There is a big element of déjà vu in International Container Terminal Services Inc. (ICTSI’s) challenge to the award of the concession for Costa Rica’s Puerto Caldera to the Sunset Consortium, a group comprising APM Terminals, Hanseatic Global Terminals (HGT) Inversiones – a Hapag Lloyd group company and SPC, the existing operator, writes Mike Mundy.
Effectively it pitches ICTSI into yet another ‘contest’ with APM Terminals for the right to operate a concession – following a battle of some magnitude in this respect in Durban, South Africa where earlier this year ICTSI emerged victorious. Furthermore, one of the key points in this respect, if not the key point, was the question of debt-to-equity ratio and it has again raised its head in conjunction with qualifying for the Caldera concession.
ICTSI was originally judged by the qualifying authority, the Costa Rican Pacific Ports Institute (INCOP), based on financial information supplied, to have a compliant 1.33 debt-to-equity ratio but this was subsequently changed to a non-compliant 2.16 ratio and led directly to its exclusion as bidder, in turn leaving the Sunset Consortium in pole position. The reclassification has been widely reported as due to a note from Sunset which questioned the original rating. On reclassification, however, no detailed explanation of this fundamentally important move was given to ICTSI – no insight as to the methodology applied etc. Hence, it is not surprising that this aspect figures large in ICTSI’s challenge to a process which it has dubbed as both opaque and full of irregularities.
With respect to the debt-to-equity ratio and generally across the tender process it is interesting to note that whereas the International Finance Corp (IFC), an arm of the World Bank, were retained to establish the tender process it was not retained to be involved at the tender evaluation stage. This is not entirely unusual but equally it is not the norm – logic dictates it makes sense to retain such an advisor from the beginning to the end of such a process and not just for the initial part of the ‘journey.’ Indeed, many informed parties would argue that the largest contribution of a transaction advisor is likely to take place during the bid evaluation stage – and not least for providing independent verification of the conclusions drawn.
“We see the tender process for Puerto Caldera as riddled with flaws, many of which are in plain sight. We are hopeful that the current review by the office of the Comptroller General of the Republic, represents a first step in putting the wrongs right and delivering the best solution for Costa Rica,” underlines Bart Wiersum, Director of Business Development, the Americas.
The integrity of the process has also been thrown further into question by statements made by former congressman Eli Feinzaig who has alleged that more than 60% of the financial information contained in the Sunset Consortium’s bid is illegible and thus raises questions as to the validity of the figure arrived at for the Sunset Consortium’s debt-to-equity ratio as well as other issues.
The robustness of the Sunset Consortium’s technical submission as part of its bid plus the exclusion of a review of potential monopolistic practices by the Evaluation Committee are two further main areas of challenge by ICTSI.
Technical criticisms identify a lack of ability to simultaneously handle two vessels of a given size, a significant reduction in the vessel handling time claimed when weather and wave patterns are taken into account and the inability to meet international safety standards.
The objection lodged on monopolistic practices contends that as the Consortium’s members are both competitor’s with the ability to participate in the bid on a solo basis, the formation of the Sunset Consortium could comprise an “absolute monopolistic practice” and following on from this INCOP failed in its legal duty to inform the national anti-trust authority.
Next steps
ICTSI’s appeal against the tender process for Puerto Caldera was accepted in mid-May. The Office of the Comptroller General of the Republic has stated, publicly, that it will conduct a comprehensive review of the award process to assess potential irregularities. As part of this, both INCOP and the Sunset Consortium have been granted a hearing to respond to the facts presented in the appeal, and there is an obligation to issue a ruling within forty days, which can be extended by fifteen days.
The allegations regarding monopolistic practices have to be investigated by the competent authority and acted upon if deemed appropriate.
