Port Authority short on working capital - report
Published:Friday | May 6, 2011 | 12:00 AM
Lavern Clarke, Business Editor
A report tabled in Parliament says the Port Authority of Jamaica (PAJ) is facing a liquidity crunch that, it suggests, will likely persist for this year despite an expected uptick in revenue as international shipping continues to recover.
The port, even while touting big profits of an estimated J$2.8 billion, fell short on working capital last year.
Its cash and near cash holdings of J$5.2 billion was about J$780 million shy of what it needed to cover short-term debts in the fiscal period ending March 2011.
The gap is expected to narrow slightly this year, but short-term assets of J$5.33 billion will fall about J$680 million short of current liabilities, according to the most recent Jamaica Public Bodies report released in April by the finance ministry.
"Projections indicate that PAJ will continue to face liquidity challenges as the value of current assets, J$5.33 billion, remains inadequate to meet current obligations, J$6.18 billion," the report said of the 2011-12 period.
But on Thursday, new information provided to the Financial Gleaner by PAJ vice-president of finance, Elva Williams-Richards, cast doubt on the veracity of the numbers in the report that was disseminated to lawmakers among other budget documents.
The report indicates that Port Authority had 'zero' cash at March 2011; some J$833 million of short term deposits; and J$3.7 billion of receivables. The rest, J$716 million, was the value placed on its inventory.
But Williams-Richards said the Port Authority had 'cash and short-term deposits' of J$1.69 billion at March 2011.
"Therefore, the suggestion that the Authority has 'zero cash' is baseless. The Authority continues to pay its loans and operating expenses on time, without financial support from the Government," the port executive said.
That figure too, assuming the other information in the report is correct, would have wiped out the working capital shortfall referenced in the report.
Williams-Richards, who responded to queries originally sent to senior VP Winston Boothe and president/chairman Noel Hylton, skirted whether the PAJ was in deficit and the plans in play to address it, though her other comments suggest a problem exists even if the Public Bodies report did get some numbers wrong.
"Since 2008, the global economy has being suffering from the worst economic crisis since the Great Depression of 1929. The Port Authority operates in the international market, with approximately 85 per cent of its revenue generated from transhipment container and cruise activities," the VP said.
"Consequently, these businesses were severely impacted by the recession. Notwithstanding, measures were implemented to improve operational efficiency, reduce cost and maintain financial viability."
The data she provided also suggests that the Port Authority's liquidity will weaken, with cash and short-term deposit' forecast at J$865 million by yearend March 2012, or just about half its current levels.
Still, though the Port Authority faces short-term funding challenges, the agency has an expanded equity base of J$12.5 billion and fixed assets valued on its balance sheet preliminarily at around J$38 billion.
The audited values a year earlier, ending March 2010, were capital of J$9.8 billion and fixed assets of J$33 billion.
Operationally, the port's expenses - including an annual J$2-billion debt-servicing bill - track around J$2-3 billion below revenue intake.
Weighing on the PAJ is its highly leveraged position resulting from debt incurred to grow capacity to 3.2 million TEUs, and latterly to cover its US$122-million portion of the Falmouth cruise pier project.
The value of long-term loans are stuck at J$34 billion, which based on Financial Gleaner estimates, is around 9.4 times operating income, once financing charges are stripped from the numbers provided by the finance ministry.
The port's debt is also three times its annual revenue intake of J$9-10 billion.
Its current revenue forecast of an 18 per cent increase to J$10.4 billion this year is based on estimates of an uptick in container volumes by 8 per cent or 91,956 to 1,176,377 box movements, and a 38 per cent rise in cruise passenger volumes.
The Port Authority has spent an average of J$7 billion in each of the past three years on capital programmes.
This year, the PAJ's capital expenditure is budgeted at J$3.6 billion. Its plans include a 14-acre expansion of the Kingston Container Port and the wrapping up of the Falmouth pier project.