Rhode Island Lawmakers Debate IGT Contract

A $1 billion no-bid deal crafted by former Governor Gina Raimondo (l.), who recently took a position with the Biden administration, that gives IGT a 20-year no-bid contract to supply the Rhode Island Lottery is under scrutiny by state lawmakers.

Rhode Island Lawmakers Debate IGT Contract

Lawmakers in Rhode Island are debating whether to sign off on a no-bid contract worth $1 billion that would give International Game Technology the right to supply the state lottery for the next 20 years, in exchange for IGT funding a 50,000-squar-foot expansion of the Twin River Casino Hotel in Lincoln, in partnership with Bally Corp., owner of the casino.

The agreement, negotiated by former Rhode Island Governor Gina Raimondo, would give exclusive rights to IGT to supply the lottery through 2043. IGT supplies the central monitoring system for video lottery terminals at Rhode Island’s two casinos, and provides instant ticket games and technology for the lottery. IGT also leases video lottery terminals to the lottery for placement at the casino, and supplies keno machines for Rhode Island Lottery retailers.

IGT Chairman Robert K. Vincent submitted a statement heard last week by the state House Finance Committee, noting that the deal would go far to help the state recover from last year’s Covid-19 disruptions.

“In short, we remain steadfastly committed to carrying out this deal which is at its heart one of the largest economic development packages put forth in recent history, here in Rhode Island,” Vincent wrote, according to the Providence Journal.

“At the same time, I must also tell you that … one of the major areas of cost savings is in our real estate footprint. There is a major effort under way at IGT to reduce and consolidate our global presence. To give you a sense of that activity, our two major facilities in Nevada, our gaming headquarters in Las Vegas and a 1 million-square-foot office and manufacturing facility in Reno, are on the market… The Reno facility is where legacy IGT began.

“Rhode Island has been fortunate in that our presence here is directly tied to our Rhode Island contract and our headquarters in Providence, (but) as you see with my Nevada example, everything is on the table. Passing this legislation and thereby eliminating the uncertainty about our future relationship will protect our presence in Rhode Island from same pressures impacting the rest of our business.”

Critics of the deal say the 20-year term is too long, and is likely to cost taxpayers more than separate bidding over the period. There also is resistance to continue leasing of the machines with a percentage of profits to IGT, with some lawmakers pushing for the state to buy the terminals outright.

At last week’s meeting, House Republican leader Blake Filippi peppered IGT officials with questions to determine how much more the state is paying in the proposed contract to keep a corporate presence here, according to the Journal.

In related news, cost management and a recovering lottery business enabled IGT to boost 2020 cash flow in the face of headwinds from the pandemic.

IGT Chief Executive Officer Marco Sala said the machine gaming and lottery giant is seeing continued momentum in its digital and betting segments and credited the lottery business and $500 million of synergies on the cost side with delivering $576 million of combined free cash flow for year.

“Market dynamics caused us to think differently about how we manage day-to-day operations,” he said. “The experience enabled us to retain our cost structure in a way that has opened additional opportunities.”

He added that IGT has identified another $200 million in structural cost reductions in the coming months and expects a big boost from the pending US$1.2 billion sale of its machine gaming and sports betting businesses in Italy to Gamenet Group.

The deal is expected to close in the first half.

IGT posted a net loss for 2020 of $897.9 million, or $4.39 per diluted share on revenues that fell by 22 percent year on year to $3.12 billion.