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Mac asserts progress in 2012
(CNS): The Cayman Islands premier said Sunday that the steps his government had taken to strengthen the local economy were “unprecedented in the region”. In his New Year message to the people of Cayman McKeeva Bush said that good progress was made in 2011 on government finances and attracting investment. In a radio and television broadcast Bush said a comparison before 2009 and after demonstrated the good progress. However, the opposition leader said government decisions had made the suffering worse and the disregard for transparency and rules in government was creating a crisis of confidence.
Highlighting the major projects his government hopes to turn into a reality, McKeeva Bush said the UDP administration’s goal for 2012 was "to build a stronger economy, stronger infrastructure, and stronger financials” by carrying out its plans.
He once again focused on his hopes of seeing Cayman Enterprise City, Narayana Cayman University Medical City, the ForCayman Investment Alliance and the George Town Cruise Port come to fruition over the next twelve months, .
Bush said great strides had been made regarding the special economic zone since he announced the MOU at last year’s Business Outlook Conference and the zone was now operational, with the first zone companies set to be licensed in January 2012. He noted that eleven Caymanians have been employed at Cayman Enterprise City.
Bush pointed to the land being purchased by those involved with the Dr Devi Shetty medical project, which was expected to begin construction by the middle of 2012. The ForCayman Investment Alliance project was advancing and Cayman did not have the luxury of waiting for the economy to turn around.
“We must act now,” Bush told the people in his message. “I trust that the people of these islands recognise how fortunate we are to have the good relationships with private-sector groups such as CEC, Narayana Cayman University Medical Centre and Dart that allow these partnerships to move past the discussion stage, past the 'would be nice to have' stage.
“All three of these investments, representing both foreign and local confidence in the Cayman Islands, are well on their way to becoming a beneficial reality for the country,” he added.
The premier described the talks between government and the Port Authority of the Cayman Islands with China Harbour Engineering Company to develop cruise tourism facilities at the George Town Port as advanced. Bush also stated that the Chinese developers were the only ones to show interest in the broad-based partnership for the seaport facilities that includes supplementary facilities at Spotts as well as the Turtle Farm. He said CHEC was capable of financing the developments on the most favourable terms.
When it came to public finances, he said that the deficit his government inherited combined with the effects of the economic downturn was going to be difficult to overcome but the stateof public finances has been steadily improving since May 2009. “I am confident that the 'before and after May 2009' comparison … with the independent view of Moody’s on the Cayman Islands, serve to prove that public finances in the Cayman Islands have been improved by the present government, and there is more improvement that is possible under the present government,” the premier said.
Despite of the opposition’s claim that all of the things that he had done were going to cause the ratings to drop, Cayman had remained steadfast,he said and claimed, “This is good management."
Speaking about the next twelve months, the premier said the “overarching goal is to create more employment opportunities; to work with the private sector and build a country in which no Caymanian can say they cannot find employment.”
Meanwhile, the opposition leader had a different view of the government’s achievements. The impact of the global economic downturn had been a real “shock to the system" for many, said Alden McLaughlin, who noted that the significant increase in the cost of living due to government decisions had made things far worse. “Businesses have closed in record numbers, many rental apartments stand empty and many people have lost or are losing their homes because they simply can’t pay the mortgages. Caymanians find themselves unemployed in numbers that in the recent past would have seemed impossible," he said.
McLaughlin said that the local economy was still struggling as many projects announced by the government to stimulate the economy had not started.
“The continued failure to secure a definitive contractor and viable plan to build a cruise ship berthing in George Town has contributed to making the 2011 cruise ship season among the worst we’ve ever known,” the opposition leader said.
He raised his concerns again about the significant increase in serious crime this year, which he said had served to further damage Cayman’s previous reputation as a safe country.
McLaughlin did, however, welcome the turnaround in the number of tourists arriving by air and the surplus in the 2010/2011 budget year which ended in June as well as the Framework for Fiscal Responsibility document that government has signed with the UK, requiring greater accountability in government financial matters, as well as Moody’s reaffirmation of Cayman’s Aa3 credit rating
But he also warned of the pressing need for more openness, transparency and honesty in government and better adherence to rules and regulations as he said concerns about these issues had created a crisis of confidence that was undermining Cayman’s ability to recover from the recession.
In 2012, he said, Caymanians would need to draw their resourcefulness and resilience to succeed in this very challenging environment. “Collectively, we must also encourage government to improve the way it does business and to press on with initiatives to get the Cayman economy moving again," McLaughlin added.
See both speeches in full below.
Accused men freed after judge dismisses case
(CNS): Two men whom the prosecution claimed had been seen escaping the scene of a robbery in West Bay earlier this year have had the case against them dismissed after the judge found there was no evidence implicating the men. Justice Charles Quin released Dennis Ebanks and John McLaughlin on Thursday after an application by the defence that there was no case to answer as it had become apparent during the trial that none of the witnesses in the case were able to link them directly to the robbery. Although the two men had been seen getting into two vehicles across the street from the robbery, there was no other evidence to link those men with the crime.
Ebanks and McLaughlin had been charged with a daylight heist at the Tortuga liquor store in West Bay because witnesses outside the store said they saw two men who were acting suspiciously just after the robbery get into two different vehicles, and as a result called in the registration numbers. The men in those cars were then stopped by police and later arrested and charged with the robbery but no other evidence was presented to the court that indicated either of the men were in fact the robbers.
On the day of the crime two masked men held up the store at gunpoint and made their escape with around $2,000.
The store is situated between the Turtle Farm, the Cayman Car Museum, a dolphinairium, the Cracked Conch restaurant and the Macabuca Tiki Bar, all of which are popular tourist locations. The hold-up took place on a day when there were four cruise ships in port.
Government settles with GLF
(CNS): The Cayman Islands government has reached an agreement with GLF Construction but there will be no cost to the public purse, the premier has said. McKeeva Bush said that a settlement has been reached with the company previously in talks to build the cruise berthing facilities in George Town but he would not say how much or who was footing the bill. In a statement to the Legislative Assembly on Wednesday afternoon he confirmed the agreement but said it was not yet appropriate to release any more details. He said that when it was, the public would be informed of the amount but indicated that the figure was less than $3 milllion.
Although he was questioned by the opposition member for East End, Arden McLean, to clarify what he meant when he said the public coffers would not be paying the settlement to the developers, the premier refused to be drawn.
The agreement appears to be in connection with the premier’s decision to terminate the talks with the Italian company and their local partners, Royal Construction, earlier this year and move onto discussions with the Beijing based firm China Harbour Engineering Company (CHEC). GLF had taken legal action against the Cayman government over the terminated agreement but speculation had been mounting recently that that government had settled the matter with the company.
The revelation came as the premier adjourned the House sine die for the Christmas break and delivered a statement about what he described as the misinformation and poisoning of public opinion regarding the goal to develop a cruise port. He said there had been too much heat and too little light on the subject.
Bush accused the opposition benches in the Legislative Assembly as well as others who opposed his decision to work with CHEC outside of the parliament of using the talk shows, editorials and the blogs to spread misinformation and rumours.
He said since 2003 it had been a huge battle to try and get cruise facilities, and meanwhile, government continued to lose considerable sums of money as competitors all completed their berthing projects.
Bush also took aim at GLF’s local partners, whom he accused of interfering. Although he did not mention Royal Construction by name, he suggested that during the talks they had been involved in side deals unknown to government with a jewellery store to develop the upland element of the port. He said that there was never any evidence that the firm had the funds to do the project nor did they have the equipment.
He warned the local partners that he “would deal with them in this House” if they did not stop interfering, as he made unspecified accusations against them. “I have taken enough,” Bush said. “And one of these days they are going to understand where I am coming from.”
Encouraging the public to be balanced in their views about the port, he said his government would deliver a facility. He said the press should wait for all of the facts rather than pouring oil on the fire. Criticizing all of the media organisations, he singled out Rooster and its morning talk show, describing it as “nasty”, as he threatened more law suits before the year was out.
Bush said that with CHEC, contrary to the rumour mongering and the bad things people were saying about the Chinese firm, government had finally found a proper partner to develop the facilities. CHEC would not flood the islands with their own labour because the MOU made it clear the job would use local labour and only specialists would be brought from China, he added.
Not only would CHEC deliver on providing local work and business opportunities, the premier stated, but there was also an opportunity for local people to buy shares and invest in the development once it was completed. He said this equity element was already in the MOU and would form part of the final agreement.
Listing what he believed were the positive aspects of working with CHEC, he said they had committed to deliver the upgrade at Spotts and a pier at the Cayman Turtle Farm in West Bay for cruise ships. This alone would save government the $9 milllion subsidy being poured into the farm because, he said, that attraction was always meant to be served by a cruise ship pier. He also saidthat the Chinese had made a commitment to work with Dervyn Scott to build a dock on Cayman Brac.
Working with CHEC, the premier said, government would not need to find any capital or guarantee any loans. He said that KPMG was now working on the independent business case and although he was not able to go into further detail about the plans, government was working on the due diligence.
Bush also stated that in contrast to the accusations being made by the opposition and others, the FCO was content with how the government was managing the project and revealed that it would go to the Central Tenders Committee once it was ready for the final agreement. “Henry Bellingham is very happy and supportive of the steps we are taking,” Bush said.
Getaway not so clean for Tortuga robbers
(CNS): Two men were apprehended by police and charged with the robbery of the Tortuga liquor store in West Bay because witnesses saw the men get into their getaway vehicles, according to the prosecution. A customer outside the store and a passing cyclist both saw the robbers as they tried to make their escape in separate cars the crown’s counsel, Kenneth Ferguson told the court Monday as the trial of Dennis Ebanks and John McLaughlin opened. The two men are accused of holding up the store in February of this year and stealing some $2000 at gunpoint.
Opening his case against both men for robbery and for possession of an imitation firearm against McLaughlin, the crown’s lawyer described how two masked men had held up the store popular with cruise visitors in the middle of the day.
Ferguson said that although the men were masked during the commission of the crime they were spotted getting into two cars across the street from the robbery by two separate witnesses who both called 911 and reported the details of the vehicles including license plates. The police were then able to track down the robbers and arrested them both for the crime.
The store is situated between the Turtle Farm, the Cayman Car Museum, a dolphinairium, the Cracked Conch restaurant and the Macabuca Tiki bar all of which are popular tourist locations. The hold-up took place on a day when there were four cruise ships in port.
The first witness called by the crown as the case opened was the sales clerk in the store on the day of the robbery who said the store had been very busy that day. She described how two masked men had entered the shop around lunch time. One of them who was wearing a black and white handkerchief over his face and carrying a silver gun pointed the weapon at her and asked for the money. She opened the cash register and the gunman told her to turn around and not look at him. She then heard the cash pan fall to the floor as the robbers then fled.
Although unhurt the clerk told the court that she was traumatized by the event and a fellow staff member at the store was the one who made the 911 call which coupled with the reports from the two witnesses outside led to the robbers both being apprehended by police shortly after the crime.
Both men have pleaded not guilty to the crime and have opted for a judge alone trial before Justice Charles Quin, the case continues tomorrow in courtroom five.
Bush lectures ICCI students on economy
(CNS): The premier appeared as a guest lecturer last week at ICCI, where he talked to business students about the interdependence of the global and local economies. According to a release from the college, McKeeva Bush spoke on the economy, government initiatives, including economic stimulus through public private-public partnerships, managing public debt, immigration reform and the country’s relationship with the UK. “Government should not be in the business of creating businesses, but it should be in the business of facilitating businesses to grow in the medium and the long term,” he told the students. He said he did not finish high school or university because he grew up in a different time with limited resources and means.
However, Bush told the students that the new generation coming up should take advantage of the educational opportunities available overseas and locally. Despite not studying for a degree himself, he said, he had been awarded an honorary master’s degree in humanities by the International College of the Cayman Islands, which was a source of great pride.
“If everyone here at ICCI convinces just two people to go and get a university education, Cayman would be a much better place,” he told the group.
According to the release one student said she was impressed with how much time and effort thePremier put into his presentation. “We always see him in the newspapers and TV, but to actually hear him in person was fantastic,” added Sophia Elliott.
Marva Powell, a master’s student in the human resources programme, said the premier’s exchange to the students' and faculty’s questions was engaging and thought provoking.
College business instructor, Joey Ebanks (the former director of the turtle farm), said that, given Bush’s demanding schedule, the fact he found time to come and give the evening class lecture showed how important education was to the country’s premier.
“The premier gave a very broad overview of the economy, where we are, where we need to go and what we need to do to get there. And the students got some insight in how the premier operates,” Ebanks added.
Cayman signs tax deal with Chinese
(CNS): Cayman has signed a tax deal with the People’s Republic of China. The country’s 26th tax information exchange agreement (TIEA) was signed by the premier, Monday, on behalf of the Cayman Islands and by Madame Song Lan, the State Administration of Taxation (SAT) Deputy Commissioner and Vice Minister, on behalf of the Chinese government. Aside from adding to Cayman’s tally in the OECD’s yardstick on transparency the deal was described by McKeeva Bush as a “significant step in enhancing” Cayman’s relationship” with China. The TIEA comes at a time when the premier is in the middle of talks with the Chinese to build cruise berthing facilities in George Town.
“This is the 26th signed agreement for exchange of information for tax purposes and the People’s Republic of China has become another member of the G20 group of countries to have a TIEA with the Cayman Islands,” said McKeeva Bush. “Signing this TIEA is a significant step in enhancingthe relationship between the Cayman Islands and China. With China being one of the fastest growing economies in the world, we are confident that this TIEA will contribute positively to economic activity between the two countries."
China Harbour Engineering Company signed a Ministerial MOU with the premier in June for a five month ‘exclusive’ period to thrash out a deal that if successful will see the Bejing based firm finance, build and operate two cruise piers in George Town harbour to provide docking facilities for the next generation of cruise ships. The proposed project also includes discussions about a pier in West Bay, near the Turtle Farm and the renovation of the Spotts Jetty.
Governor Duncan Taylor as well as Members of the Legislative Assembly; Cayman Islands International Tax Cooperation Team members; senior officials from the Ministry of Finance; and representatives from the Bank of China were all in attendance at the ceremony held in George Town. Attending for the Chinese delegation were the Director General of SAT Tax Administration Department, Mr. LI Linjun; Director General of SAT Electronic Tax Service Centre, Madame YAO Qin; Director of Global Cooperation and Compliance, SAT International Taxation Department, Mr. HUANG Suhua; Principal Staff Member of SAT General Office, Ms. LU Shan; and Staff Member of SAT International Taxation Department, Mr. LI Qiaolang.
New York kids get a breath of fresh Caribbean air
(CNS): Ten youngsters from the Big Apple are enjoying a week in Grand Cayman thanks to an independent non-profit organisation that provides children from New York City with free summer vacations that will enable them to experience new environments and cultures. The Fresh Air Fund (FAF) kids arrived on Grand Cayman Monday 25 July and are staying with host families on the island. Before they leave on Sunday they will be visiting various tourist attractions and will be involved in various activities. The Cayman Islands Department of Tourism and Cayman Airways partnered with FAF in 2007, with the goal of supporting a charity that Caymanians could have an affiliation with.
In 2010, FAF hosted five Caymanian children between ages 10 and 12 at their camps in Fishkill, New York. The kids were selected on the basis of good academic achievement, involvement in extra-curricular activities in their schools and communities, along with positive attitude and willingness to apply themselves.
During their trip on Grand Cayman, the FAF kids group have learnt about the local environment at the Ambassadors of the Environment programme at the Grand Cayman Ritz-Carlton Hotel and toured the Stingray Sandbar. On 27 July the group attended a presentation by Cayman Traditional Arts, toured the Cayman Turtle Farm and visited the Black Pearl Skate Park.
The rest of the week will be filled with a tour Pedro St. James Castle, a visit to the Queen Elizabeth II Botanic Park and Blue Iguana Sanctuary, a presentation by the National Trust for the Cayman Islands, a tour the Cayman Islands National Museum, plus a tour on the Atlantis Submarine, followed by a farewell dinner at the Wharf Restaurant.
Airport expansion set to start
(CNS):The premier gave very little away on Monday about the future of Owen Roberts International Airport when he made the opening remarks at the AAAE Airports Conference of the Americas. McKeeva Bush said that the long-awaited planned expansion that will triple the size of the current airport would be underway shortly but he didn’t say who would be constructing the project or how it would be financed. The premier said that the expansion plans would allow larger aircraft to come to Cayman, indicating that the proposed runway extension would be part of the redevelopment. Bush said that the conference, which Cayman was hosting for the first time, was timely as lessons learned would be put to good use as the full scale expansion would start soon.
“Refurbishment of the airport has been ongoing in a piecemeal fashion in order to tackle the most urgently required minor changes,” he said. “But I’m pleased to say that CIAA is finally poised to embark on the bulk of planned changes which have been in the pipeline since 2007. They will allow newer and bigger jets to fly into Grand Cayman, spurring air passenger growth from the current 950,000 annually to a projected 1.25 million a year.”
He said the changes would also improve passenger amenities, enhance baggage handling capabilities and increase the welcoming atmosphere for people arriving in Cayman. However, the premier gave no details about financing for the development or whether the airport would be constructed by China Harbour Engineering Company.
For several months now there has been considerable speculation in the community that as well as taking on the George Town cruise berthing facilities, a cruise pier at Cayman Turtle Farm in West Bay, and the reconstruction of the jetty at Spotts, CHEC would also be involved in the airport project. Earlier this year Bush had suggested that the Bejing based firm was interested in building the airport but so far there has been no confirmation regarding the proposed plans for Owen Roberts.
The need for new airport facilities and in particular the expansion of the runway by at least 2,000 feet to allow for intercontinental long haul flights, especially from Europe, has been a government policy of both the UDP and PPM administrations over the last decade.
However, the issue of whether or not the airport should remain in George Town or move east and how the project should be financed appear to be at the main factors in delaying the project. The previous administration had settled on keeping the airport at its current location and had drawn up plans for its redevelopment but those plans were thwarted in face of the economic downturn. The goal then was for the airport to raise the capital itself for the project.
With public finances still precarious and no money voted in the most recent budget for the project, if the redevelopment is to begin this year it must be through private investment. Although Cayman Airports Authority is one government’s unsubsidised companies and its earnings have been sufficient to deal with the piecemeal renovations, the anticipated surplus for this financial year of just over $3.5 milllion falls far short of the funds required for a complete renovation and runway extension.
During his address Bush pointed to the importance of Owen Roberts as well as the airports on the Sister Islands to Cayman’s success, as he said without these vital entry points, “we would never have grown or progressed as we have. Instead, we would have indeed remained the 'Islands that time forgot',” he said.
The premier said it was no exaggeration to say airports were imperative to tourism-reliant economies. “Today’s airports, particularly international ones, play a significantly complex role. Airport executives must therefore determine new solutions to existing problems as well as respond to new challenges that are encountered,” he added.
"With growing demands from increasingly sophisticated and tech-savvy clientele as well as better body and baggage searching techniques, the need for enhanced safety requirements while ensuring smooth passenger flows airports are akin to mini-domains,” he said. Bush added that airports such as the CIAA must maintain their economic independence, earn revenue and function as corporate entities in order to remain viable and even make a profit.
The conference, which has drawn together airport industry experts from across the Americas, is being held this week at the Grand Cayman Marriot Resort.
GLF plans legal action
(CNS): After several weeks of speculation that the company which had been involved in exclusive talks with government to build cruise berthing facilities was going to take legal action, GLF released a statement at the weekend signalling its intention to protect its interests through the courts. The Italian based firm, which partnered with Royal Construction, said statements made by government officials “relating to GLF’s failure to comply with any part of the Framework Agreement …were inaccurate and misleading,” and accused the government of not only breaching its contractual relationship but also damaging its reputation.
The firm had been in exclusive talks with government over the construction of two piers and an up-land development to support cruise berthing but the talks were ended by the premier, McKeeva Bush, in April when he wrote to CEO Francesco Senis terminating the negotiations because he said GLF had not shown it had the money.
The premier’s letter was in response to a request by Senis in April for a final agreement with government as the firm said it was ready to mobilize within six weeks. However, Bush wrote stating that the Cayman Islands Government did not consider it had proof of the necessary financing to warrant the signing of a master agreement. As a result, he said, government, in agreement with the Port Authority chairman, was terminating the framework agreement which had been signed on December 2010.
It has since emerged, however, that the Port Authority board was not consulted about the decision until after it was made and it appears, given the recent resignation or removal of the port chair, Stefan Baraud, that he had not agreed to the termination.
It became clear after Bush sent the letter to Senis that the government had decided to work with the Chinese firm China Harbour Engineering Company, with which the premier signed a ‘ministerial’ MOU last month that does not yet include the Port Authority. Several new members have now been appointed to the board, however, including John Henry, the new chairman, and Nick Freeland, who confirmed he had accepted the request last week. Local attorney Anthony Akiwumi was also asked to serve on the board but CNS has been unable to confirm whether he has agreed to join the board.
Bush had made it clear earlier in his administration that he would change board memberships wherever the directors did not support his decisions or policies. In this case, the resignations and removals and the lack of support for the premier may have much to do with the liability the board members could face when GLF files suit.
According to the framework agreement, which was signed between GLF, government and the Aort Authority, the exclusive talks were for four months with an additional two month period if neither party had given notice to terminate before the first four months ended. It also required a ten day notice period from any of the parties who wished to pull out of the deal. Bush wrote to Senis on 14 April, four months to the day from the start of the deal on 14 December 2010, to terminate the exclusive talks, as he said he was pursuing other options.
In this weekend’s statement, Senis said that GLF had “fully complied with all requirements of the Framework Agreement, including but not limited to funding of the project, maximum utilization of local resources and the creation of a commercial retail area to be maintained by the Port Authority.”
A local spokesperson said that the legal documents were expected to be filed in the courts this week.
"We can only express our disappointment that this matter has reached this point but have only the utmost respect for GLF which has surprised us with the patience they have exhibited under very difficult circumstances," Howard Finlason, Managing Director of Royal Construction Ltd said.
"Most companies would have gone to litigation much sooner but this was not GLF’s desire, they wanted only to build the Port they designed for the people of the Cayman Islands. It is only after exhausting every avenue that they have been forced to resort to this. It only goes to reinforce the integrity of this world class firm which spent millions on our behalf only to be thrown to the curb in a most disrespectful and unceremonious manner," he told CNS.
The decision of government to work with CHEC has raised further questions in the community as a result of a number of accusations made about the firm in other jurisdictions.
Leader of the Opposition Alden McLaughlin said the recent revelations that it paid bribes to the former Bangladesh premier’s son Khaleda Zia for assistance with government contracts is of significant concern. Questions have also been asked about the firm and the work it is currently doing in Jamaica.
It is not yet clear how the decision to work with the Chinese firm fits with the government’s own procurement process. In the first instance the cruise port development had gone through central tendering and been awarded to Dart. Thereafter, talks between Dart and government collapsed when the parties could not agree on the length of the lease period to Dart for the upland development area. GLF was the second choice of the technical committee recommended to the Central Tenders Committee. It is understood that CHEC was not on the short list of the preferred bidders reviewed by the CTC.
The premier has defended his decision to begin talks with CHEC as he said the firm not only had the finances to build the cruise port it had also agreed to construct a cruise pier at the Turtle Farm in West Bay and to renovate the jetty at Spotts, the back-up dock used when the weather in George Town is too rough for the tenders to operate. The premier said work at Spotts was due to commence this month and CHEC had advanced $3 million to government for that work, which will be paid back to the company from public money if it fails to reach agreement with the government on the main project.
The statement from Senis in full reads: “Further to recent publications by local news regarding the development of the George Town Port Expansion, GLF wishes to confirm that they have fully complied with all requirements of the Framework Agreement, including but not limited to funding of the project, maximum utilization of local resources and the creation of a commercial retail area to be maintained by the Port Authority.
“As such, statements and interviews recently released by Government Officials relating to GLF’s failure to comply with any part of the Framework Agreement are not only inaccurate and misleading, but constitute a serious breach of the contractual relationship and damaging to GLF’s reputation. The Law firm of Browne Jacobson will assist GLF in defending and protecting their rights and interests as permitted by Law.”
See Framework agreement with GLF here
See CHEC MOU here
See correspondence between GLF and premier here
We can’t spend money after it is burned
About 70 million of our tax dollars went up the smokestack in the form of wasted heat. This article explains how some of our tax dollars are being incinerated. It is aimed at you the taxpayer and the policy makers to expose this calamity and offers ways to stop it.
Although CUC is mentioned here, there is no fault directed toward this company. CUC is very good at what it does and I am thankful every time I enter an air-conditioned space or flip a light switch. I do not take them for granted and offer some insights as to how the current systems work and what can be done to improve the overall contribution to our economy by both Government and CUC.
CUC’s 2010 Annual Report states concern that electrical consumption declined while the number of customers increased by 3%. This was partially explained by empty rental units still hooked up but not in use. Additionally, it is likely that the existing customers are making a concerted effort to use less power because of the high cost of electricity.
In July 2010, government increased the duty on a gallon (imperial gallon) of diesel fuel from 50 cents to 75 cents. Government collected about 20 million dollars in tax by my calculations.
Here’s where the waste begins. A gallon of diesel fuel represents 40.64 kilowatt hours of power. In a perfect world CUC would produce 40.64 kwh for each gallon used. But there are losses due to heat and machine inefficiencies and transmission line losses in the wires coming to your home that result in an overall efficiency of about 36%. This means that although we are paying for 40 kwh worth of diesel we are actually getting at most about 24 kwh per gallon. The remaining 64% of energy is lost along the way. It is not criminal, it is science and the way electrical generation works. Of course electrical producers strive to attain maximum efficiency in order to maximize profits.
The financial impact of this fact is painful. Of the 110 million dollars we spent for CUC fuel in 2010; about 70 million dollars of it went up the smokestack in the form of wasted heat.
I will address a real world solution to reclaim some of this lost energy and turn it into electricity and more net profit for CUC but first I want to address a bigger problem. The problem is that government is placing a tax on this fuel. Therefore it follows that 64% of the money we spend on this tax is being burned up and wasted in the process of creating electricity. If government collected about 20 million dollars in this fuel tax then this means 64% or $12,800,000 of our taxes went up the chimney as waste heat. We did not get the bang for our buck we just got a lot of smoke. The most damaging thing in this scenario is that these 12 million dollars will not be used ever again to purchase goods or services that would generate more revenue for government in the form of duties and other fees and taxes. This is 12 million dollars we won’t have to put gasoline in our cars to provide government with gasoline tax revenue. (This burns money too). This money is gone and cannot come back.
As was pointed out in an earlier article I read, lowering electrical costs to the consumer result in growth to the gross domestic product of a country. I submit that when consumers are presented with extra money due to lower electrical costs that their spending power increases by much more than the amount saved since the prices of goods and services will also become less expensive. Therefore, an extra $10 in the pocket of the consumer could purchase more goods than before since they are now less expensive. Increased consumer spending causes more goods to be imported and more revenue for government. Electricity costs less so people use more and CUC realizes greater revenue and profits to shareholders.
The 2010 report also shows that over the 5 year period ending 2010 that an investment in CUC common stock returned only 3% while the Standard & Poors utility index produced a 48% return. Expensive electricity stifles economic growth and profits to shareholders. Our kwh cost to the customer is about 33 cents as compared to about 10 cents for the companies represented by the S&P index. Higher prices do not make for higher net profit.
By the way, the 20 million dollars in net profit earned by CUC represents 12% of their income for 2010. This does seem a bit excessive when banks are paying less than 1% in interest on savings. Reducing slightly this figure and passing the savings on to the customer would create more consumption and more return on investment than current levels. It truly is all about efficiency. It should also be noted that CUC pays the duty on fuel to Government even when customers fail to pay their bills. This creates a further financial burden on the company which was 6.5 million dollars billed that has not been collected at the end of 2010.
In spite of 3% more customers and less consumption, CUC managed to grow its income for 2010 by 8% through cost cutting and efficiency measures. Placing any tax on fuel used by CUC is a very inefficient use of our money and spending power. Many ask how Government would make up for this shortfall in revenue if they were to remove the fuel taxes. First of all, this year’s budget provides 10 million dollars for Nation Building. I recommend using that to offset the immediate shortfall. That leaves 10 million left to account for. Much of this money will go to subsidize things that are costing the country millions like the Turtle Farm, Pedro Castle etc.
Although I am a proponent of no government involvement in the retail private sector, we are currently saddled with these debt producers. Taxes could be raised by taxing unhealthy food items in order to reduce the cost of healthcare. There are many other areas where taxes could be increased or implemented that allow the money to still exist and be used again and again rather than have 64% of it vanish up the smokestack. As demand for goods and services grow, more revenue will flow to government immediately as these goods are brought back in. Demand for jobs will follow as economic growth begins. As the once unemployed now have income, they too will spend and contribute to the overall growth. Growth feeds on itself and continues whenunimpeded by the wrong kinds of taxes or excessive taxation. As the economy grows, crimes related to tough economic times will diminish which will mean decreasing Police, Court and Prison costs.
One very cost effective remedy: Many are familiar with OTEC (Ocean Thermal Energy Conversion). This is an alternative energy device that utilizes the difference between cooler deep ocean water and warm surface water to boil a gas like ammonia which has a low boiling point in order to propel a turbine in a closed loop system. This is the most efficient device to date and its efficiency rivals that of the Carnot Engine (Sterling Engine) also known asthe Sterling Cycle Engine. The efficiency averages in the range of 65% to 75% in converting heat to power. It is a means of capturing energy from heat. It has been studied here in Cayman because of our deep water.
I propose that such a device is not warranted or affordable. Rather, use the concept of the system to utilize the waste heat from the power plant and the nearby water of the North Sound to create the temperature differential needed to boil and condense a suitable gas like ammonia to drive turbines for electrical production. This is a large amount of potential power that could be reclaimed for the purpose of further lowering cost to the consumer and further increasing gross income and net profit to CUC. The benefits to the economy as a whole are increased immeasurably.
The above makes it clear that although we need taxes for government to run, this tax is highly detrimental to the country as a whole. There is one guiding premise that must always be remembered: energy is money and money is energy. They are one to one identical. Anything that wastes energy also wastes money. We cannot afford this waste any longer.