Through a contract that deviates from the tendering criteria, aiming for the development of the “Durrës Yachts Marina” project, the Port of Durrës will pay a Maltese company 37 million euros over 5 years to manage the service at the container terminal. The Durrës Port Authority and the company “Mariner Adriatic” are playing a cat-and-mouse game. Maritime line operators are facing losses of thousands of euros due to delays in shipment processing.
Dorina Azo
The ship “Libertas H”, departing from the port of Piraeus, arrived at the port of Durrës on June 23rd but remained blocked for 4 consecutive days at the container terminal. The only crane in operation out of the three supposed to be at this terminal was unloading another ship that had been waiting for days in line.
A day later, on June 24th, another ship, “MSC Amanda F”, arrived, but it was also told to wait at sea until its turn for unloading came. On June 25th, the third ship, “MSC Jenny II”, arrived, and on June 26th, “Contship ECO” arrived. All of them had to wait for several days to be unloaded.
For about 1 month (from May 25th to June 26th, a critical period that was intensively followed by INA MEDIA), the lack of unloading equipment caused significant financial losses for maritime shipping line operators transporting cargo containers by ship.
One of the representatives of maritime line operators stated anonymously that losses due to extended ship stay hours at the docks and cargo waiting for storage were estimated to be over 20,000 euros. Operators claim that the main reason for this critical situation is the lack of equipment following the concession of container terminal management to the Maltese company “Mariner Adriatic.”
“Since the concession was given to the Maltese company ‘Mariner Adriatic’ for the container terminal, the processing productivity has decreased; there are 50% fewer containers per hour compared to the previous company that had the concession,” said one of the operators anonymously, adding that the tariffs they pay to the Port Authority of Durrës (APD) have increased. The delays have also created a chain of difficulties for cargo transportation companies by trucks.
Andi Shijaku, the Director of Transportation at the company “Shega Trans,” says that trucks spend an exceptionally long time waiting in line to load/unload containers, resulting in increased costs.
The container terminal at the port of Durrës faced a series of difficulties after the Albanian state unilaterally resolved the concession contract with the Turkish company “Container Terminal Durrës” in 2018, a contract that is currently in arbitration and risks a compensation cost of 100 million euros. After the termination of this contract, the service was given to the Maltese company “Hili Company Limited” for 5 years, represented in Albania by “Mariner Adriatic.” This contract will be paid 37 million euros, with conditions that have been altered, both technically and financially, from what was foreseen in the international competition.
Durrës Port Authority denies that the signed contract for container service deviates from the announced procurement criteria but admits that a short-term contract was concluded to pave the way for the development of the “Durrës Yachts Marina” real estate project and the construction of a new port in Porto Romano.
“We are not dealing with a contract deviation, as the economic operator in this specific case has the obligation of maintenance service, covering all expenses related to the operation, maintenance of the terminal, and ensuring the technical readiness, optimization of equipment, devices, networks, and systems for the successful completion of all services offered at the container terminal,” emphasized APD in a written response to Investigative Network Albania.
“The port activities currently taking place at the port of Durrës will be moved to a new port, which will be the Integrated Port, Durrës in Porto Romano. It has been assessed that we should have a short-term service contract that will coincide with the transfer of activities to the new port,” Durrës Port Authority further explains.
The contract, available to INA MEDIA, was signed on March 8, 2021, and aims solely to coordinate the movements of cranes unloading goods from ships. Initially, in the technical criteria for procurement by the Durrës Port Authority (APD), it was required that the private company winning the bid for managing the loading and unloading service of ships at the container terminal would have its own equipment. This criterion deviated from the contract signed between the parties that INA MEDIA possesses, as the assets of APD were made available to the private company without any lease obligations.
With a favorable contract, where the winning company was only responsible for employee salaries, routine repairs, and the software network for terminal operations, while the port covers the costs of the equipment (for which the operator does not pay rent), their amortization, including major renewals and repairs, the risk of revenue collection, it is unclear what the role of “Mariner Adriatic,” a subsidiary of “Hili Company Limited,” which won the contract, actually is.
For the Durrës Port Authority, the role of “Mariner Adriatic” sh. p.k. is in line with the definitions in the tender documents and the conditions presented in the contract. The institution explains that billing for the services offered at the container terminal to container lines and other operators is carried out by them, and the contractor is paid the offered value for the above services per unit.
“In this way, there is no risk of revenue collection for the APD, and there are no expenses in the terminal, as the contractor has the obligation of maintenance service,” explains the Durrës Port Authority.
From the contract, it is understood that the operator is only left with the obligation to carry out the investment, which aims to install the software network (Terminal Operating System – TOS); a system that, through electronic tablets, coordinates the movement of cranes with goods and the itinerary of trucks. According to experts, the investment corresponds to a maximum value of 100,000 euros.
Another obligation of the private company is to purchase consumables such as tires, and fuel, and to pay employees.
When asked about this software system, both the APD and the company “Mariner Adriatic” do not mention in their explanations how much has been invested.
Due to the lack of equipment and the non-functioning of the existing ones, maritime line operators throughout the month of June found themselves in an unusual situation, previously unseen, as they considered sending ships to alternative ports in Montenegro and Greece as a solution.
On the other hand, according to data provided by APD, the private company has been paid 43% of the value, or 1.5 billion lekë, from the signing of the contract until December 2022.
The required criteria in the tender
In 2018, due to reasons that the parties are currently explaining in the Washington Arbitration Court, the concession contract with the Turkish operator “Durrës Container Terminal” was terminated. For 2 consecutive years, until the international tender was opened, the service was managed by the Durrës Port Authority itself. The tender was announced on January 9, 2020, according to publications in the Public Procurement Agency, and the revised deadline for submitting offers was set for October 2, 2020.
Two competitors participated in the tender:
1) HHLA (Hamburger Hafen und Logistik AG), with a container traffic volume of over 10 million containers per year in 6 different terminals.
2) Hili Company Limited from Malta, with three terminals and a maximum capacity of 1 million containers.
Interestingly, during the tender process, a company as large as HHLA which manages 4 terminals at the Port of Hamburg and several others across Europe, withdrew from the competition. Sources from the Port of Durrës informed INA MEDIA that the reason for the withdrawal was the unclear contract closure deadlines and the possession of the equipment.
However, this situation is clear in the contract itself. Article 31.6 specifies that if the private operator processes cargo worth 3.7 billion lek within a specified period, the contract is considered fulfilled. So, if the operator performs better and achieves the volume of the 5-year contract within 3 or 4 years, the contract is completed!
Another reason was the ambiguity regarding equipment ownership. The standard tender documents stipulate that the economic operator must possess an extensive list of machinery and port equipment. However, the contract deviates from this, and for the remaining winner, HILI, not only is it not required to possess the equipment, but the equipment and assets of APD are made available without any rental obligation, providing funds for major repairs and adding the procurement of equipment and other items, such as 2 cranes, several reach stackers, etc.
For the German company, APD explained that it did not submit its economic offer in the second phase of the procurement procedure and withdrew from the competition in this manner. APD did not provide any correspondence between them and the German company regarding the reasons for the withdrawal from the competition.
In the procurement documentation, in the section “Technical Specifications,” it is specified that the bidder must demonstrate lawful ownership, either through ownership or lease, for the equipment, including 3 mobile cranes, 6 reach stackers (equipment used for container handling), 4 spreaders, 6 transport chassis, and 6 towing trucks.
In contrast to the tender, the signed contract deviates, stating that infrastructure assets and machinery equipment have been transferred from the contracting authority, APD, to the contractor, “Mariner Adriatic,” without any financial obligations, leaving the choice of the contractor’s desire.
The contract specifies that the contractor will only be responsible for routine maintenance, such as lubricants, filters, etc., while major repairs will be handled by APD, covering the expenses. Additionally, referring to the contract’s annex “Spare Parts Handover,” besides handing over the equipment, APD has made available an amount of spare parts worth 568,790 euros. For asset maintenance and unforeseen situations, APD provides the company with 100 million lekë to cover depreciation expenses, as stated in Article 36.8 of the signed contract between the parties.
APD will also be responsible for asset replacement and will undertake to remove any abandoned cargo within 6 months at its own expense.
“APD will be responsible for replacing the assets for the continuity of operational services, and the contractor will be exempt from any penalties. The contracting authority will also be liable for any damage that may arise from the lack of equipment,” as cited in Article 34.2 of the contract.
Continuing with the contract, Article 36.9 states that for the fulfillment of its service, the contractor will request equipment from APD, such as 3 mobile port cranes, 6 reach stackers, and 8 tug masters.
Furthermore, in cases of unforeseen situations, APD will provide the contractor with a Mobile Harbour Crane (MHC), an auxiliary mobile crane (MHC 115), along with the relevant accessories for container handling, as well as 4 reach stackers and 4 trucks with their respective accessories.
As evident, the differences between the specified criteria in the procurement documents and the contract are substantial.
According to economics expert Zef Preçi, the practices of public service contracts, utilizing public facilities and assets, have widely extended to public companies and local authorities, abandoning their primary purpose: cost reduction and risk avoidance from the sectors.
“In this way, these contracts, such as the container processing contract of the Port of Durrës, serve as a source of ‘easy money’ for phantom companies specifically created for this purpose. Through them, the public interest is compromised and there is a reasonable suspicion of corruption involving high-ranking officials and politicians. In most cases, these contracts are drafted by the beneficiary party and the partnership between the parties is not respected,” argues economics expert Preçi.
The consequences for shipping companies
For the situation that arose during the month of June, APD “blames” the private company for mismanagement, while “Mariner Adriatic” highlights the problematic state of the cranes, and the operators are left without a solution. “This was a temporary situation under objectively impossible conditions for the private company to perform better, due to unforeseeable breakdowns of heavy machinery used for container processing,” stated APD to INA MEDIA.
Meanwhile, “Mariner Adriatic” added that the new cranes are facing warranty issues that limit their full productivity, and together with the Durrës Port Authority, they are working on resolving them with the manufacturer. “The quantity and quality of equipment are crucial for every container terminal,” stated company officials.
Concerns about productivity and the malfunctioning of work equipment were also raised by 5 maritime line operators, “CMA CGM Albania”, “Mediterranean Shipping Company Albania”, “Stacon Shipping Al”, “Hub Adriatic”, “Stella Mare”, in a letter they sent on May 25, 2023, to the Prime Minister, Edi Rama, the Minister of Infrastructure and Energy, Belinda Balluku, and the Durrës Port Authority. According to them, delays stem from crane malfunctions and the lack of loading and unloading equipment.
“It has been a long time since the container terminal started experiencing serious productivity problems, causing delays and significant costs. The most critical issue is related to the cranes’ productivity. Out of the 2 cranes used, one constantly exhibits technical problems resulting in frequent stoppages. This translates into delays in ship operations and additional costs. The second issue is related to the inadequacy of loading and unloading equipment within the terminal (reach stackers),” expressed the companies in the letter.
The Port Authority of Durrës claims that the cause of the delays is the increase in cargo volume, but INSTAT does not report a significant increase in cargo volume at the Port of Durrës.
INSTAT data shows that the Port of Durrës is the main port in the country, from which 95.9% of the transported cargo volume by sea or 1,553 tons of goods have been transported.
The overall volume of goods transported from the Port of Durrës has increased by 14.3% compared to the same period one year earlier. Despite the increase compared to the same period one year ago, the Port of Durrës has processed higher trade volumes throughout the year 2022.
In the third quarter of 2022, the Port of Durrës processed a record of 1.62 million tons of goods, which is 5% more than in the first quarter of this year.
The company’s revenue
According to the official financial statements of “Mariner Adriatic” company submitted to the Central Bank of Albania (QKB), it is reported that the revenues for 9 months of operation in 2021 are around 4 million euros. The profits amount to 1.9 million euros, with only about 66,000 euros of bank credit input and 0 lek from shareholder capital.
The profit margin is approximately 36%, while the return on assets stands at about 99%, figures that would be enviable for any business, especially considering that it’s only the first 10 months since the start of operations. With these revenues, “Mariner Adriatic” covers the salaries of its 86 employees, with an annual fund of around 24 million lek.
Meanwhile, while the financial reports of “Mariner Adriatic” seem positive, the financial data of the Port Authority of Durrës is not as optimistic. According to published balance sheets, the total revenues of the Port Authority of Durrës for the year 2020 amount to 2.4 billion lek, and the pre-tax profit is around 432 million lek. For the year 2021, the total revenues amount to 2.7 billion lek, with a profit of about 252 million lek.
In other words, there is lower turnover and higher profit for the year 2020, and higher turnover but lower profit for the year 2021, the year in which the contract for the container terminal service was awarded. For the year 2022, according to the Port Authority of Durrës, the pre-tax profit amounts to 677.6 million lek.
The contract, in contradiction with the master plan
Based on the recommendations of the World Bank and UNCTAD, the Albanian government enacted the “Port Authority Law” in 2003, which established the path for strategic development to transition from a semi-socialist economy to a market economy. In this context, the EU financed the development of the “Master Plan for the Development of the Port of Durrës” in 2009.
The overarching objective of this document, prepared with the assistance of the European Commission, was to create a strategic master plan based on a comparative analysis of port activities and land uses, aligned with general concerns for security and the environment for at least several decades to come. According to the master plan, the development trajectory of the port should pass through three phases:
1) Service Port – where services, equipment, and infrastructure are managed by the public entity.
2) Partly Private Port – where the infrastructure and main equipment are owned and managed by the public entity, while the workforce and light equipment (cranes, forklifts, stackers) are managed by a private operator.
3) Landowner Port – where services, equipment, and infrastructure are managed by a private operator, while the public entity functions as the landowner (collecting rent and revenues), overseeing activities and service standards, and setting service tariffs.
Until 2018, out of the four terminals in the Port of Durrës, three were operating in the advanced phase under the Landowner Port model, and one under the Partly Private Port model, including the container terminal operated by the company “Container Durrës.”
Even in 2021, instead of continuing with the strategy defined by law as the landowner administrator of assets and structure with private involvement, APD has taken steps backward in the case of the contract for the management of the container terminal.
Tomi Spahiu, a port engineer, told INA MEDIA that the distortion in implementing the master plan began after 2005 to avoid settling the 80 million euros of debt from the Durrës port, accumulated since the ’90s.
“In the Port of Durrës, several service contracts have been signed, which are intentionally referred to as concessions due to unpaid debts, when they are not. How can a service contract at the passenger terminal be called a concession when the project was funded by the European Bank for Reconstruction and Development (EBRD)? But how can a service performed using the port’s cranes and the company profits be termed a concession? Where does this profit go? So, this is completely contrary to the strategy outlined by the World Bank,” argues engineer Spahiu.
Ky shkrim është pjesë e projektit që mbështetet financiarisht nga Zyra e Mardhënieve me Publikun e Ambasadës së SH.B.A. në Tiranë. Opinionet, gjetjet, konkluzionet dhe rekomandimet e shprehura janë te autor-it/ve dhe nuk përfaqesojnë domosdoshmërisht ato të Departamentit të Shtetit. / This article is part of a project that is financially supported by the Public Relations Office of the US Embassy in Tirana. The opinions, findings, conclusions, and recommendations expressed are those of the author(s) and do not necessarily represent those of the Department of State.