Holness defends deal with Chinese firm to build Naggo Head Technology Park, Morant Bay Urban Centre


Friday, April 26, 2019

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CHINA Harbour Engineering Company (CHEC) is to spend just over $1 billion to cover the planning and development cost for the long-proposed Naggo Head Technology Park in Portmore, St Catherine, and the Morant Bay Urban Centre in St Thomas.

This will represent approximately eight per cent of the total cost of the two developments which have been on Jamaica's wish list for years.

Last September the Government announced that both projects would be fast-tracked after the Cabinet approved joint-venture agreements between CHEC and the Factories Corporation of Jamaica (FCJ).

Details of both agreements were presented by Prime Minister Andrew Holness in Parliament on Tuesday in response to questions posed by Peter Bunting, the Opposition spokesman on industry, investment and competitiveness.

According to Holness, the Naggo Head project will have rentable building space of 810,000 square feet with the full development cost being approximately US$75 million.

The Morant Bay project will have rentable building space of 365,000 square feet and is projected to cost approximately US$49.8 million.

The FCJ, which will be leading both developments, will contribute $1.78 billion in equity for the Naggo Head Technology Park and $800 million for the Morant Bay Urban Centre.

Holness, in his response to the questions from Bunting, said the decision to partner with CHEC on the two projects came after the Chinese firm made an unsolicited offer to the FCJ.

“On receipt of the unsolicited investment proposal, FCJ assessed the merits of the proposal and identified that the proposal was of a unique nature,” said Holness.

He argued that the proposal was unique because CHEC, as a private investor, would arrange 100 per cent financing to facilitate the development of both projects without any Government or FCJ guarantee and without any cash contribution from the State.

“It allows the FCJ, as an investor, to capitalise on the bilateral agreement between the Jamaican and Chinese governments whereby funding, if available, may be secured at a concessionary interest rate to be provided by a Chinese financial institution.

“It [also] allows FCJ, without any cash injection, to maximise its return on investment of up to 70 per cent, without which [it] may not have been available to the GOJ,” added Holness.

The prime minister further argued that without going the route of a joint-venture it would be challenging to find an investor to put up the large amount of money that would be required to package the project to present to a financial institution for consideration of funding.

Holness added that under the joint venture agreement each development will be done by a project company, with CHEC holding a 30 per cent stake in each, the FCJ 29 per cent, and 41 per cent available to other investors.

He said both projects will be financed by a combination of debt and equity with the money to be sourced before the work begins.

“If the loan is not secured before start-up, then CHEC is obligated to use its own resources to provide bridge financing to initiate the project and this will be in the form of a loan to the project company, which interest rate will not exceed the interest rate that would ordinarily be paid had the financing been secured with China Development Bank,” said Holness.

While not giving a start date for the two projects, Holness said they are scheduled to start at the same time and be completed together.

When done, the Morant Bay Urban Centre is slated to house the St Thomas Municipal Council, St Thomas Parish Court, Tax Administration (Revenue Centre), an office of the Passport Immigration and Citizenship Agency and a branch of the National Insurance Fund.

These State agencies will account for approximately 40 per cent of the available rental commercial with the other 60 per cent being made available to other Government agencies and private sector investors for rental.

The Naggo Head Technology Park is not planned to house any Government agency as it is being targeted to offer world-class information and communications technology/business process outsourcing facilities.

It will also facilitate an appropriate mix of industry and services for optimum functionality.

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