DP World Takes Squabble To The Streets
Central to the tussle is the Port Newark Container Terminal (PNCT), an advanced 180 acre container terminal, capacity of 1 million containers (measured in 20-foot equivalent units) with 4,400 feet of deep water wharf.
Sen. Charles Schumer (D-NY) and Sen. Robert Menendez (D-NJ) "threaten[ed] political payback against the Port Authority." Menendez: "I have no intention of carrying any water for the Port Authority if they cannot consummate this deal for the national security of the people of our region and our nation." Schumer said the PA is being "greedy."
Perhaps they didn't understand that DP World and AIGGIG, after three requests since mid-December, had "[o]nly in the last 48 hours... begun to share any of the information that the PA requires in order to exercise its fiduciary responsibility." Or that the "greedy claim" reported in the press is more nuanced in the letter exchange.
Moreover, the citizens of New York and New Jersey own 50 percent of the terminal. Is it not reasonable for the Port Authority to review information about "the financial viability and the actual ownership of PNCT following the proposed sale to AIGGIG"? Is it not reasonable to recoup public investment that has increased the value of the property?
Back Story
DP World purchased the assets of British P&O in 2006, making it the third largest container port operator in the world. When Congress learned the extent of P&O's business in the United States (a figure consistently underreported), the hue and cry that followed led to a promise to sell the US business to a domestic firm.
In December, an unnamed AIG "member company" (pdf) won the bidding war. The AIG Global Investment Group is "a group of international companies which provide investment advice and market asset management products and services to clients around the world."
In the 11 December 2006 press release, AIGGIG states that the business that it is purchasing "principally comprise marine terminal concessions in the ports of New York/New Jersey, Philadelphia, Baltimore, Miami, Tampa and New Orleans, coupled with stevedoring operations in 16 locations along the East and Gulf Coasts and a passenger terminal in New York City." This is the expanded facility list that I've been talking about for a year. AP and Bloomberg are still talking about six facilities.
From a citizen point of view, there appear to be legitimate complaints outlined in the Port Authority letter: .
- The PA first requested due diligence information from Dubai Ports and AIGGIG, in writing, in December 2006 shortly after Dubai Ports first contacted the PA for its consent. This was approximately nine months after Dubai Ports initiated the sales process, and after Dubai Ports had signed a Purchase and Sale Agreement with AIGGIG.
- Two additional written requests for this information were made by the PA in January and February 2007. Only in the last 48 hours, and pursuant to the PA's insistence, have Dubai Ports and AIGGIG begun to share any of the information that the PA requires in order to exercise its fiduciary responsibility.
- Dubai Ports undertook to sell its PNCT interest with full knowledge that the PNCT lease expressly provides the PA with an unconditional consent right in the event of a change of control. Dubai Ports elected to proceed with the sales process without in any way discussing with the PA what requirements would need to be satisfied to obtain the PA's consent. This consent right is intended to ensure both the suitability of any terminal operator as well as to ensure that change of ownership does not occur continually to simply pull the value out of the public investments made without benefiting the long-term interests of the port...
- The PA's expenditures of public funds were made to increase capacity of the terminal and thereby directly enhanced the value that Dubai Ports will receive upon a sale of PNCT.
What do you think? Should the PA sign off on this sale after having documents for only 48 hours -- and an incomplete set at that?
Prior coverage:
- The Story That Won't Die
- Security Assessment of DP World Deal Lacking
- Bush Agrees to Port Deal Review
- More Questions About Port Deal
- Port Deal: Business As Usual - Connections, Connections, Connections
- Bush Budget Cuts Port Security
- US Ports Managed by P&O
- Bipartisan Howls as White House Quietly Outsources US Port Operations to United Arab Emirates
Press reports from AP, Bloomberg, WSJ Blog,
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Comments
Hi,
Again, in this story, I think that there are a couple of misconceptions.
First, DPW does not own the port or even PNCT, it leases it through a 50% Joint Venture. Which means that when it sells PNCT to AIGGIG, it is in fact transferring 50% of the lease and 50% of the operating company to AIGIG, not the port or terminal onwership.
Secondly, it seems to me a bit extreme that Port of New York-New Jersey takes advantage of a situation where DPW was politically forced to sell to an “all American” company. And this request is to cover investments the port was supposed to make anyway. Traditionally, in developped countries, ports are investing in things such as dredging, quay walls, hard work, etc. while operators invest in the cranes, lighter infrastructure, security, buildings, etc. In exchange, the operator pays a fee to the port, based on the trafic it generates.
All in all, this story puts again the US maritime market under a very bad light. The USA are promoting free trade all over the world… but hey, not in my garden! There was already the Jones Act, a very bad piece of legislation which had put the US maritime world under a false sense of security, but actually totally destroying its competitiveness, to such an extent that there is simply no major US owned maritime industry anymore, at least not at the global level. But now, if there is also this type of balckmailing going on, it is difficult to see if operators are going to continue to invest in US ports anymore, as it might be seen as too risky.
Something which was more happening in countries such as Angola or Madagascar…
Hi, Alphest - thanks for your comments.
Note that the language used in this report is from the actual letters exchanged by the PU and DP World and other news stories.
According to the P&O website, the Newark terminal was a 50 percent “shareholding.” I’m not going to try to guess what was meant by that term.
Nevertheless, the contract gave the PA the right to review the sale of the 50% — whatever it is 50% of.
I notice that your note focuses on the compensation the PA has asked for.
Do you have no comment at all on the PA fiduciary responsibilities or the fact the DP World/AIG dragged their collective feet on getting paperwork to the PA?
Also, we do not know which of the ‘international companies’ under the AIGGIG umbrella is the buyer — the AGGIG press release does not say anything about the actual agent that will own the P&O operations.
Finally, I find it interesting to see a claim of blackmail — the DP World extortion claim — when we have no proof of such a claim.
Granted, we don’t have proof that DP World and AIGGIG dragged its feet, either … we are wrapped in he said/she said until someone else speaks up or someone shows paperwork.
I’m still exploring what public links there are between DP World and the Carlyle Group and other Bush Administration players - something I started last year and then abandoned.
AFA “fair trade” is concerned - let me remind everyone that DP World is a state organization.
Hi Kathy,
PNCT was a Joint Venture owned at 50% by P&O Ports (a British port operating company) and 50% by P&O Nedlloyd (a Dutch shipping line). P&O Nedlloyd was acquired by Maersk Line (a Danish shipping group, but with ties to the USA). As a consequence, the 50% shares were temporarily transferred to its terminal operating company, APM Terminals.
As for your other comments, I actually agree. We have no other source than the press cuts published by the three parties (at least) involved. And these are heated, to say the least. So any bad words exchanged should be taken with a grain of salt.
I don’t exactly understand what you mean by the PA fiduciary responsibilities (sorry for my English, it’s not my native language). If you mean they have a responsibility that their tax money invested in the port is going to bring back profits for the two states, yes, I agree with you, they need at least some guarantees. But paying upfront instead of over the years for DPW or AIG is indeed, to my understanding, similar to extortion. Again, as I said, the normal way of paying back public investment in ports is over the number of exploitation years, usually through a fee per container. The claim of blackmail by DPW would then be justified: the PA is taking advantage of the fact that DPW is forced to sell to make them pay upfront (which is not customary in the port sector). The blackmail being: you pay now or we block the sales, which makes you lose a lot of money.
For the DPW links to Carlyle, I have no real clue. There was something in Farenheit 11 about Carlyle and the Ben Laden and Al Saud families, but I never saw anything related to the emir of Dubai in there. This said, the emir is a big friend of the US administration, in general (under Clinton and both Bush), and Dubai as well as the E.A.U. have consistently been an ally of the USA, militarily and economically. So I wouldn’t be surprised if some links on a more personal or financial level also exist.
You are also right, of course, on DPW being State owned. Though it would probably be more true to say that Dubai (as a political entity) is family owned…
This said, apparently the PA dropped its demands on Friday and only requires AIG to reinvest 50 millions in the port over the years, which is more in line with common practice.