New administration under Samia Suluhu gives hope after 5 years of hopelessness

New administration under Samia Suluhu gives hope after 5 years of hopelessness

DELAWARE DEM LAWMAKERS PASS BILL RAISING MINIMUM WAGE TO $15 PER HOUR BY 2025 OVER REPUBLICAN OBJECTIONS

GT USA Wilmington is a subsidiary of port management company Gulftainer, which is based in the United Arab Emirates. In 2018, it obtained the rights to operate the Wilmington port for 50 years in exchange for agreeing to make significant upgrades and to pay the state at least $3 million annually in concession fees.

Murphy Marine is a family-owned business that was purchased in 2006 by a former longshoreman and three of his cousins through trusts, which are the company’s stockholders.

Will awarded the trusts more than $21.4 million direct damages for the loss of fair market value that GT agreed to pay for Murphy Marine’s stock. She also said the plaintiffs are entitled to pre- and post-judgment interest at a rate of 7.5%, compounded quarterly, from September 2018 to the date of payment.

Will also ordered GT to pay the legal fees and expenses incurred by Murphy Marine regarding its motion to find GT in contempt for violating a confidentiality order governing the exchange of documents in the lawsuit. According to the ruling, GT used revenue and financial information for various Murphy Marine customers to negotiate its own stevedoring contract with Dole, which had been a customer of Murphy Marine.
 
"That violation was not a technical one," the judge wrote. "Rather, it is more likely than not that GT used a competitor’s obviously confidential information to negotiate with a then-current Murphy Marine customer against Murphy Marine."

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Under a privatization deal signed with Gov. John Carney's administration in 2018, Gulftainer agreed to take over operations at the port for 50 years and invest almost $600 million in port upgrades and a new container-handling terminal at Edgemoor.

State officials did not require GT to buy Murphy Marine, but both companies have said they felt "pressure" from the state to make a deal. The companies finalized the letter agreement in April 2018 and agreed shortly thereafter that KPMG would conduct a valuation analysis of Murphy Marine.

KPMG estimated Murphy Marine’s equity value to be between $21.5 million and $26.1 million.

GT officials were not happy with those numbers and asked KPMG to "fix its analysis," according to court records. A key concern for GT was that the effect of the port privatization was not included in KPMG’s valuation, even though the parties agreed that privatization would not be considered.

Vice Chancellor Sam Glasscock III noted in a ruling last year that, if GT did not acquire Murphy Marine, its privatization of the port would have a "drastically detrimental effect" on Murphy Marine’s value.
 
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"GT, which is the largest privately-owned port operator in the world, could have started its own stevedoring business and shuttered Murphy Marine’s business entirely by denying it access to the port," he noted.
 
After years of losses, can Gulftainer deliver on Port of Wilmington promises?

Karl Baker

Special to The News Journal

Published 12:01 PM GMT+3 Sep. 23, 2021 Updated 4:09 AM GMT+3 Sep. 25, 2021



Three years ago, Gulftainer said it could transform the Port of Wilmington into one of the East Coast’s largest gateways, rivaling those in New Jersey and Virginia.

Today, the future of the multinational port company in Delaware is in question after it fired the CEO of its once-celebrated local subsidiary, GT USA Wilmington, and an executive revealed that the local business has suffered continuous losses, and even “ran out of cash."

At an internal company meeting of administrative staff and managers in late August, the executive, Peter Richards urged GT administration employees at the Port of Wilmington to have "faith” and stay with the business as it seeks new ways to make money.

“We’re actually running a port for three years now, running a port for three years and losing money all of the time,” said Richards, who heads Gulftainer’s U.S. operations at the Port of Wilmington and Port Canaveral in Florida.

Gulftainer also operates ports and logistics facilities in Iraq, Lebanon, Saudi Arabia and at its home in the United Arab Emirates.

Richards’ comments capped more than a year of observable turmoil at the port, featuring lawsuits over money, the departure of key finance executives, 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.
PSX_20230621_002227.jpg
 
It is a stunningly different reality from that which was predicted in 2018 when Delaware officials celebrated Gulftainer’s 50-year lease. The privatization deal, as described then, promised to grow business at the Port of Wilmington's primary facility along the Christina River. The resulting prosperity would then "underpin" construction of a new container terminal at Edgemoor, a former DuPont chemical site north of Wilmington along the Delaware River.

In all, the plan would stabilize the port's business by fending off competing ports, and could eventually double Delaware’s 5,700 port and maritime-related jobs, state officials said in 2018.

At the time, the port 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 the amount of goods that move through the Port of Philadelphia.
 
The financial troubles beg the question of whether Gulftainer can make its still-fledgling Delaware operations profitable as it moves forward with its contractually obligated plans to pay for construction of the Edgemoor container terminal.

It is unclear what would follow if Gulftainer is not able to turn around the business, as neither officials from the company, nor the state entity that oversees Gulftainer's Wilmington operations agreed to an interview for this story.
 
During the late-August meeting, Richards said Gulftainer is committed to Delaware for the full 50 years of its lease. He pointed to a $10 million cash infusion from investors as evidence of the commitment. Still, he noted there was reluctance on their part.

"It has taken some doing, but we’re forcing the shareholders to actually invest another $10 million into this facility,” Richards said at the meeting. “That will be $20 million that they had to put in because obviously we were losing money.”

Last year, GT received an additional $7 million from the federal government’s Paycheck Protection Program to save Port of Wilmington jobs during the height of the pandemic.

In 2018, GT also secured a line of credit of up to $350 million through a mortgage on the 50-year lease, according to public deed documents.
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Richards said the root of the company’s money troubles were “loss-making” operations and what he described as nearly “$23 million outstanding that was due to us that just wasn’t being collected from our customers.

"And that’s why the company actually ran out of cash.”

To make up for losses, GT will charge existing customers more for port services, and transition to “different revenue streams,” Richards said. He did not specify the type of new businesses the company is considering.

“It’s going to be hard to convince them (customers) to pay more to actually make a profit in this port,” he said. “But we’re going to have to do it.”

An employee who attended the late August meeting recorded its proceedings, and shared the audio for this story.
 
After years of losses, can Gulftainer deliver on Port of Wilmington promises?

Karl Baker

Special to The News Journal

Published 12:01 PM GMT+3 Sep. 23, 2021 Updated 4:09 AM GMT+3 Sep. 25, 2021

Three years ago, Gulftainer said it could transform the Port of Wilmington into one of the East Coast’s largest gateways, rivaling those in New Jersey and Virginia.

Today, the future of the multinational port company in Delaware is in question after it fired the CEO of its once-celebrated local subsidiary, GT USA Wilmington, and an executive revealed that the local business has suffered continuous losses, and even “ran out of cash."

At an internal company meeting of administrative staff and managers in late August, the executive, Peter Richards urged GT administration employees at the Port of Wilmington to have "faith” and stay with the business as it seeks new ways to make money.

“We’re actually running a port for three years now, running a port for three years and losing money all of the time,” said Richards, who heads Gulftainer’s U.S. operations at the Port of Wilmington and Port Canaveral in Florida.

Gulftainer also operates ports and logistics facilities in Iraq, Lebanon, Saudi Arabia and at its home in the United Arab Emirates.

Richards’ comments capped more than a year of observable turmoil at the port, featuring lawsuits over money, the departure of key finance executives, 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.

It is a stunningly different reality from that which was predicted in 2018 when Delaware officials celebrated Gulftainer’s 50-year lease. The privatization deal, as described then, promised to grow business at the Port of Wilmington's primary facility along the Christina River. The resulting prosperity would then "underpin" construction of a new container terminal at Edgemoor, a former DuPont chemical site north of Wilmington along the Delaware River.

In all, the plan would stabilize the port's business by fending off competing ports, and could eventually double Delaware’s 5,700 port and maritime-related jobs, state officials said in 2018.

At the time, the port 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 the amount of goods that move through the Port of Philadelphia.

Delaware Gov. John Carney and Gulftainer executive Badr Jafar at the 2018 deal.
SUCHAT PEDERSON, DELAWARE NEWS JOURNAL
Archive: Port of Wilmington privatization deal promises more jobs, stable economic future

Delaware officials signed a final agreement with Gulftainer in 2018 to privatize the Port of Wilmington.

Background.

Can Gulftainer turn things around?

The financial troubles beg the question of whether Gulftainer can make its still-fledgling Delaware operations profitable as it moves forward with its contractually obligated plans to pay for construction of the Edgemoor container terminal.

It is unclear what would follow if Gulftainer is not able to turn around the business, as neither officials from the company, nor the state entity that oversees Gulftainer's Wilmington operations agreed to an interview for this story.

During the late-August meeting, Richards said Gulftainer is committed to Delaware for the full 50 years of its lease. He pointed to a $10 million cash infusion from investors as evidence of the commitment. Still, he noted there was reluctance on their part.

"It has taken some doing, but we’re forcing the shareholders to actually invest another $10 million into this facility,” Richards said at the meeting. “That will be $20 million that they had to put in because obviously we were losing money.”

Last year, GT received an additional $7 million from the federal government’s Paycheck Protection Program to save Port of Wilmington jobs during the height of the pandemic.

In 2018, GT also secured a line of credit of up to $350 million through a mortgage on the 50-year lease, according to public deed documents.

At a late August company meeting, Peter Richards, who heads Gulftainer’s U.S. operations at the Port of Wilmington and Port Canaveral in Florida, said that GT USA Wilmington had "run out of cash."

At a late August company meeting, Peter Richards, who heads Gulftainer’s U.S. operations at the Port of Wilmington and Port Canaveral in Florida, said that GT USA Wilmington had "run out of cash."


JERRY HABRAKEN, DELAWARE NEWS JOURNAL

Richards said the root of the company’s money troubles were “loss-making” operations and what he described as nearly “$23 million outstanding that was due to us that just wasn’t being collected from our customers.

"And that’s why the company actually ran out of cash.”

To make up for losses, GT will charge existing customers more for port services, and transition to “different revenue streams,” Richards said. He did not specify the type of new businesses the company is considering.

“It’s going to be hard to convince them (customers) to pay more to actually make a profit in this port,” he said. “But we’re going to have to do it.”

An employee who attended the late August meeting recorded its proceedings, and shared the audio for this story.

‘Going to be a hell of a fight to get it back on course’
Gulftainer’s lease at the Port of Wilmington was its second in the United States, following a similar deal it struck in 2014 to run Port Canaveral in Florida.

At the time, it appeared to be quite a favorable one for Delaware taxpayers.

Not only would the deal end state subsidies at the Port of Wilmington, it would provide Delaware with millions of dollars in annual operating fees, and inject $585 million into infrastructure at the facility over 10 years, including the Edgemoor container terminal.

Without such infrastructure upgrades, the Port of Wilmington, which was founded in 1923, was at risk of losing customers – and the jobs they provided – according to a 2018 document written by the Diamond State Port Corporation, the state-owned entity that operated the Port of Wilmington until 2018, and now oversees GT’s operations there.
 
Even with the million-dollar obligations, Gulftainer officials believed they could turn a profit at a port that had been losing money for years under state management.

Gulftainer Chairman Badr Jafar said in 2018 the North American market had long been an aspiration. He estimated his company could double the container throughput of the Port of Wilmington – an increase that would then "underpin" development at Edgemoor container terminal, he said.

To fulfill the promise, Gulftainer hired Eric Casey in 2018 – then a vice president at the Port of Virginia and a Marine Corps colonel – as CEO of the new subsidiary, GT USA Wilmington.

A year later, the state and Gulftainer quietly amended the port lease.

The new terms lowered the annual fee GT pays Delaware, an amount based on the total imports and exports that flow through the port. The minimum annual fee of $3 million remained the same.

It is not clear whether it was Gulftainer or the Diamond State Port Corporation that asked for the change.

Responding to an email last spring about the amendment, Delaware Secretary of State Jeffrey Bullock, who serves as chairman of the Diamond State Port Corporation, said it was a good deal for taxpayers. He said the amendment allowed the state to wipe away debt Delaware owed to Gulftainer in exchange for a lower annual payment from GT. He did not disclose the interest rate Delaware was paying on the debt – a key to help determine whether the deal was beneficial to taxpayers.
 
Under the amended terms, GT paid Delaware $6.1 million during the 2020 fiscal year, which ended June 30, 2020. Last spring, Bullock estimated that GT would pay $4.5 million for the 2021 fiscal year.

The Delaware Department of State did not say whether GT paid Delaware for the most recent lease payment.

A year after Delaware amended its lease with GT, COVID-19 struck and, with it, a drastically slower global shipping industry emerged.

By the end of 2020, GT missed a deadline to invest an initial $250 million into the construction of the Edgemoor container terminal. A clause in the lease allowed the company to postpone investments if port business was slow.

In the email exchange last spring, Bullock attributed the missed deadline to the economic toll COVID inflicted on the port’s shipping business, as well as to a lack of construction permits issued by the state and federal governments.

Aside from construction at Edgemoor, he said GT met its investment targets for the Port of Wilmington’s facility along the Christina River. Those included nearly $13 million for a rebuild of port dock space, more than $6 million to purchase refrigeration racks, and nearly $9 million for cranes.

Federal trade records show Port of Wilmington’s import and export business fell by almost 50 percent to about $6 billion from 2019 to 2020.

Still, in February, Casey told the American Journal of Transportation that GT Wilmington’s revenue “increased by 50 percent year-over-year, including with the pandemic.”

It is unclear whether the numbers are an apples-to-apples comparison and why they appear to conflict. Casey could not be reached for comment.

Yet, even with the pandemic’s challenges, GT USA Wilmington’s operations have amounted to a “total cockup,” Richards said at the August meeting.

He stopped short of blaming Casey, stating his firing came about because of a “clash ... of personalities” with Gulftainer CEO Charles Menkhorst. He also said company shareholders “drew a line in the sand” after they noticed the problems at the Port of Wilmington.

“They turned around and said to Eric and his team, ‘you made this mess, you need to solve this mess,' ” he said.
 
Richards, who was tapped in 2016 to lead Gulftainer in the United States, said “if blame needs to be put, it needs to be put at the senior levels in Sharjah,” Gulftainer’s corporate headquarters in the United Arab Emirates.

“They missed what was happening here,” he said. “And, they missed it to the extent where it’s now going to be a hell of a fight to get it back on course.”

An open records request for emails sent between GT officials and Eugene Bailey, executive director of the Diamond State Port Corporation, was denied and is being appealed to the Delaware Attorney General.

The Attorney General’s office ruled against an appeal of a denied records request for emails between GT and other state officials.
 
In early 2020, Casey told The News Journal that port operations had grown over the previous year by 40 percent – mostly from opening new markets in Latin America. The following year, he made the comments to the American Journal of Transportation.

But, by then, the port operator had already become engulfed in turmoil that was sparking widespread rumors among workers, some of whom questioned whether GT would survive.

In June, skepticism spread to the financial press when the New York publication Reorg Research, Inc. posted a report that said GT’s creditors were undecided about whether they would give the company additional cash.

The report said GT “faces an interest payment coming due at the end of the month, which it may not be able to service” and is “at risk of missing lease payments” to Delaware.

California-based Crescent Capital, which Reorg stated is GT’s creditor, did not comment for this story.

Gulftainer is a subsidiary of Crescent Enterprises, based in the UAE. There are no apparent links between Crescent Capital and Cresent Enterprises.

While the Reorg report went largely unnoticed in Delaware, rumors of GT’s financial instability persisted as the summer wore on, particularly when individuals from Gulftainer’s Emerati headquarters were observed over several days at the Delaware facility.

Also seen at the port was Bailey, the executive director of the Diamond State Port Corporation.

When emailed in July, Bailey declined to comment, stating in a written response that the “questions that you emailed are outside of the scope of DSPC’s FOIA obligations.”

When reached by phone the same month, Bullock said nothing of significance was happening at the port.

“They’re doing business,” he said.

Pressed further, Bullock declined to answer follow-up questions.
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It appears Bullock in July was downplaying the financial condition of the port.

Richards said at the August meeting that Delaware state officials had been expressing concerns, as were customers and port employees.

“We’ve got a lot of bridge-building to do again to try and bring us back,” he said.
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Among the rank and file port workers, concerns grew widely in April when several threatened a work stoppage after paychecks did not arrive on time, according to nearly a dozen of the workers at the time.

While no such stoppage ultimately occurred, the event served to heighten bad blood that had been on the rise between Gulftainer and others on and around the port.

Among GT’s simmering disputes over the past year was its legal battle with fuel terminal company Buckeye Partners – a dispute that spilled into the news cycle when the port operator barred Wawa fuel trucks from driving through its property to fill up at an adjacent terminal.

GT said Buckeye owed it $1 million. Buckeye called the blockade “an extortion attempt,” and claimed it disrupted fuel supplies to more than 200 gas stations in Delaware and four other states.

Referencing the lawsuit, Delaware Vice Chancellor Travis Laster said, “This whole thing is a nonsensical experiment to me.” Post-trial arguments in the case are scheduled for next February.

Over the past year, GT has also faced off in court with Norfolk Southern over rail storage fees in a dispute that is ongoing, and it was sued by a union health care fund that claimed GT failed to contribute nearly a half-million dollars. That suit has been voluntarily dismissed.
PSX_20230621_005027.jpg
 
The port operator is continuing a high-dollar legal fight with Murphy Marine Services, a Delaware stevedoring company GT took over as part of the Port of Wilmington privatization deal. The fight could result in a judgment against GT for tens of millions of dollars.
 
A month after employees threatened a work stoppage, Sen. Jack Walsh, D-Stanton, asked Bullock, who was testifying at a state budget hearing, why GT had not paid, as he described, “all of the contractors on site now,” since the previous December.

Bullock said the pandemic had taken a heavy toll on the port’s business but insisted taxpayers were better off with GT running the Port of Wilmington than having the state operating the facility and lose $10 million annually, as it had done in prior years.

He also said GT had complied with investment obligations to date, and expressed a concern that too many rumors were circulating about the Port of Wilmington.

“There are a lot of people out there trying to stop this port” from expanding.

Addressing rumors during the late August meeting with port employees, Richards claimed they all were untrue, even as he acknowledged that GT did run out of cash.

“There have been a tremendous amount of rumors and stories going around about how bad Gulftainer is,” he said. “How terrible they are, they don’t pay their bills, they’ve got no money, they’re going bankrupt, they’re running away, they’re abandoning the port.”

Taking over for Casey temporarily is Joe Cruise, who also served as the commercial manager at Port Canaveral.

Cruise also spoke to Port of Wilmington employees during the late-August meeting, and told them the facility does not need “more chiefs” but instead needs workers “to roll up their sleeves and get dirty and figure this thing out.”

The comments referenced what Cruise described as a schism that existed between management in Delaware and at Gulftainer’s Emerati headquarters, which was too often viewed as an “enemy.”

“They don’t necessarily understand how we do business in the United States,” he said. “But they’re not our enemy. They are here to help.”

Cruise also said GT has “the board’s commitment to make this work,” likely a reference to Gulftainer’s board of directors.

But he did not indicate how long he believed the recent $10 million cash infusion may allow the company to stay operable if losses continue, or whether Gulftainer’s shareholders may invest more at a future date.

Responding to a question about budgets from a crane maintenance manager, Cruise said he will meet regularly with port employees who make decisions about costs and revenue.

“Unless you know where the shortcomings are, you’re not going to be able to fix them,” he said.
 
Following the comments, Richards again spoke, telling the group of managers and administration staff that GT has “no intention of cutting people or reducing the staff that we see here.”

He said GT would soon hire a chief financial officer and controller, two key finance positions the company had been missing for months.

He also told employees that GT Chief Commercial Officer David Harriss was near to finalizing several new contracts, including for the shipment of containers, for shredded rubber, and for limestone.

“Saying all of this, that puts a lot of pressure on Dave,” Richards said lightheartedly prompting laughs from employees.

A week after the meeting, Harriss left his job at the Port of Wilmington. It’s unclear whether the new shipping contracts are finalized.

Contact Karl Baker at (302) 867-1528 or on Signal at (206) 595-0057.
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