Remember the huge hoo-rah last year when it was announced that several U.S. Ports had been acquired by a Dubai-based company named Dubai Ports World? Sure you do. How could you forget? Politicians and regular peeps raised all sorts of hell focusing on security concerns, resulting in the Dubai Ports World deciding to sell its interests in the American ports to AIG Global Investment Group, subject to approval of the deal by regulatory authorities in the various states concerned.
Apparently, the only agency now standing in the way of the consummation of the transaction is the New York, New Jersey Port Authority.
So, what’s the problem? In short, money.
According to the Star Ledger, the Port Authority wants to be paid $30 million for improvements it made to the docks “since 2000”. However, according to the New York Times, the amount being demanded is as high as $84 million, some or all of which will have to be spent by the new owner for “capital projects”.
I concede that there are probably many facts of which I am unaware, but, having said that, these payment demands sure sound like normal operating procedure in Jersey, particularly when it comes to the the way things historically work at the ports.
For instance, I frankly don’t understand the basis for the $30 million demand for improvements made since 2000. I have to assume that the original buyer (Dubai Ports World) is responsible for improvements made to the ports through the date of 2006 transfer. As such, either the Port Authority has already been paid for the improvements, or it has a contractual right to payment from the Dubai Company (and quite possibly also from AIG if AIG has assumed Dubai Ports’ liabilities, giving the Port Authority two pockets to collect the debt from).
The demand for commitments by the new buyer (AIG) to pay $54 million (84 -30?) for “capital projects” is quite astounding. I am assuming that such a demand was not in the original deal. A Port Authority spokesman was quoted by the NY Times as saying, “Dubai Ports World has ‘made a pretty substantial profit here, and we want AIG to make a commitment to reinvest money in the capital projects so that we’re sure they’re going to operate the terminal responsibly.’”
The Port Authority’s making the payment a condition of giving its consent to the sale, strikes me, at best, to be a gutsy way to get a second bite at the apple (i.e. this should have been demanded in the first deal, but wasn’t) or, at worst, to be a Jersey shakedown worthy of Tony Soprano and his crew.
We’ll have to wait and see who blinks first.