After years of financial turmoil, the operator of the Port of Wilmington on Monday created a new leadership team composed of two corporate restructuring experts and a former cabinet member to Gov. John Carney.
The state of the port today comes in stark contrast to the vision Emirati port operator Gulftainer pitched before taking over operations in 2018. Then, Gulftainer officials said they could transform the Port of Wilmington into one of the East Coast’s largest gateways and potentially double the number of jobs at the port.
Four years later, the port operator owes Delaware at least $3 million, a promised new facility has yet to be built and the state is still subsidizing some port operations.
Why did Delaware privatize the Port of Wilmington?
Carney in September 2018 said the deal to privatize the Port of Wilmington would secure and grow the state’s 5,700 port and maritime-related jobs and halt the loss of “blue-collar jobs” in the state. The state of Delaware had been operating the port at an annual loss of $10 million in the years prior.
Delaware was “out of the business of subsidizing the port,” Carney said.
Who is Gulftainer?
Gulftainer is a privately owned independent port operator based in the United Arab Emirates.
Founded in 1976, it operates two U.S. ports: the Port of Wilmington and Port Canaveral in Florida. It also has ports in Iraq, Saudi Arabia and the UAE.
Gulftainer is the parent company of GT USA Wilmington, which operates the port.
What was in the agreement with Gulftainer?
The state and Gulftainer negotiated a 50-year lease beginning in 2018.
Among the terms set in a 150-page agreement between Delaware and Gulftainer subsidiary GT USA Wilmington are that “there shall be no continuing financial commitment” from Delaware; that the port shall never be used as a liquefied natural gas terminal; and that GT USA invest $585 million into Port of Wilmington infrastructure, mostly for construction of a massive new container terminal. The terminal is supposed to be constructed at Edgemoor, a former DuPont chemical site north of Wilmington along the Delaware River.
GT USA is required to pay Delaware at least $3 million each year to operate the port.
What moves through the port? How large is it?
At the time the state privatized the port, it was moving about 7 million tons of goods each year, about a quarter of which were bananas and plantains. The port’s throughput was slightly larger than that of its competitors in South Jersey, but smaller than that of the Port of Philadelphia.
When did the port operator begin to struggle?
Gulftainer executive Peter Richards in late August 2021 told employees, “We’re actually running a port for three years now, running a port for three years and losing money all of the time.”
PREVIOUS REPORTING: After years of losses, can Gulftainer deliver on Port of Wilmington promises?
His comments followed more than a year of observable turmoil at the port, featuring the departure of key finance executives, lawsuits, threats of a work stoppage following delayed paychecks, and claims by one Delaware state senator that “all of the contractors on site” were not being paid.
Is Delaware still subsidizing the port?
The state has committed multiple recent subsidies.
The Bond Bill included a $5 million appropriation for a “Port Terminal Access and Training Facility.”
The Diamond State Port Corporation, a state entity that ran the port before its 2018 privatization and now oversees GT USA Wilmington’s operations, committed nearly $3 million in April to pay the costs of a settlement that resolved a dispute between GT USA Wilmington and a union health insurance fund.
Officials at the corporation also approved what could become $20 million more for expenses related to obtaining and defending permits for construction of the container terminal at Edgemoor.
Earlier this year, GT USA Wilmington failed to make its first quarter lease payment to the state – a delinquent amount to taxpayers that totals at least $750,000. It has not made subsequent payment to Delaware since, Secretary of State Jeffrey Bullock said last month.
State representative Debra Heffernan in a letter to Carney and Bullock Monday said GT USA has not made a lease payment in more than a year – indicating a delinquent amount to taxpayers of at least $3 million. Heffernan said despite the “breach of contract,” Delaware has continued “to contribute financially to the port in ways that appear to conflict with the terms of the original lease agreement.”
Who else does GT USA Wilmington owe money?
As state officials negotiated the lease with Gulftainer in early 2018, they pressured Gulftainer and Murphy Marine Services – a local ship loading company already doing business at the port – to combine operations, according to court documents.
The companies agreed to combine operations, but couldn’t agree on a price that Gulftainer subsidiary GT USA Wilmington should pay to take over the smaller Murphy Marine.
Murphy Marine wanted roughly $26 million, but Gulftainer officials saw the company as far less valuable. The dispute landed in Chancery Court where a judge ruled last month that GT USA Wilmington must pay Murphy Marine Services more than $28 million – a $21.5 million payment plus interest.
Why did GT USA Wilmington form a new leadership team?
GT USA Wilmington created a new leadership team with a board of directors now composed of two corporate restructuring experts and one former cabinet member to Carney. No one from the Gulftainer team that sold its privatization bid to Delaware officials in 2018 is on the board.
GT USA Wilmington said in a statement Wednesday that it reconfigured its board as “a part of the further development of the Port.”
When asked Tuesday about the new board of directors, Secretary of State Jeff Bullock said GT USA’s creditors – to which it owes $100 million – “exercised their ability under a lending agreement to name an independent board with the goals of expanding growth” at the Port of Wilmington.
The board restructuring came less than a month after a judge directed GT USA Wilmington to pay more than $28 million to a ship loading company that previously operated at the port.
The new board includes Tim Pohl and Michael Sullivan – each corporate restructuring consultants – and Mike Jackson, who served as director of the Delaware Office of Management and Budget between 2017 and 2020.