By Islam Atris
The International Damietta Ports Company (DEPCO) recently presented to businessman Raafat Al-Gamil, Chairman of the Board of Directors of the Cairo Three A Group, the opportunity to help fund the construction of a new freight station in the Damietta Port, whose total cost exceeds $1.2bn.
DEPCO offered Al-Gamil 30% share of the project, 15% of which would be paid in cash, with the remaining 15% taking the form of an Emirati bank guarantee.
A source within the Maritime Transport Sector (MTS) attributed the offer to the fact that the company had not yet found significant funding for the project, the result of the reluctance of public banks within Egypt to provide funding for projects whose implementation may be delayed, thereby decreasing their profit margins. Average margins have dropped recently to 4% compared to 11% in 2006.
Al-Gamil is considered a pioneer in the heavy transport and grain trade, shipping a total of 4 million tonnes yearly and responsible for transporting 125,000 tons in the customs clearance and storage sectors within the Damietta port. His company is known to be capable of transporting upwards of 12,500 tonnes of cargo per day, in addition to charging and discharging a total of 18,000 tonnes daily. It is the largest Egyptian company operating in the sector, enjoying a monopoly within the wheat, flour and storage industries.
The source, who chose to remain anonymous, stated that representatives from the Maersk and CMA-CGM lines, in addition to a third Chinese line, visited the Damietta Ports Authority in recent weeks to announce their collective desire to begin implementation of the new freight station within the port. The station is needed they say, due to the oversaturation of the country’s first freight station in East Port Said, owned and operated by the Suez Canal Container Terminal (SCCT). Experts have stated that an additional side canal leading into Port Said should also be constructed to increase the number of ships capable of passing through the port.
He stated that owners of maritime routes were prepared to begin dredging and construction operations and begin constructing new wharves in the event that DEPCO withdrew from the project, taking with it its investments. The three shipping lines had previously given DEPCO the opportunity to contribute to the funding of the project by no less than 30%.
DEPCO recently put an end to a settlement announced by previous Minister of Finance Hatim Abdel Latif, which sought to decrease fees paid by companies to $38m, providing them with a six-month timeframe in which to review the contractors and banks involved in the project. This came after DEPCO paid $6m to the Damietta Ports Authority, an amount which it requested be reassessed and reviewed by the country’s Dispute Settlement Committee within the Ministry of Investment.
The agreement would require that DEPCO continue the project and begin construction of the first stage of the 1300 long metre wharf over a period of two and a half years after the signing of the company’s agreement with the government. The second stage would consist of construction of a second 1,000 metre long pier over a period of two and a half years after completion of construction of the first stage. The new station would be expected to be able to trade upwards of 4 million cases of freight per year.
The agreement grants companies six months to review which project contractors and banks will contribute to the bank’s funding and implementation. The agreement also stipulates that construction of the new station will occur in tandem with the dredging and expansion of the maritime passageway to 18 metres, with the rotating basin being expanded to 17 metres.
The Kuwaiti KGL Holdings company signed an agreement in 2006 with the Egyptian Ministry of Transport to develop, construct and operate a new freight station in the Damietta port, to be operated based on a usufruct scheme for a period of up to 40 years, with investments of more than $1bn.
KGL founded the DEPCO company, currently maintaining 35% ownership of its capital. Remaining ownership belongs to China Shipping (20%), CMA-CGM (20%), the Kuwaiti Aref Investment Group (10%), in addition to the American company General Electric (15%).