The third quarter of 2016 opened with a landmark in Jamaican port history: Kingston Freeport Terminal Limited assumed operational management of the Kingston Container Terminal on July 1, formally ending the Port Authority of Jamaica’s direct management of the facility after more than four decades and placing one of the Caribbean’s most strategically positioned container ports in the hands of a CMA CGM-backed private concessionaire. The handover coincided with continued momentum in renewable energy procurement and a strong summer tourism performance, providing the Holness government with a cluster of positive infrastructure milestones in its first full quarter of uninterrupted administration.
Key Highlights
- Kingston Freeport Terminal Limited assumes operational management of Kingston Container Terminal on July 1, 2016; the Port Authority of Jamaica formally cedes day-to-day terminal management after four-plus decades.
- Office of Utilities Regulation awards contracts for the first round of utility-scale renewable energy projects; wind and solar developers selected for combined capacity of approximately 115 MW.
- Summer tourism season extends the strong multi-year growth trend; JTB reports record or near-record stopover arrivals for July-August combined.
- IDB eastern parish road rehabilitation programme in active construction across St Mary, Portland and St Thomas; works on schedule for mid-2017 completion targets.
- IMF EFF final year progressing; Jamaica in compliance with all performance criteria through June 2016 assessment period.
- LNG negotiations continuing under restructured approach; government in advanced discussions with multiple interested parties on gas supply and power generation configurations.
KFTL Takes the Helm: Port History Made on July 1
The formal handover of operational management of the Kingston Container Terminal from the Port Authority of Jamaica to Kingston Freeport Terminal Limited on July 1, 2016 was marked by a ceremony attended by Prime Minister Andrew Holness, senior government ministers, the Port Authority’s board and management, and representatives of CMA CGM and the KFTL consortium. The ceremony acknowledged the significance of the transition: KCT had operated under Port Authority management since the Authority’s establishment in the 1960s, and the concession represented the government’s most consequential privatisation-adjacent transaction in port infrastructure since the Highway 2000 build-operate-transfer arrangement of the early 2000s.
KFTL’s incoming management team assumed control of a terminal with established shipping line relationships, a known physical asset base and a container throughput volume profile that had recovered steadily from the 2008-09 global trade contraction. The transition checklist that had been worked through over the preceding twelve months ensured that the cargo management systems, billing arrangements and port tariff schedules transferred without disruption. Shipping lines operating through KCT received confirmation that their commercial terms and operational interfaces would continue without interruption through the first weeks of KFTL management.
The thirty-year concession obligated KFTL to invest in terminal equipment and infrastructure improvements over the concession period, with minimum investment benchmarks specified for the early years that would deliver a modernisation of ship-to-shore crane capacity and yard handling equipment. The first wave of these capital investments — new gantry cranes and yard tractors whose procurement KFTL had initiated during the transition period — was expected to arrive at the terminal within the first year of operation, visibly upgrading the terminal’s productive capacity and enabling KFTL to compete more effectively for transshipment volume from regional shipping lines beyond CMA CGM’s own services.
The Port Authority of Jamaica’s post-concession role was reconfigured to focus on landlord and regulatory functions: maintaining the port infrastructure — quay walls, reclaimed land, utilities and road access — that lay outside the terminal’s operational boundary, and overseeing KFTL’s compliance with its concession obligations. The restructuring of the Port Authority’s own staffing and commercial operation following the loss of KCT management revenue was being managed through a transition plan that included reprofiling of the Authority’s cost base and reorientation of its commercial activities toward other port facilities under its management, including Kingston Wharves and the island’s smaller commercial ports.
Renewable Energy: First Awards Under Competitive Framework
The Office of Utilities Regulation’s competitive renewable energy procurement round produced its first awards during the third quarter, with contracts signed for utility-scale wind and solar photovoltaic projects totalling approximately 115 megawatts of installed capacity. The awarded tariffs were significantly below the cost of heavy fuel oil generation on a levelised cost basis, confirming that the dramatic global decline in renewable energy equipment costs had reached the point where new renewables were the economically rational choice for new capacity additions in the Jamaican market without subsidy.
The wind project award went to a developer planning a facility in the St Elizabeth corridor, where the island’s geography produces reliable trade wind flows suitable for modern utility-scale turbines. The solar awards covered multiple smaller projects at different locations across the island, reflecting the distributed nature of solar resource availability and the developers’ own site-selection processes. All projects were structured as independent power producers under power purchase agreements with the Jamaica Public Service Company, with the OUR’s tariff approval providing the regulatory underpinning for the long-term contracts.
For JPS and the OUR’s system planners, the integration of variable renewable generation into a small island grid required careful management of the dispatch order, frequency response and voltage regulation that had historically been provided by the utility’s conventional thermal fleet. The grid integration studies conducted during the procurement process identified the technical constraints and the mitigation measures — including enhanced forecasting, demand response and, in the medium term, battery storage — that would be required as renewable penetration increased. The initial 115 MW procurement was sized within what the system planners assessed as technically manageable without fundamental changes to grid operating protocols.
Tourism: Record Summer Season
The Jamaica Tourist Board’s preliminary data for July and August 2016 pointed to record or near-record stopover arrivals for those months, extending the strong multi-year growth trend that had followed Jamaica’s recovery from the post-2008 downturn. The Montego Bay corridor maintained its status as the island’s highest-volume tourism destination, with the major all-inclusive resort properties operating at or near capacity through both months. Negril, Ocho Rios and the north coast corridor collectively contributed to a national arrivals figure that the JTB’s full-year projection was positioning as potentially the highest in the island’s recorded tourism history.
The tourism sector’s infrastructure requirements were increasingly visible in the public discourse. The road network connecting resort towns to the national highway system — particularly the B8 western approach to Negril and the A1 north coast road through the resort corridor — continued to generate complaints from hotel operators about the quality of visitor experience on arrival and departure transfers. The Airports Authority of Jamaica commissioned updated studies on Sangster International Airport’s terminal capacity headroom, as throughput during peak summer weeks was approaching levels that required active management of gate assignments and ground transportation to avoid congestion.
The tourism ministry and JAMPRO were actively pursuing new airlift arrangements with North American and European carriers to sustain the demand growth that the sector had achieved. Seasonal route additions by US carriers serving Sangster had contributed to the strong performance, and discussions were underway with additional airlines about year-round or seasonal service from secondary US cities that would diversify the source market beyond the major gateway airports. The aviation infrastructure — the airport facilities and the Air Traffic Control capacity managed by the Airports Authority — had kept pace with the volume growth to date, though the long-term adequacy of the existing terminal footprint remained a medium-term planning concern.
Road Infrastructure: Eastern Works Progress
The IDB-financed road rehabilitation works in the eastern and central parishes that had commenced in Q2 2016 were in active construction through the third quarter. The contract packages covering sections of the A3, A4 and connecting B-roads in St Mary, Portland and St Thomas were being executed by the awarded contractors, with the NWA’s resident engineers maintaining supervision at each site. The works were proceeding broadly on schedule through the quarter, with the usual interruptions from weather and utility conflict resolutions that characterise road construction in the Jamaican environment.
The Portland-area works, which included sections of the main road serving Port Antonio, attracted particular public attention given the town’s potential as an alternative tourism destination to the established north coast corridor. Local business owners and community groups in Port Antonio had long argued that inadequate road access was the primary constraint on tourism development in the area, and the current programme was expected to materially improve the quality of the main approach routes once completed. The Blue and John Crow Mountains UNESCO World Heritage Site, whose management plan identified improved visitor access as a priority, would also benefit from enhanced road quality on the approach routes from Kingston and from the north coast.
IMF EFF: Approaching the Programme’s Conclusion
Jamaica’s performance under the IMF Extended Fund Facility through the third quarter of 2016 remained on track, with the government meeting its fiscal targets for the period ended June 30, 2016 and maintaining the primary surplus at the level required for the programme’s penultimate year. The IMF’s Board had concluded the twelfth review during the quarter, finding the programme satisfactory and confirming Jamaica’s access to the remaining EFF disbursements. With the programme scheduled to conclude in May 2017, the policy discussion was increasingly focused on the post-EFF framework: what fiscal rule or institutional arrangement would replace the programme anchor and provide the discipline signal that international investors had come to associate with Jamaica’s macro management.
Finance Minister Shaw and the Economic Programme Oversight Committee — the domestic monitoring body established as part of the EFF’s governance framework — were engaged in preliminary work on the Fiscal Responsibility Framework that would serve as the post-EFF anchor. The framework, modelled in part on similar arrangements in other emerging market economies that had completed IMF programmes, would enshrine primary surplus targets and debt reduction rules in domestic legislation, giving the fiscal consolidation commitment a legal basis that would persist across changes of government. Drafting of the relevant legislation was being progressed through the Ministry of Finance during the quarter.
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