- The Diamond State Port Corp., a state-owned entity that oversees the port, approved an agreement with Enstructure that would see the company take over the port from GT USA Wilmington.
- GT USA Wilmington’s tenure has been marred by financial problems, maintenance issues and environmental violations.
- The new deal is expected to produce immediate investment in the port to correct lingering facility issues.
An agreement that will see a new operator take over the Port of Wilmington has moved one step closer to being finalized.
The Diamond State Port Corp., a state-owned entity that oversees the port, approved an agreement with a 7-year-old shipping company called Enstructure LLC at a board of directors meeting Friday morning. The deal will now head to its final sign-off: an approval by a group of Delaware lawmakers and the state controller general.
Enstructure Co-CEO and Chairman Matt Satnick said the company expects to be in position to start operating “in the next few weeks.”
Enstructure will replace GT USA Wilmington, a subsidiary of Emirati company Gulftainer that has operated the port since it was privatized in 2018. GT USA Wilmington’s tenure has been marred by financial problems, maintenance issues and environmental violations. After the company’s creditors seized control of its board of directors last fall, the port corporation solicited proposals to take over the port.
Enstructure has agreed to make an annual payment to the port corporation, invest in the port’s infrastructure and lead a long-planned expansion of the port. In exchange, they will reap any profits the port makes. The state had been operating the port at a roughly $15 million annual deficit prior to conceding control to GT USA five years ago.
Although the agreement with Enstructure includes the expansion project, port officials said Friday their focus is on the port’s existing operations. Secretary of State Jeffrey Bullock, who serves as the chair of the port corporation board, said there has not been any significant investment in the century-old port for a year and a half. That lack of maintenance has led to several issues that Enstructure plans to address soon after taking over.
“We’re eager to get in there,” Satnick said.
Satnick said Enstructure has a deal to purchase GT USA’s debt from its noteholders that will close by July 14. They plan to reach an agreement with GT USA on a similar timeline that will clear the way for a transition, Satnick said.
The final “concurrence” will come from Controller General Ruth Ann Miller; Senate President Pro Tempore David Sokola; Speaker of the House Valerie Longhurst; and the co-chairs of the Bond and Capital Improvement Committee, Sen. Jack Walsh and Rep. Debra Heffernan.
What’s in the deal?
The deal the Diamond State Port Corp. and Enstructure negotiated is technically a series of changes to the existing agreement that concedes control of the port to GT USA Wilmington. Although much of the technical language remains, the financial terms have been altered.
Enstructure will make an annual payment that will start at $1 million. It will increase each year by the lesser of 5% or the Consumer Price Index. After seven years, the payment will be reset between $1.5 million and $2 million based on the port’s revenue. It will be subject to the risers thereafter.
Earlier terms showed Enstructure committing $87 million to port improvements. Tom McGonigle, an attorney with Barnes & Thornburg LLP, said Friday this represents the minimum amount Enstructure will spend and that the company has plans above this amount.
Enstructure will also make a one-time payment of $21.5 million when the deal is finalized.
The agreement will last 55 years, expiring on Oct. 1, 2078.
Enstructure has made multiple labor agreements that were also included in the final term sheet, McGonigle said. They include a project labor agreement with the Delaware Building and Construction Trades Council for the expansion project and a community workforce agreement that will ensure jobs for minority and women workers, James Maravelias, president of trades council, said.
Since 2018, GT USA Wilmington has paid $12 million to the port corporation in concession fees, eliminated $9 million of debt and contributed $80 million in capital investment at the port, according to the port corporation.
The original agreement with GT USA called for a minimum annual payment of $3 million and a total investment of $584 million in the port, the planned expansion and additional warehousing.
In addition to missing recent payments and failing to invest in the port over the past year and a half, GT USA never advanced the expansion project. For years, port officials have wanted to build a container terminal on a 114-acre property known as Edgemoor acquired from Chemours in 2016.
“While [the port corporation] and [the Port of Wilmington] benefited from this partnership, GT Wilmington did not provide a viable long-term financing plan for the [port], the expansion at the Edgemoor Property and did not properly advance the Edgemoor project,” the resolution approved by the board Friday states.
What they are saying
After an executive session, McGonigle opened the public portion of Friday’s meeting with a rundown of what had changed in the term sheet with Enstructure since the board’s previous meeting in May.
Bullock then said the port corporation needed to move forward with Enstructure to improve the conditions at the port, adding that recent estimates of investment needed at the facility are “significantly higher” than he previously expected.
“We can’t wait any longer,” Bullock said.
The board soon after approved a resolution finalizing and approving the final terms of the agreement with Enstructure with a yay or nay vote.
The board received public comments only after the successful vote. Port officials declined to provide a copy of the resolution prior to Friday’s meeting.
Maravelias and International Longshoreman Association President Bill Ashe spoke in favor of moving forward with Enstructure.
“This is our infrastructure. Delaware. Delaware jobs,” Maravelias said. “These are building jobs. We’re not building a highway and it runs and that’s it. This is the ILA expansion. This is the Teamsters expansion. This is the building trades expansion.”
Holt Logistics, operators of Philadelphia’s Packer Avenue terminal and ports in Gloucester and Paulsboro, New Jersey, had previously called for a “more transparent and thorough” selection process. They believe the port corporation board failed to fully consider their bid to take over the Port of Wilmington, which they say is more lucrative to the state than Enstructure’s proposal.
“This obfuscation is just amazing,” Darrell Baker, a lobbyist representing Holt, said Friday. “Where is the after-action report like you would see in the army or say when the FAA investigates a plane crash? This was a $700 million mistake. … You need to tell everybody, sometime, what really went on here.”
Members of a community group concerned with the environmental impact of the port and its planned expansion also called for a more open process Friday, asking for an open dialogue with port and Enstructure officials. They are seeking a community benefits agreement, which would outline the ways the port will help the community and mitigate its concerns.
Language from the original agreement stating the operator should pursue a community benefits agreement was carried over to the agreement with Enstructure.
“I support a public meeting with all involved so we can ask questions, so we’re not limited to just making a comment,” Simeon Hahn, a member of the Delaware Community Benefits Coalition, said. “This process is insufficient.”
Contact Brandon Holveck at bholveck@delawareonline.com. Follow him on Twitter @holveck_brandon.
