Business View Caribbean, July/August 2018

14 15 consider and ratify the agreement.“This landmark deal to jumpstart our recovery and to pave the road to better times …requires us to move expe- ditiously if the refinery is to restart on schedule,” Mapp said.“I look forward to working with mem- bers of the Legislature and our partners at Lime- tree Bay to realize its potential for the benefit of all of our people.” Upon the closing of the transaction,ArcLight Capital will make a $70 million closing payment to the government of the U.S.Virgin Islands.The payment includes $30 million for the purchase from the government of approximately 225 acres of land and 122 homes.This property was ac- quired as part of the government’s settlement of certain claims against HOVIC, Petróleos de Vene- zuela SA (PDVSA),Hovensa, and Hess Oil Corpo- ration.The government will retain the vocational school and more than 350 acres of land it had received in that settlement.The closing payment also includes a $40 million prepayment of taxes by a new refinery entity created byArcLight Capi- tal to operate the refinery. Once refinery operations commence, and after crediting the $40 million of prepaid taxes, Lime- tree will make annual payments to the govern- OPENING LINES ment in lieu of taxes at a base rate of $22.5 million a year.With market adjustments based on the refinery’s performance, this could increase to as much as $70 million per year, but will not fall below $14 million a year. According to industry experts and consultants Gaffney, Cline & Associates, the government expects to receive more than $600 million over the first ten years of the restart of the refining oper- ations.This income is in addition to the $11.5 million currently flowing to the government from the oil storage terminal each year. “For comparison sake, in the over 30 years that Hess Oil op- erated the refinery on the island of St. Croix, the company paid approximately $330 million in corporate taxes to the govern- ment.As you may recall, in 2015 Hess Oil filed suit for the return of (those tax payments),”Mapp pointed out. The Governor explained that his submission to the Legislature provides that 50 percent of the annual revenues from the refin- ing operations go directly to GERS.The anticipated payments over the first ten years amount to $300 million. The Governor’s bill also provides for the purchase from GERS of the Havensight Mall and the ground lease of the Port of Sale property. In addition to this purchase, the bill provides that GERS will receive 50 percent of the annual net revenues from the mall and the ground lease.The Public Finance Authority (PFA) will take ownership of these properties, and the Authority’s sub- sidiary, the West Indian Company (WICO),will fullymanage and develop these properties. From the closing payment and new revenue streams gener- ated by investments made possible by this transaction, the PFA will make a $25 million down payment to GERS and enter into a mortgage with GERS at a rate of 8 percent per annum,which is above the pension system’s required rate of return, for the balance of the agreed purchase price of these assets. Acquisition of these assets by the PFA andWICO will allow the government to enter into an agreement with the territory’s cruise partners or others to fully develop and leverage these KENNETH MAPP USVI GOVERNOR