Enstructure is negotiating more favorable terms to take over a Port of Wilmington that has been reeling in issues. | DBT PHOTO BY JACOB OWENS
WILMINGTON – Enstructure would see far more favorable terms in a new 55-year deal to operate the Port of Wilmington than previous operator Gulftainer but it would also be required to make significant investments and progress at the Edgemoor project too, according to state records.
Late last week, state and company officials confirmed that Boston-based Enstructure will soon take over management of the Port of Wilmington after financial, legal and labor issues troubled the Gulftainer subsidiary here, GT USA Wilmington.
Those officials were silent, however, regarding the terms of the new concession agreement – essentially a lease to operate the port on the state’s behalf – negotiated between the state-created entity that manages the publicly owned port, the Diamond State Port Corp. (DSPC), and Enstructure.
According to documents obtained through a Freedom of Information Act request though, Delaware Business Times has learned that Gulftainer’s failure to advance the future container port at Edgemoor weighed heavily on the DSPC board, which is chaired by Secretary of State Jeffrey Bullock.
Under the terms of the original concession agreement, GT USA Wilmington was required to spend $250 million to advance the Edgemoor project by the end of 2020 – a timeline that was not met, at least in part due to the impact of the COVID-19 pandemic. It was expected to invest upward of $500 million within the first decade.
To pay for the bevy of improvements, GT USA Wilmington obtained a $350 million leasehold mortgage on the port operations in January 2019, principally predicated on its holding of the core concession agreement, according to county land records. It was required to maintain good standing on its concession agreement to tap the funding though.
After its financiers forced the Emirati subsidiary company to replace its board and leadership following several years of reported deficit cash flows, GT USA Wilmington was unable to identify alternative long-term financing for the Edgemoor project. Meanwhile, the DSPC began to apply for permits and pay for work to advance the desired Edgemoor project, also in violation of the concession agreement with Gulftainer that required it to bear those costs.
The DSPC hired a Philadelphia-based consulting firm, PFM Financial, to review the status of the deal and seek out alternatives. In the end, six companies bid for the contract and ultimately Enstructure was chosen from three finalists at the DSPC’s May 22 meeting.
According to the proposed term sheet for the new concession agreement – the contract is not yet final and could be amended amid negotiations – Enstructure has reached an agreement in principle with Gulftainer’s senior secured noteholders to purchase the debt and assume the obligations under the original concession agreement.
The concession agreement will be extended about 55 years to Oct. 1, 2078, and Enstructure will agree to not operate any international shipping container handling terminals in Baltimore or on the Delaware River.
Under the deal, Enstructure would pay an annual concession fee of $1 million – a reduction of 66% from Gulftainer’s $3 million annual fee – that will increase annually by the lesser of 5% or the annual consumer price index.
Unlike its predecessor, however, Enstructure will not be required to meet any throughput metrics or minimum annual volume guarantees, freeing it from penalties on fluctuating cargo loads coming through the port.
Enstructure will reportedly look to invest upward of $200 million in the Port of Wilmington and the future Port of Edgemoor over the lifetime of the agreement. That is likewise about 66% less than what Gulftainer proposed at the outset of its arrival in Delaware.
Included in the proposed funding commitments is $87 million in upgrades at the Port of Wilmington, including $45 million spent before the end of 2032. The company, which has completed a due diligence review of the properties, is eyeing $30 million in buildings and $10 million in cranes and equipment, with the remaining $5 million going to site improvements.
Enstructure will also make a single, non-refundable payment of $21.5 million at the outset of the deal to move the 100-acre Edgemoor container port ahead. It would also agree to include its adjacent 25-acre, waterfront parcel currently home to its Port Contractors Inc. subsidiary to the port plans, increasing the project’s shoreline by about 45% and its total acreage by 30%.
The company is reportedly already in discussions with a global carrier regarding the development of Edgemoor as a best-in-class container terminal. The identity of that carrier was redacted from the released records.
On Tuesday, Enstructure declined to comment on the details of its concession agreement term sheet with the DSPC.
Co-CEOs Matthew Satnick and Philippe De Montigny said Friday that their company “fully recognizes the importance of the port to the state of Delaware and the local community, as well as the pressing need for strategic investment to position Delaware for the future in the maritime industry.”
