Winning bidder and Transnet welcome ruling. From Moneyweb.
Danish ports and shipping giant AP Moller-Maersk has failed in its bid to halt the award of a tender by Transnet to Philippines-based International Container Terminal Services Inc (ICTSI) to run the Durban Container Terminal (DCT) Pier 2, South Africa’s busiest shipping container handling facility.
On Friday (10 October), the Durban High Court dismissed Maersk’s case. ICTSI was quick to welcome the ruling, saying it is an “affirmation of [a] fair and transparent tender process”.
Transnet Group CEO Michelle Phillips hailed the ruling saying “it removes a major hurdle to the implementation of the transaction – we can now focus all our energy on executing our plan to modernise and expand DCT Pier 2.”
The case was brought by APM Terminals, part AP Moller-Maersk, which had previously succeeded in interdicting Transnet from proceeding with the partial privatisation of DCT Pier 2 that would see ICTSI acquire 49% of the terminal, with Transnet retaining the majority share. ICTSI won the tender for a 25-year concession of the terminal.
The latest ruling dealt with the second part of the same case, where Maersk asked the court to set aside the tender on the grounds that it was full of irregularities, including a solvency test that allowed ICTSI to use market capitalisation rather than balance sheet equity. All other bidders were required to use balance sheet equity, and Maersk argued that ICTSI’s use of market cap unfairly pushed it over the solvency threshold.
Judge Mahendra Chetty criticised Maersk’s decision to wait until March 2024 to bring the court challenge, eight months after ICTSI was announced as Transnet’s preferred bidder.
The court said this was an “undue delay” and that Maersk’s application failed on this basis.
“The ruling, delivered by Judge Mahendra Chetty, brings a decisive end to a dispute that losing bidder Maersk brought on spurious legal grounds,” ICTSI said in its statement on Friday.
Maersk also challenged how ICTSI calculated its solvency ratio in the tender process. Solvency is one of the measurements that Transnet used to judge whether bidders could afford to run the port.
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“The court found ICTSI was transparent about its calculation method and had provided ample credible evidence of its financial capacity to run the Durban Container Terminal [Pier 2]. It said given the weight of public interest in having an efficient port for the national economy, a disagreement on a single ratio was “not a basis to set aside” the tender decision,” ICTSI noted in its statement.
“Maersk was in essence asking the court to force Transnet to accept their lower bid for the concession, having offered R2 billion less than ICTSI’s offer of R11 billion,” the Filipino group added.
“This ruling reaffirms our confidence in the legality of the bidding process and validates our commitment to operating with integrity and in full compliance with the law,” said ICTSI regional head Hans-Ole Madsen.
“We have always believed in the strength of our position, and we are pleased that the court has agreed.”
Read: Filipino ports giant ICTSI fights for its Durban port deal
ICTSI attorney Andrew Pike of Bowmans told Moneyweb that the issue of solvency, on which Maersk placed so much store, was found by the court to be a mandatory requirement that was insufficient to overturn Transnet’s decision to award the tender to ICTSI, given its strong financial credentials.
“We are delighted that the interdict [preventing Transnet from proceeding with the award of the tender] is gone, and we can now proceed with the project,” said Pike.
With this judgment, the long-awaited public-private partnership at the DCT Pier 2 can finally be implemented, says ICTSI in its statement.
Delays and bottlenecks
The terminal handles the bulk of South Africa’s containerised shipping freight and has been beset by delays and bottlenecks in the past.
ICTSI says the agreement between it and Transnet will allow significant investment into the skills and infrastructure at the port, to the benefit of South Africa’s economy.
“We now stand ready and look forward to working with Transnet at the Durban Container Terminal and the importers and exporters who rely on South Africa’s busiest container terminal to make a range of operational improvements for the betterment of all stakeholders and the South African economy,” said Madsen.
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“This ruling confirms the integrity and transparency of Transnet’s procurement processes and governance structures,” said Transnet’s Phillips.
“It paves the way for us to move expeditiously to finalise the implementation of this transaction without undue delay. We remain committed to transforming our ports into world-class hubs that unlock new trade opportunities through the deployment of state-of-the-art equipment,” she added.
“It is unfortunate that our endeavours to stimulate investments at DCT have been delayed. We hope that this unwanted delay is an isolated incident that will not set a precedent for future obstacles, particularly as we move forward with vital private sector participation transactions”.
