June 30, 2023. This fiscal year net income of $11.4m, and $11.8m net income in the prior year, reflects the bank’s continuous achievement of maintaining profitability despite the current global economic challenges.”

Further breaking down Bank of The Bahamas’ performance, Mr Strachan added: “Total

operating income was partially offset by higher net impairment losses and operating expenses. Additional impairment losses of $3.3m on the bank’s sovereign and corporate financial assets portfolio was recorded during the year stemming from the October 2022 Bahamas’ credit rating downgrade by Moody’s.

“This was partially offset by lower credit losses of $5.8m during the year compared to $6.4m in the prior year, and credit recoveries averaging $5m year-on-year. Operating expenses increased by $3.9m mostly due to higher employee expenses.

“Additional increases were also recorded in information technology and depreciation expenses as the bank continues to be proactive in enhancing its technology and facilities. A rise in banking licence fees billed by the regulator was recorded and an additional Business Licence fee was levied by the Government to the banking industry.”

GRAYCLIFF’s sommeliers: (L to R) Ellex Blanc, Garry Parks, Geno Ford and DeNiro Griffin

RED LOBSTER GAINS PERMIT FOR FIRST NASSAU RESTAURANT

THE Red Lobster franchise yesterday said it has finally received the required Ministry of Works permits to start constructing its first New Providence restaurant which has increased in cost by 25 percent.

James Owen, Pinnacle Franchise Brands’ director, told Tribune Business that the $350,000 financing raised through the ArawakX crowd funding platform has been invested “solely” in The Bahamas location. The remaining

$1.5m that was secured for the business, and its expansion, came from Pinnacle’s late chairman and chief executive, Chris Mortimer, who obtained it from “his people”.

Confirming that he was informed that the relevant Ministry of Works permits were obtained last week after a year-long wait, Mr Owen said: “We have to build the location still, and that is why we’re waiting on the Ministry of Works permit. We had our permit application in since August 2022. Once they give us the permit, we still have to buy everything and then construct and erect it.

“Our original plan was for the site to be $2m, but that cost has obviously increased since we originally planned it in 2018, so we are looking at roughly $2.5m for the Nassau location. Construction is scheduled to begin by the 2024 first quarter, but Mr Owen declined to disclose the location due to a nondisclosure agreement with the prospective landlord.

“The project is still ongoing and we’ve tried to tell everyone that Trinidad is going to be the first restaurant while, unfortunately, we wait for Nassau’s permits to be reviewed and issued,” he added. Pinnacle is the Red Lobster

franchise for other Caribbean territories, including Jamaica, Trinidad and the Dominican Republic.

Mr Owen, speaking to Pinnacle’s financing, said: “There was $1.8m raised, and $1.5m of that was from Chris Mortimer’s investment. It was not his personally, but from his people that were external, and the $350,000 that was Bahamian raised has been spent in The Bahamas thus far.” In a note to Pinnacle’s shareholders, Mr Owen added: “Pinnacle Franchise Brands secured an area development agreement (ADA) with Red Lobster Hospitality in 2020. This

agreement conferred the rights to establish Red Lobster restaurant(s) in The Bahamas, Trinidad & Tobago, Jamaica and the Dominican Republic in the first phase of development.

“At the current time (August 2023), Nassau has a site leased (since April 2022) for its restaurant and awaits permits to commence construction (applied for since August 2022). Work on this 7,300 square foot restaurant should start in January 2024.

“Whilst the restaurant in Nassau is being considered by the authorities, the other territories in the ADA have been pursued. Trinidad

& Tobago was approved by Red Lobster Hospitality in September 2022, and construction has recently started with a target opening date of the 2023 fourth quarter. “For both Jamaica and the Dominican Republic, we have ongoing consultations with interested prospective partners and anticipate restaurants can be open in 2024 (Jamaica) and 2025 (Dominican Republic). Interest has been expressed towards Guyana, and we have been allowed to consider this territory although it is in our second tranche of the area development agreement.”

Tour operators enjoy 70% post-COVID visitor revival

By YOURI KEMP Tribune Business Reporter ykemp@tribunemedia.net

TOUR and excursion operators yesterday said business volumes have returned to 70 percent of pre-COVID levels amid a strong tourism rebound.

Samantha Henfield, general manager of Tourific Rides, told Tribune Business that summer 2023 has

been robust and she does not expect a drop-off in business until the traditional September low in the tourism calendar. Trade is expected to pick back up once the winter tourism season starts.

“I would say that, maybe by November, it may pick back up after we get past August. It will get slow by the end of August, going into September,” she said.

“All of the tourists are definitely enjoying the tours,

and it’s really a highlight for them when they come. They’re always looking for ways to get around the island, looking for fun and exciting activities, and they just ride and cruise around the island at their own leisure.”

The tour rental business is only at “70 percent now” of pre-COVID levels, Ms Henfield added. “It’s not 100 percent because we have some days which are very, very slow. Compared

to 2019, we were really, really busy. Just before the pandemic, that’s when things had really slowed down for us, but we have picked up and we have gotten back into the swing of things recovering from the pandemic,” she said.

Stopover tourism numbers during the 2023 first quarter rebounded to 97 percent of pre-COVID levels, according to the Central Bank. Nelson Noels, general manager of

BNB Scooter Rental and ATVs, yesterday said things are “okay for now” with tourists taking quad-scooter rides deeper and deeper into New Providence.

“Most of them are bookings not run by one company. We have at least about eight people offering ATV rentals,” Mr Noels said. “Business for us, compared to 2019, is good. It’s a lot better than the lockdowns. We can’t complain.”

There is an expectation that, within the next two weeks leading into September, the tourism industry is expected to get “really slow”. This is when the tourism season is traditionally soft.

“We expect it to die down and then come back up around November,” Mr Noels added.

and cost less than $3m, Mr Christie said. The US engineering firm, Matergenics Inc, is conducting a structural assessment of Station A with BPL executives seemingly blaming Wartsila, whose contract to manage the facility ceased at yearend 2022, for many of the issues with the building and the engines.

Repairs were described as an “ongoing issue” at Station A. “As a part of the contract (with Wartsila) it speaks to the plant being handed over back to us in the same state in which it was given. We did not encounter that. So since then we’ve been focusing on correcting a lot of these issues in order to get it in a better state,” Mr Christie said.

Station A’s basement, which does not house the Wartsila engines, has structural damage to its walls and is full of sludge and oil. It was described as “not up to standard” with the pumping systems being inoperable, which made it a “main area of focus” for BPL so it can ensure staff safety in dealing with the excess sludge that is running off into the basement. Yellow tape is in place to warn workers to be careful, with the basement also said to be suffering from salt water corrosion.

“Then we would have looked at systems that were not working in the plant. Again, we would have had a

running plant. Units would have been running. We would have had scheduled maintenance on at the time one unit was planned for service,” Mr Christie said.

“Again, based upon demand, the prior years in these units you have a 12,000 hour service, then a 24,000 and a 36,000 [hour service]. Due to the demand at the time, a lot of the scheduled maintenance was delayed and that impacted us completing a lot of the maintenance on time. Now at the time, the OEM (original equipment manufacturer) Wartsila was in charge of that.

“In addition, the scheduled maintenance that was done on five of the seven units had a lot of delays and challenges due to logistics and parts being available on time, technicians being available on time. All of this added to delays. So up until the time we took over they should have completed all of the services or overhauls, but at that time they did not. So we were left now responsible for two more overhauls that needed to be done prior to summer.”

There are also “major defects” with regard to the Wartsila engines themselves. “We would have found bolts that snapped or broke. We’ve had more wear and tear on certain components in the crankcase that needed proper analysis in order to understand the root cause,” Mr Christie asserted. BPL has

notified Wartsila of these issues and is preparing a report based on Wartsila’s additional findings with similar units deployed around the world.

Mr Christie added: “Up until the time we took over the plant there was a lot of equipment that was not functioning. Some still aren’t. I talked about the ventilation in the building. We want to correct that, and that is something that’s going to be happening real soon.

“We would have went through a very hot summer, and walking near the engine bays and near the doors, it was extremely hot and that impacts the generation output from the unit. So, in short order, we’re going to install a series of exhaust fans on the upper windows along the wall that would help with the ventilation in the building.

“Another large component outside of fuel was the air supply, which is provided by compressors that are part of the engine operations. By design, they put those in the building and they found

out that they were too hot to operate properly in the building. So they had to put them on the outside of the building.” The compressors were placed in an “ad hoc” position and BPL is trying to rectify that situation as well. The Wartsila engines were designed to optimise use of heavy fuel oil (HFO) and use less of the more expensive automated diesel oil (ADO), so as to minimise fuel costs for consumers. This requires steam for the pre-treatment of the oil, which allows it to flow at the right consistency for the engines.

FROM BPL: $3m to resolve Station A deficiencies TO ADVERTISE TODAY IN THE TRIBUNE CALL @ 502-2394

However, Mr Christie said Wartsila decided not to install a full-sized boiler for Station A but decided to use the existing separation and fuelling system at Stations B and C. He said “it became a challenge” for BPL to keep up with the HFO needs for the seven Wartsila units.

“So, as an addition afterwards, they decided to install two standalone boilers to help support the steam needed for the plant and production of HFO in order to run all the units on HFO. And, again, this plant was designed, the engines were built, to run on HFO primarily,” he added.

“HFO is the cheapest fuel that we have available in The Bahamas right now to produce electricity. That was a key point, and having that as part of the design for this plant. However, the original concept was to use systems that existed in order to save time and costs from Station’s B and C.

Bahamas moves on climate change infrastructure threat

FROM PAGE B1

concerns in a letter to the IDB’s Bahamas country head, Daniela Carrera Marquis, that gave the Government’s go-ahead for an initiative that will analyse the risk extreme weather events pose “to critical infrastructure on the island of New Providence and other low-lying islands, and to quantify the funding needs to upgrade this highrisk infrastructure”.

He added: “The recent rains (without hurricane flooding) have highlighted the need for flood remediation and mitigation in New Providence and other islands, and such an exercise as contemplated in the technical co-operation

will provide the basis for a policy/financial decision on the way ahead.

“As the minister of works and utilities [Alfred Sears KC] mentioned in his contribution to the Budget debate, New Providence is an expanding region and it is important that as the capital city it should be in a position to ensure that its critical infrastructure should always be up and running in order to provide the response to the rest of The Bahamas in times of emergencies/crisis. The recent flooding demonstrates the challenges this poses.”

The IDB paper added of the project’s goals: “The aim is to map the degree of

severity of risks to critical transport and energy infrastructure posed by natural hazards, increased variability in weather patterns and extreme climate events to create a prioritised set of risk mitigation investments and costs for the Government of The Bahamas.

“The analysis will draw on models across New Providence (especially inland areas) and other low-lying Islands to simulate hydrometeorological risks for a range of climate hazards and potential future damages along road corridors and by extension adjacent public infrastructure (energy, water and sanitation, health and education infrastructure)....

“The Bahamas is one of the most vulnerable countries in the Latin America and Caribbean region to climate hazard events,” the IDB paper continued. “In the past two decades (20002020), the country has been hit by 15 major disasters, mainly hurricanes. The high winds and flooding from heavy rains and storm surges from these disasters have in total resulted in more than $6bn in public infrastructure and housing losses.

“Moreover, The Bahamas is expected to experience rising temperatures and reduced rainfall. Combined with a drier climate, more extreme weather events can place additional stress

on infrastructure. Damaged transport assets, along with infrastructure structural integrity and operational capacity [issues] from increased variability and extreme weather events, in turn can lead to reduced mobility and access to key destinations, disrupted power and lead to loss of life. It can represent a sizable portion of economic losses.”

Giving further insight into the project’s goals, the IDB said: “The aim is to map the degree of severity of climate risks posed to critical transport corridors and associated energy and water supply infrastructure along those corridors, and to create a prioritised set of

risk mitigation investments and costs for the Government of The Bahamas.

“Based on the results of the modelling exercises, an investment plan of the interventions and financial needs will be prepared to ensure an adequate climate resiliency upgrade of current infrastructure stock, including a focus on increasing the stock of sustainable and inclusive infrastructure systems, and requirements to create the enabling policy environment and institutional conditions needed to scale up, sustain and replicate resilient and environmentally-sustainable infrastructure projects in the country.”

WALL STREET DRIFTS HIGHER AHEAD OF A BIG WEEK FOR RETAILERS

By STAN CHOE AP Business Writer

WALL Street drifted

higher Monday ahead of

a week of reports showing how strong U.S. shoppers remain, amid hopes their spending can keep the economy out of a recession.

The S&P 500 added 25.67, or 0.6%, to 4,489.72, though slightly more stocks fell than rose within the index. The Dow Jones Industrial Average edged up by 26.23 points, or 0.1%, to 35,307.63 in a quiet day of trading. The Nasdaq composite gained 143.48, or 1.1%, to 13,788.33.

U.S. Steel jumped to one of the market's bigger gains, up 36.8%. It said over the weekend that it rejected a buyout offer from Cleveland-Cliffs and that it's heard multiple offers.

Cleveland-Cliffs rose 8.8% after it said it offered more than $7 billion in cash and stock for the steelmaker and that it's ready to move on the offer immediately.

On the losing end of Wall Street was Nikola, which sank 6.7%. The

zero-emission truck company recalled more than 200 of its electric vehicles after an investigation indicated a problem with a component in the battery pack could be the cause of a prior fire. It earlier suggested foul play could be at play in the truck fire at its headquarters.

Across the rest of the market, trading was relatively quiet. The S&P 500 has retrenched by 2.2% in August after soaring 19.5% through the first seven months of the year. Critics have been saying a pullback was due, arguing Wall Street too quickly and forcefully latched onto the belief that inflation would continue to cool and the economy would avoid a recession.

A bulwark keeping the economy afloat has been strong spending by U.S. consumers, which has been propped up by a remarkably resilient job market.

On Tuesday, the U.S. government will give the latest monthly update on sales at retailers across the country. Economists say it's one of the week's most important reports, and they

expect it to show growth accelerated to 0.4% in July from 0.2% in June.

Several big retailers are also on the schedule this week to show how much profit they made in the latest quarter. Home Depot, Target, TJX and Walmart will all be reporting this week, as earnings

reporting season for the spring hits its tail end.

Inflation has been moderating since hitting a peak last summer, but it remains high and is denting Americans of all incomes.

Conditions may be getting tougher in upcoming months, as rising interest rates make creditcard and other payments

more expensive. Student loan payments will also weigh on consumers, and many have been spending down savings they had been built up during the pandemic.

Economists at Deutsche Bank say their expectations for a stumble in consumer spending during the last three months of the year are a reason they're forecasting a mild recession lasting through the first half of next year. They, though, also say the resilience of U.S. consumers so far has raised the probability of no recession.

The week's other big economic highlight will be Wednesday's release of the minutes from the Federal Reserve's last meeting. At that meeting, the central bank raised its main interest rate to the highest level in more than two decades. It was the Fed's 11th increase in 17 months as it tries to corral the worst inflation since the 1980s.

The hope on Wall Street is that will prove to be the final hike of this cycle and the next move for the Fed will be to cut rates. That

would provide some relief because high rates work to lower inflation by bluntly slowing the entire economy and hurting prices for stocks and other investments.

Traders broadly expect the Fed to hold rates steady at its next meeting in a little more than a month, according to data from CME Group. They also have some bets saying the Fed will begin cutting rates early next year.

That could prove to be too optimistic, according to David Mericle, economist at Goldman Sachs.

He's forecasting rate cuts could begin in the spring of 2024, from April through June, as the Fed waits for inflation and the pressure pushing upward on it to ease enough. One potential hiccup could be that the Fed does not want rate cuts to boost prices for stocks and other investments too much.

Mericle said he still sees less of a risk of a recession than the market generally.

In the bond market, the yield on the 10-year Treasury rose to 4.19% from 4.16% late Friday.

A PERSON rides a bicycle in front of an electronic stock board showing Japan’s Nikkei 225 index at a securities firm Thursday, Aug. 10, 2023, in Tokyo. Asian benchmarks mostly fell Thursday after shares declined on Wall Street and investors braced for a highly anticipated report on U.S. inflation.

Photo:Eugene Hoshiko/AP

Ex-DPM challenges Gov’t on engineer’s BPL report

A during the almost two years it has held office.

“When those engines were put in Station A, the Government of The Bahamas, which at the time was the FNM, had one of the most respected engineers in the country make a report on that,” Mr Bannister told this newspaper. “The current government would have that report on file, and they could release that report to the Bahamian people in the interests of being accountable to them. The report should be released by the Government in the interests of transparency.”

The former MP and Cabinet minister confirmed that the engineer in question was Mr Knowles as the finger-pointing and ‘blame game’ seemingly intensifies over which political party is responsible for the ongoing crisis at BPL and the wider energy industry. This is occurring just when Bahamian households and businesses are grappling with spiking BPL bills whose all-in rates have increased by 70 percent in just ten months to recover the utility’s unpaid fuel bills.

Other well-placed Tribune Business sources, speaking on condition of anonymity, yesterday confirmed that Mr Knowles was hired under the former Minnis administration to determine if the 40 yearold Station A’s structural integrity was sound enough to accommodate the Wartsila engines, which can collectively supply 132 Mega Watts (MW) of electricity, plus oversee the design/construction of the pedestals upon which they now sit.

“When that building was selected and they put those engines in, the steel structure that holds up the building was fine,” one contact said. “Lambert Knowles, a very well-known structural engineer, and probably the best in the country, was hired. He reviewed that building and determined it was fit for purpose. And when

Lambert Knowles built and designed those pedestals, they were designed to carry twice the weight of those engines.”

This contrasts sharply with Station A’s current condition as presented by BPL’s generation executives yesterday (see other article Page 1B). A US engineering company, Matergenics Inc, has been hired to conduct a new structural assessment of Station A, with the utility’s staff pointing out that vibrations from the Wartsila engines were causing spalling or pieces of concrete to fall from the roof.

This newspaper was told that further upgrades to Station A, including replacement of the roof and its ceiling tiles, were required - and known to the Government and BPL’s then-Board and management - when the former Minnis administration was voted out of office in September 2021.

The $95m investment in the Wartsila engines was intended to solve arguably one of New Providence’s worst-ever power generation crises, initially sparked by the September 2018 fire that cost BPL its then-two most efficient engines and 60 MW of generation capacity. Frequent blackouts and power outages followed as a result of the load shedding that followed, with no part of Nassau and the wider island spared.

As a result, BPL and the Minnis administration focused on installing the seven engines as rapidly as possible, while making sure that they “fitted in the building appropriately”, the pedestals were correctly constructed and the control room built-out. Other issues, such as window replacement, were given less priority, with Station A ultimately supposed to be handed over to Shell North America as part of the deal to outsource New Providence’s baseload generation. That deal will now seemingly not happen, with the Davis administration entertaining alternative offers for the supply of liquefied

natural gas (LNG) fuel for BPL. The latter’s generation staff, though, yesterday identified issues with both the building’s ventilation and air compressors that are impacting the Wartsila engines’ output because the building is too hot.

Mr Bannister, however, sought to suggest that responsibility for these difficulties lies with the present administration rather than the one he was part of. Again accusing the Davis administration of failing to build on what its predecessor had left behind, he said: “No matter what they do out there, or take journalists out there, they still have not answered one of the several questions that I raised.

“That is to tell the Bahamian people, in the almost two years they have been in power, what they have done to improve any persistent challenges we have at Station A. The answer is going to be that they did nothing, and it’s a dismal failure. Suppose I am wrong, which I am not, and suppose Station A was not fully inspected by a top, highlyrespected engineer.

“Suppose I am wrong, and the PLP government came into power and there were lapses in the structural integrity of the building. Surely in two years they would have done something to improve the structural integrity?” Mr Bannister asked.

“What they are doing with this ex-post analysis of the situation, two years after we left office, they are not telling the Bahamian people, from the time we lost the election, what the situation was then, and if the situation warrants, what they have done to improve the situation. Nothing. That is a very sad indictment.”

Mr Bannister questioned why all the deficiencies identified with Station A are only just being reviewed now after the Davis administration has had two years to address them, adding: “This shows you the worst type of neglect the country can have.” Calling on the Government to “get

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something done”, he added: “They’re showing the Bahamian people that since we left office nothing has been done.” BPL generation executives yesterday said the walls of Station A’s basement were structurally damaged, and that it was full of sludge and oil and “not up to standard”. Its pumping systems were also described as inoperable. This description,

though, sparked amazement from a well-placed source who said the basement has been “cleaned out completely” under the former Minnis administration with all oil residue removed.

“There was just concrete there,” they added. “A group from Freeport was brought in and they cleaned that out. It was cleaned up with the intent and desire to have that never to turn into oil sludge again. That

is disappointing. That is illogical.”

Mr Bannister yesterday suggested that BPL’s decision to terminate the contract for Wartsila to manage Station A at end-2022 had resulted in maintenance issues, which presently have two of the seven engines offline, plus complaints of “wear and tear” with the engines’ crankcases and bolts snapping.

market in terms of the real estate sector.”

The Government’s corporate income tax ‘green paper’, released in May this year, forecast that real estate firms will experience the highest increase in their tax burden for each of the four tax options that the Government is proposing as replacements for the turnover-based Business Licence fees. Bahamian realtors are projected to see an increase of between 2.2 percent and 3.7 percent in their tax burden, as a proportion of gross turnover, compared to what they pay now under the present Business Licence fee. Mr Morley, who said he had also “done a deep dive” into the tax deductions and incentive credits available to real estate in the 160 countries that presently have corporate income tax, said the BREA committee had also suggested the Government use fresh numbers.

“Our biggest recommendation to them is they should re-run all the numbers in the ‘green paper’ based on activity from 2018 and 2019 being the highest years pre-pandemic,” he said. “What they have done is run a lot of stuff from 2021, which was during a real estate boom.”

Mr Morley told Tribune Business that the findings of a BREA membership survey also dispute the ‘green paper’s assertion

that real estate enjoys some of the higher gross profit margins in The Bahamas at close to 40 percent. He added that, in conversation with the principals at other major firms, only one said they had come close to a 30 percent margin - and that was only for one year.

“I think there were only two companies that had gross profit margins in excess of that 38 percent,” he added. “We also suspect those companies are small ‘Mom and Pop’ shops with one or two people doing real estate on the side, and not having the staffing and infrastructure.

“Most real estate companies share their commissions 50/50 [with staff], so straight right off the bat your profit margin is at 50 percent. We don’t know where they got that data from.” Once salaries, utility bills and other costs started accumulating, Mr Morley said realtors’ gross profit margins quickly slid far below the 38 percent outlined in the ‘green paper’.

“We need to sit down [with government] and look at this together, because the picture they’ve made with real estate is skewed very far off,” he continued. The Government’s ‘green paper’ showed that real estate and recreational activities both enjoyed earnings margins of close to 40 percent based on EBITDA (earnings before interest, taxation, depreciation and amortisation), but paid the same

NOTICE

NOTICE is hereby given that NADIA PIERRE of Monastery Park, New Providence, The Bahamas applying to the Minister responsible for Nationality and Citizenship, for Registration Naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 15th day of August 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, New Providence, The Bahamas.

on corporate income tax

Business Licence fees - as a proportion of turnover - as retailers and wholesalers with a 5 percent margin.

A corporate income tax will be the first such income-based levy in the country’s history, apart from the National Insurance Board’s (NIB) payrollbased contributions, and is intended to ensure The Bahamas complies and fulfills its obligations as one of 140 countries that have signed on to the G-20/ Organisation for Economic Co-Operation and Development (OECD) drive for a minimum 15 percent global corporate tax.

In the first instance, this initiative applies only to corporate groups and their subsidiaries that have a minimum annual turnover in excess of 750m euros.

The Government’s ‘green paper’, which is dated May 17, 2023, sets out the first option as merely introducing a 15 percent corporate income tax for all Bahamasbased entities that fall into that 750m-plus turnover category, while maintaining the Business Licence status quo for all entities which are not affected.

Mr Morley yesterday suggested that the Government will likely have to implement a corporate income tax, should The Bahamas ultimately decide to go that route, via a twostep process. The first stage would be the 15 percent for all Bahamas-based entities that are members of

multinational groups with turnovers that exceed the G-20/OECD threshold, with the next phase involving a decision as to whether to extend the tax to the rest of the economy.

Agreeing with Simon Wilson, the Ministry of Finance’s financial secretary, that implementation of a corporate income tax economy-wide is some four years away at least, Mr Morley nevertheless warned: “I told a government official the other day that my biggest concern for The Bahamas is that you put a 15 percent corporate income tax in.

“That might be competitive, but the cost of business in this country is higher than the rest of the region and the ease of doing business is shocking. A company may say, fine, you’ve levelled the playing field, but do we need to be in The Bahamas? My concern is what the fall-out might well be when this is put through for multinational corporations.”

The second and third corporate income tax options, described as “more nuanced” because of the better balance they strike between tax revenue and economic impact, are those the Government indicates it is giving more serious consideration to. The second, labelled as “a soft introduction”, would introduce the same 15 percent rate for all those caught in the G-20/OECD

NOTICE

NOTICE is hereby given that RICARDO JUSTIN of Ramming Street, New Providence, The Bahamas applying to the Minister responsible for Nationality and Citizenship, for Registration Naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 15th day of August 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, New Providence, The Bahamas.

net and also levy a 10 percent corporate income tax on all other businesses “to maintain regional tax competitiveness”.

This option, the ‘green paper’ adds, would have minor negative impacts on GDP, foreign and domestic investment, and unemployment. The latter would rise by 0.1 percent, while GDP growth would contract by 0.3 percent and foreign and domestic investment fall by 1.5 percent and 0.3 percent, respectively.

The third option, branded as “simplicity driven”, would exempt or carve-out small businesses earning less than a $500,000 annual turnover to leave them still paying the existing Business Licence fee. Bahamas-based entities in groups that meet the G-20/ OECD threshold would pay a 15 percent corporate income tax, and all other companies generating more than $500,000 would pay a 12 percent rate.

The third option, though, would result in greater negative economic impacts although generating more revenue for the Government. Under this scenario, the ‘green paper’ said GDP growth was estimated to contract by 0.9 percent with unemployment increasing by 0.5 percent. Foreign and domestic investment will fall by sums equivalent to 5.1 percent and 1 percent, respectively.

The final option, which will generate the greatest revenue increase for the Government but also inflict the harshest economic impact, is to simply impose the 15 percent corporate income tax rate on all businesses with a turnover greater than $500,000 per annum and a 10 percent on small and medium-sized enterprises earning less than that.

This would result in an economic contraction of 1.7 percent, or around $200m, the ‘green paper’ projected, with the unemployment rate rising by 0.9 percent. FDI would fall by 10.2 percent, and its domestic investment counterpart by 2 percent. However, government revenues under this scenario are forecast to rise by 96 percent compared to the $140m collected from Business Licence fees in 2019 (see other article on Page 24B).

The more favoured options, according to the ‘green paper’, would see government revenues rise by 36 percent and 62 percent from implementing the second and third scenarios, respectively, compared to those same 2019 Business Licence revenues. Just levying 15 percent corporate income tax on those groups targeted by the G-20/ OECD, though, would only produce a 4 percent revenue rise from business community taxation.

NOTICE

NOTICE is hereby given that WILDANA DESINORD of Fourth Street, Coconut Grove, New Providence, Bahamas is applying to the Minister responsible for Nationality and Citizenship, for registration/ naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twentyeight days from the 8th day of August, 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

NOTICE

NOTICE is hereby given that SHACQUILLE ONIEL CORNWALL of #44 Pine Yard Road, New Providence, Bahamas is applying to the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/ naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 15th day of August, 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.