Subsidiary of London-based company chosen to manage San Juan cruise terminals for 30 years
By The Star Staff
The Puerto Rico government selected San Juan Cruise Port, a subsidiary of London-based Global Ports Holding, for the repair, design, construction, financing, maintenance and operation of the San Juan Bay cruise terminals as part of a 30-year concession.
The announcement was made by Gov. Pedro Pierluisi Urrutia and Puerto Rico Public-Private Partnerships Authority (P3A) Executive Director Fermín Fontanés Gómez at a news conference. Federico González Denton was appointed by Global Ports Holding to head the San Juan Cruise Port.
The 30-year public-private partnership agreement (PPP) between the Puerto Rico Ports Authority and San Juan Cruise Port encompasses a private capital investment of over $400 million to meet the infrastructure and modernization needs of piers 1, 3, 4, and 11 to 14 and Pan American I and II of the Ports Authority.
The selection of San Juan Cruise Port is the result of a procurement process that began in 2017 with the goal of addressing the historical deterioration of the cruise ship terminals and optimizing and modernizing their structural condition so as to bring them up to date with current and future cruise ship industry standards, the governor said. Global Ports Holding submitted an unsolicited proposal. The proposed PPP will allow increased port access in the San Juan Bay and will strengthen the island’s position as a maritime tourist destination in the Caribbean. As part of the process established by the Public-Private Partnership Act of 2009 (Act 29- 2009), the P3A carried out a desirability and convenience study that analyzed various options to address the current situation of the Ports Authority cruise terminals.
The study concluded that a PPP is the appropriate mechanism for the project since it allows for the capital investment necessary to bring the terminals up to world-class standards and maximize the impact of the cruise sector on the island’s economy and tourism.
“As a government, our main efforts and initiatives in the tourism sector include the private sector. The cruise line industry has always been an important component of what we have to offer to the world but at this moment, we can’t compete on a large scale with other jurisdictions that are being transformed to attract more ships with better port facilities,” Pierluisi said. “That’s why we decided to take prompt action against the evident deterioration of the infrastructure of our cruise ship docks to meet the demands of the international cruise industry. This public-private partnership is essential to promote Puerto Rico as the main cruise destination in the Caribbean. With this alliance the docks and cruise ports will receive an unprecedented investment of more than $400 million in capital improvements that will transform them to the high standards of our competitors, but most of all to the tourism sector around the world.”
The P3A executive director stated that “the selection of San Juan Cruise Port, a subsidiary of Global Ports Holding, is the culmination of an extensive five-year process that included the constant adaptation of the project to the current reality of the cruise industry.”
“The outdated ports infrastructure we see today is the result of decades of challenges that have limited the continued development capacity of the Ports Authority,” Fontanés Gómez said. “Today we formally create a viable way to execute the improvements and modernization that this infrastructure needs, in the experienced hands of a private company with vast, global experience in the operation of cruise terminals.”
Global Ports Holding (GPH) is the world’s largest independent cruise port operator. It operates 26 cruise ports in 14 countries, including the cruise ship terminals in The Bahamas; Antigua & Barbuda in the Caribbean; Málaga and Barcelona in Spain; and several ports in Portugal, Italy, Malta, the Adriatic and East Mediterranean and Singapore, among other destinations worldwide. The company was established in 2004 as an international port operator with a diversified portfolio of cruise ports. GPH traditionally provides services for 15 million passengers annually (pre-COVID pandemic) throughout the Caribbean, Mediterranean and Asia-Pacific regions. GPH is strongly focused on operational excellence, enhanced security and safety practices, and customer-oriented services. San Juan Cruise Port, as a GPH subsidiary, is the entity responsible for managing and operating the San Juan Bay cruise terminals project in Puerto Rico.
Under the PPP agreement, GPH will undertake the repair, design, construction, financing, maintenance and operation of the San Juan Bay cruise terminals; all costs and expenses relating to the port facility operations, maintenance and improvements of the ports facilities; all debts and obligations relating to the facilities and its operations, maintenance and improvements; the Initial Investment Projects at financial closing and, subject to demand triggers, the Expansion Investment Projects and the Phase Two Projects; prepare a business and marketing plan, as well as operations and open access; maintain the safety of the piers and facilities at a level and in a manner consistent with good industry practice and other regulatory requirements, and other requirements of the PPP agreement; satisfy key performance indicators such as: maximize the use of the terminals by attracting cruise lines and involving local stakeholders; provide reference services to all cruise line vessels and other shipping lines; and pay the Ports Authority annual revenue shares equal to a minimum of 5% of the gross revenue.
Ports Authority Executive Director Joel Pizá Batiz added that “historically, the work that the Ports Authority has done on the cruise terminals has been modest, with minimum capital investment, mostly to meet the particular needs of the cruise lines, but never as part of an organized general plan.”
“One of the main considerations weighing on the need for this PPP was the Ports Authority’s lack of capital for the necessary infrastructure works in the terminals,” he said.
Factors such as the lack of long-term planning and the lack of financing for improvements contributed to the deterioration of the cruise terminals, which were in a state of disrepair prior to hurricanes Irma and Maria and suffered even more damage after their impact. In fact, evaluations of the cruise ship terminals by federal authorities such as The Federal Emergency Management Agency and the United States Maritime Administration have identified serious structural deficiencies that require repairs and improvements of more than $200 million.
“This PPP makes capital investment viable to achieve the goal of positioning Puerto Rico at the forefront of the cruise industry in the Caribbean region,” Pizá Batiz added. “It allows us to capitalize on the experience of the private sector in carrying out the repair of existing facilities and the construction of new facilities within the framework of an organized long-term plan. It will also allow the optimization of the terminal operation and maintenance in order to ensure the arrival of, and additional cruise line visits along with a greater number of base ports.”
Pizá Batiz said some 78 of the estimated 500 Ports workers will be impacted. They will be given a choice to work with San Juan Cruise Port, which has its own retirement system, or continue to work with the government. Some workers will be given incentivized retirement or work with other agencies.
Pierluisi said it was not fair to compare the contract given San Juan Cruise Port with the contract given to LUMA Energy to operate the transmission and distribution of the energy utility because they are different. Fontanés Gómez said the new contract was more similar to the concession for the Luis Muñoz Marín International Airport.