PricewaterhouseCoopers report reveals shipyards made €5.3 million in profits on ship-repair
Matthew Vella The Ministry of Finance is once again fending off claims that a joint bid for Malta Superyachts (MSYS) by Neapolitan firm Palumbo and the Manoel Island Consortium, which includes Tigné Point developers Midi plc, could be tantamount to collusion and anti-competitive.
The ministry is putting in some store in explaining why the two bidders were allowed to join forces in the middle of the MSYS bidding process, shortly after the Privatisation Unit asked all five bidders to submit new offers.
The ministry is claiming the Request for Proposals governing the privatisation of the superyachts – which it is not disclosing – allows “two existing bidders to join in the form of a consortium for the purposes of allowing a single proposal”.
But it is unclear whether the privatisation unit could have approved the joint bid when the two firms had already presented their individual bids, and then presenting themselves as a consortium when the PU decided the superyacht offers were not good enough.
This opportunity came in November 2009, when two bidders – the Melita Group and the Hili Group – had already been shortlisted by the PU. Arguably, the individual offers by Palumbo and Manoel Island consortium had been too low at this stage of bidding to be shortlisted.
All five bidders (the other bidder was CGA-CGM) were asked to resubmit their offers. At this point, Palumbo and the Manoel Island consortium presented a joint bid.
What opens the finance ministry to claims it has allowed collusion is that, in presenting a joint bid the two firms could have breached confidentiality clauses and anti-competitive practices.
The ministry says Palumbo and Manoel Island consortium should not be disqualified, because the Request for Proposals “expressly allows” such a joint bid.
But it does not explain why it did not ask shortlisted bidders Melita or Hili to improve their offers before stopping the process in November 2009. The ministry is refuting that the RfP binds the privatisation unit to accept the highest offers of upfront payments and annual rents.
Question marks have been raised yet again on the privatisation of MSYS when last week the bidding process was halted yet again, over claims that the offers – reportedly hovering at €22 million – are still unsatisfactory.
Instead, the government announced that Palumbo and the Manoel Island consortium, tendering for two other facilities in the shipyards privatisation, had been awarded the ship repair facility and the Manoel Island yacht yard respectively.
Palumbo will take the shipyards for €90.6 million, €18 million of which is paid upfront, while €72.6 million is rent for the 30-year concession.
Palumbo’s offer of €18 million is the lowest offer predicted in the valuation report by PricewaterhouseCoopers, which the finance ministry last week bizarrely denied had been appointed to valuate the shipyard facilities.
In its valuation report, PricewaterhouseCoopers reveals that for the first time since 2003 the shipyards reaped €5.3 million in gross profits on the ship-repair business alone in 2007. That was the same year in which the shipyards went belly-up with the disastrous Fairmount conversion, which in 2007 alone cost €24 million in losses. From this point onwards, the shipyards were set on the route of privatisation.
The Manoel Island consortium instead was awarded the Manoel Island yacht yard for €12.4 million, the valuation of which was also carried out by PricewaterhouseCoopers.
It is crucial to note that PWC’s client is Midi plc, one of the shareholders in the Manoel Island consortium and the developer of the Manoel Island project.
Its valuation of Manoel Island yacht yard at €13 million was the lowest of all four shipyard entities, in spite of its being one of the most profitable entities thanks to the constant activity of yachts that use its facilities.
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