05/09/2013 - 00:36
02 Sep 2013 - Effectively loading the result of an open tender is never a good path to realising a positive outcome for a container terminal concession, especially when the concession is awarded to a company that is a non-port operating company.
But in the Albanian port of Durres first one and then a second operating partner faced difficulties working with the non-port operating company, the first even before the concession was handed over and the second in the lead up to the handover.
The first was the Turkish company Global Investments Holding and the second the Maltese-based company Hili Industries. They both found partnering with the Turkish group Kurum Holdings in conjunction with the Durres Container Terminal concession an activity too ‘hot’ to handle.
Within the concession process for the Durres Container Terminal, Kurum was awarded special points for handing back to the authorities the shipyard in Durres which it owned. This facilitated part of the overall restructuring of the port of Durres. These ‘special points’ were instrumental in Kurum being awarded the concession – in effect it was a concession process that went through the motions with the outcome weighed in one bidder's favour. History will probably show this as mistake No.1 in terms of delivering a modern, efficient container handling operation in Durres to the benefit of Albania as a whole.
Nevertheless, even with this sort of process there was and still is a requirement for an equity partner with expertise but in reality this is no longer in place. Why? It is fact that the two investors essentially found partnering with Kurum as unworkable.
In the case of Hili Industries, a well reputed operator of a small portfolio of terminals, it is felt that Kurum did not really want an operating partner, that its intention all along had been to go it alone. This contention is possibly borne out by the discussions Kurum has engaged in with international operators regarding the resale of the 35-year concession – APM Terminals being one name mentioned in this context.
It is highly unusual to gain a concession and immediately look to sell it. The more normal course of action is to invest in the facility and workforce, raise efficiency, revenues and maximise profits, and then to look to optimise the returns from a sale off the back of these activities.
The bush telegraph beats that Kurum’s expectations with regard to a sale price are totally unrealistic – $100m is one figure that has been mentioned. It is hard to attach such a price tag to a facility that is an adapted container facility located in Durres inner harbour with draft restrictions.
That such a figure has been contemplated is likely to be more a product of the inflated terminal resale prices that have been manifest in Turkey in recent years rather than any proper valuation of the Durres business. If such a sale does become possible then it may well be the only plausible path for the Durres Container Terminal to perform to expectations following the completion of the concession process.
The World Bank has been active in Durres running a project to improve the efficiency and effective capacity of the port. This has involved increasing its commercial orientation by establishing an autonomous port authority, privatising operations, improving Customs procedures, rehabilitating infrastructure and improving operations and safety.
The concession of the container terminal flowed out of this process but clearly it has not delivered the expected results. Shipowners and terminal clients in general have yet to see any upside while Kurum attempts to find its way into container handling via the single resource of ‘hired in help’ rather than the much broader resource base of an experienced investor.