Who wants to hand over concession revenue of 400 million euros?
The new Governing Council of the Port of Dubrovnik, which is 100 percent owned by the state, the body which is subordinate to the Ministry of Sea, Transport and Infrastructure, has just one more week to, alone or together with the Ministry, resolve the major affair which has rocked Dubrovnik on the eve of local elections, reports Poslovni.hr on February 12, 2017.
It is a case of a disputed concession for the future terminal for cruise passengers. There is a possibility that the case might end up at the Administrative Court, which would be the first major investment dispute which would arise because a lower body would have legally challenged a decision made by the Ministry, so that the controversial concession contract would not hurt the interests of the state institution. The Ministry as the owner has not yet taken the final position.
That would also mark the end of the public tender announced in September 2015, whose turning point happened during a term of the caretaker government in July 2016, when the previous Governing Council decided to terminate the contract with the winning concessionaire, Dubrovnik International Cruise Port Investment Ltd. Zagreb (DICPI), which is owned by Global Ports Holding from Turkey and Bouygues Batiment International from France.
It has been confirmed that 16 February is the deadline for possible lawsuit to be filed, which is also a warning to lawyers which the new Governing Council has hired to examine the documents to hurry up. The question is also whether the Prime Minister and the Transport Minister will react.
The case is in the focus due to suspicions of corruption. It is not known who has the interest to give up the concession revenue of about 400 million euros, while the project itself is of much lower value. According to calculations confirmed by some new members of the Governing Council, the profits that would be realized during a period of 40 years would amount to at least 300 million euros or even more, depending on the cost of constructing the terminal. According to experts, the calculation is simple: the current fee charged to passengers from cruisers coming to Dubrovnik is nil, which is significantly different from Venice, where the concessionaire is reportedly expected to pay a fee of 8.5 euros per passenger.
Based on the fact that last year there were 809,000 passengers in Dubrovnik, of which around 740,000 from cruise liners, and that Dubrovnik can attract a million passengers a year, and there is talk about as many as a million and a half, there is enormous potential profit which is an additional reason to protect the interests of Dubrovnik. According to sources, Transport Minister Oleg Butković has ruled out the possibility that the state would guarantee for possible financial damage to the concessionaire in the case of a smaller number of passengers, for example, if traffic falls below 1.1 million passengers a year.
The decision will in any case have a big impact; on the one hand, it will define the future of the port of Dubrovnik and the passenger terminal, as well as of the wider community, since it is a lifeline of Dubrovnik, which lives off tourism. On the other hand, politicians who are involved are “washing their hands” of the project. Anyway, one new member of the Governing Council who did not want to be named confirmed that there were two options how this might end up, and it is possible that in the end international arbitrators will have to be called.
In short, according to him, the Council can support the decision of the previous Governing Council and file a lawsuit against the decision of the Ministry, which he would support 100 percent, explaining that he would not vote along party lines and would protect the interests of the town. But, on the other hand, it cannot be ruled out that the new Council will accept the decision of the Ministry, which would mean the continuation of negotiations with the concessionaire on specific items in the concession contract. Bouygues is also a concessionaire of Bina Istra and the Zagreb Airport, and it is known for collecting tolls for the Učka Tunnel, as well as by its intentions to increase airport taxes in Zagreb.
Also, DICPI was the only bidder, with the anticipated investment of 93.7 million euros (with the right to use the facility and to provide port services of loading and unloading of passengers for a period of 40 years), which sources from Dubrovnik dispute and claim that the first step of the investment is worth only about 33 million euros. After the Governing Council last year terminated the preliminary contract, they claim that there is an option for Dubrovnik, with the help of the state, to realize the lucrative project on its own. Currently, the obstacle is the logical interest of DICPI and its successful appeal to the Ministry.
The partially adopted appeal in mid-January reversed the decision of the Governing Council which terminated the contract. However, there is speculation that the Ministry had no authority to decide the case because the dispute was supposed to be solved by international arbitration. Several law firms confirmed to the old Governing Council that this was not an administrative dispute and that the Ministry was not competent to make a decision, as well as that the contract precisely stated that the international chamber of commerce was authorized to solve possible disputes.
The key problem therefore becomes the model of financing, since Dubrovnik can realize the project through its companies, says Maro Kristić from “Srđ je naš” NGO, who was also a candidate of MOST. Kristić claims that their initiative has the full support of MOST. “There are doubts about the project about which we have been saying, from the very beginning, that we can realize it on our own through our companies, which means that we can build and manage the terminal ourselves, and that is important for the town for several reasons”, said Kristić.
Credit potential necessary for the project could supposedly be achieved by the Port of Dubrovnik company, which is 48% owned by the Town of Dubrovnik, acting in synergy with the Port Authority and others, and perhaps pension funds who have openly shown interest in this investment. Last year, Port of Dubrovnik had turnover of 27 million kuna, which is enough to, as part of a consortium, get a chance to build the new terminal in the port. However, the tender in question asked that bidders have at least 120 million euros and have 20 million euros of cash flow, and there are few companies which can meet such requirements.