Enstructure could take over Port of Wilmington as early as July

More than 5 million tons of cargo pass through the Wilmington port each year
Outgoing port operator had agreed to an annual payment of $3 million and a total investment of $584 million in the port.
Prior to privatizing the port, Delaware spent spent about $15 million annually upgrading the port and covering its operating deficit.

Delaware will get less money from the Port of Wilmington following its failed deal that privatized the port and taxpayers could be on the hook for $100 million or more, according to documents obtained by Delaware Online/The News Journal.

The next operator of the port would pay a third of what its predecessor paid to operate the port and contribute a smaller portion of the estimated cost of a planned port expansion under proposed terms obtained by Delaware Online/The News Journal. Secretary of State Jeffrey Bullock said he expects taxpayers to contribute at least $100 million toward the expansion, according to minutes of a closed-doors session.

State officials rejected a proposal to unite the Port of Wilmington with the Port of Philadelphia and ports in South Jersey. Philadelphia’s main operator says it proposed a deal with a greater level of investment than the deal Delaware ultimately selected.

Last month, state officials chose a Massachusetts shipping company called Enstructure LLC to become the next operator of the century-old Port of Wilmington. Enstructure will supplant GT USA Wilmington, which has operated the port the past five years.

When Delaware selected GT USA to operate the port, Gov. John Carney said by ceding control to a private company the state was getting “out of the business of subsidizing the port.” Delaware had spent about $15 million annually upgrading the port and covering its operating deficit.

In the years since, however, GT USA struggled, missing deadlines for construction of the expansion and hemorrhaging money to the point its creditors seized control last fall, and the state has continued investing in the port.

The Diamond State Port Corporation, a state-owned entity that oversees the port, in recent months began looking for a new operator that could maintain and grow the port’s current operations and lead the expansion. They followed a process similar to when the state first privatized the port. The deal they landed on this time has less favorable terms.

The agreement with GT USA Wilmington 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. Under the proposed terms, Enstructure would pay $1 million per year and spend $87 million on port improvements. Enstructure also plans to make a one-time payment of $21.5 million toward the container terminal project.

Previous estimates have placed the cost of the project at more than $400 million.

Enstructure’s annual payment would increase each year by the lesser of 5% or the Consumer Price Index. The deal would last 55 years, expiring on Oct. 1, 2078.

The terms are now subject to negotiations between Enstructure and the port corporation. Any agreement will need to be approved by the port corporation’s board of directors and leaders of the General Assembly.

Enstructure also needs to finalize an agreement with GT USA’s creditors to purchase its debt (GT USA obtained a $350 million mortgage in 2019) and settle outstanding issues with Gulftainer regarding port operations.

Bullock, who serves as the chair of the port corporation board, said all of these negotiations are unfolding on parallel tracks. He plans to convene the board in early July to consider a final agreement with Enstructure, which he expects to be similar to what’s outlined in the proposed terms. Bullock hopes Enstructure will take over as the new operator by the middle of next month.

“It’s very important that we move quickly,” Bullock said.

A critical public asset

The Port of Wilmington is one of Delaware’s largest publicly-owned assets and economic drivers. More than 5 million tons of cargo pass through the port each year, routinely placing it among the 25 busiest ports in the country. A hub of Dole and Chiquita, it is the nation’s largest importer of bananas.

According to an economic study released in 2018, there were about 5,700 jobs associated with the port in the region, paying on average $63,592 annually. The port provided $35.6 million in tax revenue at the time.

The Diamond State Port Corporation is a corporate entity of the state that oversees a now privately-operated business. There’s been little public deliberation of the merits of the proposals received by the board — from companies who prefer their negotiations be cloaked — and the role taxpayers will play in funding the port’s expansion.

“Right now, most of the meetings as they are organized by the state, you make a statement and they typically don’t give you feedback,” said Jeffrey Richardson, chair of the Delaware Community Benefits Agreement Coalition, a collection of community groups advocating for those adversely impacted by investment projects in the state. “We want an exchange. We want a real conversation.”

“It’s a very unusual arrangement,” Bullock said. “We’re always going to have to straddle that odd situation between public and private… It’s a commercial negotiation.”

If there is any public contribution, Bullock said it will go toward public infrastructure that the state will control as opposed to equipment or other resources used by Enstructure to operate the port. Any taxpayer spending will be considered in a public forum, he said.

Inside the deal

The Diamond State Port Corporation board is made up of several members of the governor’s cabinet, state lawmakers, union leaders and lawyers. They met April 21 at the bucolic Buena Vista estate near New Castle and on Zoom to discuss proposals from potential operators.

Minutes of an executive session that consumed one hour and 46 minutes of the two-hour meeting obtained by Delaware Online/The News Journal outline the board’s discussions.

The board’s stated priorities were to find a company that can operate and invest in the current port, retain and grow jobs and move forward with the container terminal project, a planned port expansion on a 114-acre property known as Edgemoor acquired from Chemours in 2016.

It was essentially the same task the port corporation took on five years earlier, except this time would be harder, Mary Francoeur, managing director of PFM Financial Advisors noted.

Six companies submitted proposals to operate the port.

The port corporation’s finance and audit committee deemed three bids “not in the best interest” of the corporation. Those bids were not presented to the board in full.

Yildirum, a Turkish company, proposed “significant investment,” but did not have interest in developing Edgemoor.
AutoPort, a company that exports cars through the Port of Wilmington, did not share any plans for capital investment.
Holt, the operator of the main container terminal at the Port of Philadelphia, gave a bid “not to the level of the other proposers,” according to the minutes, in terms of capital commitment and funding to the port.

The elimination of those bids left three top proposals.

Liwathon, a logistics company headquartered in Estonia, proposed $65 million of investment in the port, including $20 million “over the next several years.” At closing, they would provide $7.2 million and pay a $3 million annual rent until Edgemoor is online after which they would pay $6 million. Their plans for Edgemoor called for a minimum of $345 million along with $200 million from the port corporation for “additional dredging and seawall construction, etc.”
GT USA Wilmington said it was seeking a joint venture partner to help it retain control of the port. They proposed a $47 million investment in the current port and an annual payment of $1 million. GT USA Wilmington estimated the cost of Edgemoor at $467 million and said they’d seek $100 million from the port corporation and the rest from a partner. Bullock said they did not have a partner in place.
Enstructure committed to an $87 million capital investment, including $45 million by 2032. They agreed to provide $21.5 million at closing to further the container terminal project.

In the course of discussing the proposals, Bullock said as part of any plan to develop Edgemoor the state is going to have to spend at least $100 million. He said Carney has already provided half through American Rescue Plan Act funds and the port corporation “would have to find the other half.” The corporation is submitting an application for federal grants, Bullock later said.

Bullock told Delaware Online/The News Journal that public money will be needed at the port to remain competitive. A large shift in the market occurred last year when Pennsylvania committed $246 million to the Port of Philadelphia. The state will benefit from the investment with new jobs, a stronger tax base and more consumer spending, Bullock said.

“It’s not really different from the state’s participation in any kind of economic development attraction,” Bullock said.

The board questioned the viability of GT USA’s proposal because it did not have a partner. Rep. Debra Heffernan, a Democrat whose district includes the port, said she was “sour” on GT USA and Michael Begatto, executive director at Delaware Public Employees Council 81, questioned why GT USA was on the “table” of proposals, according to the minutes.

The minutes note little discussion of the Enstructure and Liwathon bids.

When the board returned to public session they unanimously approved a resolution that empowered the chair and finance and audit committee to select one of the three remaining bidders to begin final negotiations with by May 22, the next board meeting.

At the May meeting, the board passed a resolution naming Enstructure as their choice to take over the Port of Wilmington and gave Bullock the power to negotiate exclusively with the company.

Port of Philadelphia operator calls for ‘open, transparent and impartial process’

The bid from the Holt family, operators of Philadelphia’s Packer Avenue terminal and ports in Gloucester and Paulsboro, New Jersey, was discarded by the port corporation’s finance and audit committee prior to the April meeting.

According to minutes of the executive session, Francoeur said their commitment for capital investment and funding to the existing port was “not to the level of the other proposers.” Holt’s bid was also knocked because the company had no plans for developing Edgemoor, Francoeur said.

When reached by Delaware Online/The News Journal, Holt refuted the committee’s characterization of its bid and called for a “more transparent and thorough” selection process. In a statement provided through attorney Bill Sasso, the company said Bullock did not reply to phone calls from its leadership team.

“Unfortunately, it appears that the current selection process is following the same path that led to the previous relationship with Gulftainer, which by any analysis was a total disaster insofar as the State of Delaware is concerned,” the statement reads.

The other companies that submitted a bid did not respond to requests for comment.

Bullock said it would be inappropriate for him to comment on the negotiations.

A Freedom of Information Act request for Holt’s bid and all of the bids solicited by Diamond State Port Corporation was denied.

Holt said it had proposed more than $100 million of investment and an annual rent after year two of $3 million, both greater than Enstructure’s proposed terms. It touted its existing relationships with companies that use the Delaware River and said it has a “significant non-container customer” interested in Edgemoor that could speed up the development of the property.

Holt’s bid to operate the Port of Wilmington came as part of a proposal to form a regional alliance between Wilmington and the Philadelphia and South Jersey terminals it runs. In an alliance, the ports could better coordinate resources and customer needs and prevent competition that drives down rates that shippers pay to the facilities. It would help the Delaware River ports be more competitive with ports in New York, Baltimore and Norfolk, Holt argued.

Late last year, Carney spoke with then Pennsylvania Governor Tom Wolf about ways to partner with the Philadelphia port. Carney at the time told Delaware Online/The News Journal he was seeking a “rising tide will lift all boats” type of approach. Proposals to integrate Wilmington into a larger regional system of ports, similar to the Delaware River Bridge and Bay Authority or SEPTA, had been floated among Port of Philadelphia officials, but Carney said his conversation did “not come anywhere close” to discussing the creation of a single port entity.

“Our interest is in working cooperatively with everyone that does business on the river, but we do not have interest in being controlled by anyone on the river,” Bullock told Delaware Online/The News Journal last week.

Holt’s statement said that the company believes Delaware’s reluctance to negotiate is due to the Port of Philadelphia’s legal challenge of a permit issued for the Edgemoor expansion.

As presently proposed, the Edgemoor container terminal will have what’s called a turning basin to allow exiting ships to turn around. The turning basin projects to cover the entire width of the river’s main navigation channel, which could lead to turning ships blocking the waterway. That would violate the Port of Philadelphia’s right to the waters, the port has argued.

Holt said an offer to settle their appeal of the Edgemoor permit “has been met with stony silence.”

Enstructure’s plans for the port

In a statement issued earlier this month, Enstructure’s co-CEOs said they were working with a “global carrier” on the development as Edgemoor as a container terminal. The executive session minutes note interest from HMM, a large South Korean shipping company, in partnering with the next operator. It is unclear whether Enstructure has an agreement with HMM.

Enstructure spokesperson Justin May declined to comment for this story, citing the concession agreement negotiations.

Enstructure already has a presence at the port. In 2021, Enstructure acquired a stevedoring, material handling, warehousing and logistics company that does business at the Port of Wilmington called Port Contractors. The next year, it added Intercontinental Services, another port services company doing business in Wilmington.

Under the proposed terms, Enstructure agreed to contribute a roughly 25-acre parcel adjacent to the Edgemoor site that it owns through Port Contractors for the proposed container terminal. The parcel is worth about $20 million, according to the proposed terms.

Enstructure agreed to enter a memorandum of understanding with the International Longeshoreman’s Association regarding union participation and agreed to support transitioning all Delaware operations not under the ILA to that status. The company has also signed a project labor agreement with the Delaware Building and Construction Trades Council for the container terminal project. The proposed terms include a clause mandating Enstructure preserve existing work assignments, economics and “other current material terms” with the ILA and Teamsters unions.

Contact Brandon Holveck at bholveck@delawareonline.com. Follow him on Twitter @holveck_brandon.

Source link

Enstructure could take over Port of Wilmington as early as July

Like this:

Leave a Reply Cancel reply

Access Denied

I-95 North in Philadelphia closes after truck hits overhead railroad bridge

Tens of thousands in UK with type 1 diabetes to receive artificial pancreas in a world-first initiative

Pot producers are on the rise as Florida voters decide on the fate of the use of recreational marijuana

Share this:

Like this:

Leave a Reply Cancel reply