Power, a blunt-spoken former merchant marine sailor from Wales who was then manager of research and development at Hutchison's Port of Felixstowe in England, was whisked to Freeport for three days to study the area 65 miles off the south Florida coast. Looking past the island's down-at-the-heels hotels and faded economic dreams, Power saw an unrealized business paradise: a deep-water port with room to expand, a nearby airport and a government aching for investment.
"The first thing that struck me was Freeport's position -- a lot of trade lanes merge here," he recalls. He draws lines on paper to illustrate east-west lanes linking the Americas to Europe and Africa, and north-south lanes linking the U.S. and Canada to Latin America. "I knew Latin America was forecast to be a huge market for containers. And the Port of Miami was constantly telling everyone it was full." Power returned to England and told his employer, "I think there's something there."
Five years later, Hutchison has capitalized on Power's appraisal beyond anyone's expectations. The Hong Kong-based company, which operates 17 ports worldwide, has committed somewhere in the neighborhood of half-a-billion dollars in tiny Freeport, population about 40,000. The company acquired a 50% stake in both Freeport Harbour Co. and the island's airport for a price it won't disclose. It then spent nearly $80 million to build a container port facility with the deepest harbor in the region that can handle larger container ships than any port in North America, including gigantic new 1,000-foot cargo vessels. The port specializes in "transshipment," or transferring containers from, for example, a ship coming from Europe to one heading to South America.
Already profitable, the Freeport facility is on track to handle about 400,000 containers
in 1998, its first full year of operation, says Power, now Hutchison's general manager there. That's at least half the volume being done at Miami, Jacksonville and Port Everglades -- no small matter of concern for the state's port officials. "Basically, Hutchison bought the island," observes Rick Ferrin, Port of Jacksonville vice president, marine division.
The right customers
Hutchison's success has not come without glitches. As approximately 80 ships a month, including leviathans hauling thousands of 20- and 40-foot containers, move in and out of Freeport Harbour, smaller vessels going into Freeport sometimes have to wait. An executive at Tropical Shipping, whose 235-foot Tropic Flyer calls at Freeport daily, remembers one incident when the Flyer turned back without unloading because it couldn't get a berth. "We opted to turn back to West Palm Beach," says Richard Farrington, the Bahamas Regional Manager for Tropical Shipping, "We look at that as sort of a start-up problem."
But the port has attracted the right customers. Shipping giants Maersk, Mediterranean Shipping and Sea-Land are all now using Freeport for some of their transshipment services. "We saw opportunities to cover markets we had not been able to cover before," says Harry Glogauer, Maersk's general manager at Freeport. "Any combination is possible from here because you can reach any point in the world." Five Maersk ships a week call at Freeport, including the 947-foot London Maersk. Although the world's biggest container ships don't ply the waters between Europe and the Americas today, Freeport, with its 47-foot-deep channel and some of the biggest cranes in the world, is ready if they start.
The big shipping lines have another good reason to do business here. With no unions and few government restrictions, including no taxes on Hutchison's earnings, Freeport can charge much less than U.S. ports. One knowledgeable south Florida port official estimates Freeport charges about $110 per container, roughly half the price at unionized Florida ports. Although Power won't discuss prices, Maersk's Glogauer concedes, "It's no secret that things are more affordable here.?
Freeport's daunting combination of low prices, location and state-of-the-art facilities struck fear in Florida's port directors when the new container port opened last year. Jacksonville's Ferrin recalls a 1997 meeting at which port officials "sat around wringing their hands" at the prospect of losing contracts to Freeport. So far, however, the rising tide of international trade has lifted business at all the ports. To the extent Freeport has dented the transshipment business in the United States, it appears to be pulling from Charleston, Houston, Savannah and others, not just the Florida ports.
Nevertheless, the Port of Miami figures it will lose about 100,000 containers to Freeport this year because it doesn't have enough berth space. "Right now, Miami has a congestion problem," says Wade Battles, the Port of Miami's marketing director. To get some relief, Miami is adding 1,000 feet of berth space and new equipment that can stack containers so more fit in the same space.
Growing plans
Fort Lauderdale's Port Everglades, while denying any impact from Freeport, is also expanding, adding 110 acres of container-storage space and more cranes. But the Port of Jacksonville, with a channel too shallow to compete with Freeport for the biggest ships, has taken the most unique approach: In the fall, it plans to open a Jacksonville-to-Freeport feeder service and essentially partner with Freeport. Jacksonville soon will hire a firm to operate the feeder terminal, link up with the three railroads into Jacksonville and start a regular shipping service to Freeport.
The theory is that the service will leverage Freeport's growth and link it to the U.S. at a lower cost than the major shipping lines incur now, while funneling more containers through Jacksonville. "The person who has his foot in the door first and establishes himself as the most efficient link between the U.S. and Freeport will enjoy that success," Ferrin says. The shipping lines like the concept, he adds.
Meanwhile, Freeport Harbour continues to grow. Hutchison will soon open a $70 million container-port expansion, adding more berths and cranes, and plans a $10 million facelift for the cruise-port terminal. Freeport's quaint pink airport is also on the list for development. But even those investments pale next to Hutchison's plans for the largest, most elaborate resort Grand Bahama has ever seen: a $250 million oceanfront hotel-casino-convention center complex with 1,600 guest rooms, golf, restaurants and gambling, all targeting tourists from the northeastern U.S. and scheduled to open January 1, 2000. "We're planning to move into the meetings business with Hutchison's development," says Vincent Vanderpool-Wallace, the Bahamas' director general of tourism. The government is eager for the jobs, spinoff businesses and tourist dollars the new resort could bring.
Power has visions of new Hutchison ventures in air cargo, cruise ship repair, warehousing and more. Much will depend on the return the company sees on the hundreds of millions it's investing. "We want to do it right," Power says. "But at the end of the day, it has to make sense. We don't do it for fun."