Indian dry bulk terminal business of French group Louis Dreyfus Armateurs collapses

ALBA Asia Pvt Ltd, the Indian dry bulk port operating company controlled by French shipping group Louis Dreyfus Armateurs SAS (LDA), has collapsed with state-run Visakhapatnam Port Trust terminating a contract for running a dry bulk terminal at the port just five years into a 30-year deal.

Separately, a bankruptcy court in Mumbai has initiated insolvency proceedings against Tuticorin Coal Terminal Pvt Ltd, the thermal coal and non-coking coal handling terminal run By ALBA Asia, at state-run VO Chidambaranar Port Trust (VOC Port Trust), after Bank of India filed a petition seeking to recover unpaid dues of ₹90.87 crore. The terminal operator owes ₹355.79 crore to a clutch of seven banks led by Bank of India.

“We have terminated the contract given to West Quay Multiport Pvt Ltd,” Visakhapatnam Port Trust chairman K Rama Mohana Rao, told BusinessLine.

West Quay Multiport is a special purpose company formed by ALBA Asia to develop and operate a 3 mt capacity dry bulk cargo handling terminal at Visakhapatnam port. The operator had quoted a revenue share price bid of 47.17 per cent to win the 30-year contract. Bank of Baroda has an exposure of ₹110 crore in the project.

Defaults in throughput obligations
The contract was terminated because the terminal operator defaulted on fulfilling the minimum guaranteed throughput (MGT) obligations stipulated under the contract, said Rao.

West Quay Muliport stopped operations and “abandoned” the project in late 2018, three years after starting operations in May 2015. Port contracts at government-owned major port trusts are liable for termination if they fail to achieve the minimum volumes for three consecutive years. West Quay never achieved the MGT of 520,000 tonnes a year since opening the facility.

Rao said that the Port Trust was “liberal” with the operator and provided “opportunities” to make the terminal “viable” but without success.

The background
The terminal was originally built to handle CP Coke, LAM Coke, steel and granite blocks. In October 2018, the Tariff Authority for Major Ports (TAMP), based on a proposal filed by the Port Trust, allowed the terminal to handle 10 extra cargo, to help meet the minimum volume obligations and better utilise the facility.

On the other hand, the Tuticorin Coal Terminal stopped operations in June 2018, a year after opening the facility. The 7 mt-capacity terminal is promoted by ALBA Asia with 74 per cent stake and LDA holding 26 per cent, effectively giving LDA 63 per cent stake in the facility.

Experts say that the terminal became unviable because of the steep revenue percentage it had agreed to share with the VOC Port Trust to win the deal. The operator placed the highest revenue share price bid of 52.17 per cent to emerge the successful bidder for the project.

The terminal was also hit by the closure of some thermal power plants in the vicinity, reducing the third party (non-Tangedco) coal cargo at the port to 3 mt from 13 mt a few years ago.

ALBA Asia told the National Company Law Tribunal (NCLT) that the terminal was “facing a major financial crunch and is in critical financial position”.

Wrangle at Haldia port
In October 2012, ALBA Asia quit a bulk handling terminal at Haldia Dock Complex of state-owned Syama Prasad Mookherjee Port Trust (earlier Kolkata Port Trust) citing worsening law and order situation at the port, putting safety and security of its workers at risk.

LDA then invoked arbitration under the France-India Bilateral Investment Promotion and Protection Treaty, alleging that “India’s acts and omissions resulted in the premature termination of the contract” and sought monetary relief for “breach of Treaty and for moral and reputational harm”.

In September 2018, London-based Permanent Court of Arbitration (PCA) “dismissed” the claims made by LDA and ordered it to pay India $540,885.30 towards the country’s share of the Tribunal and PCA costs of arbitration and another $6,626,971.85 towards India’s costs and expenses of legal representation and assistance.

First Half of 2020 and 2019 Results
Revenue for the six months ended June 30, 2020 was $69.1 million, as compared to $65.5 million for the same period during 2019. The increase of $3.6 million was mainly due to the increase in the number of available days from 5,039 for the six months ended June 30, 2019, to 5,237 for the six months ended June 30, 2020. TCE per day decreased from $12,409 for the six months ended June 30, 2019 to $12,225 for the same period during 2020.

Net Income for the six months ended June 30, 2020 was $2.9 million compared to $0.5 million for the same period in 2019. The $2.4 million increase in Net Income was mainly due to a: (i) $2.8 million decrease in depreciation and amortization relating mainly to the lower amortization of intangible assets; (ii) $0.5 million decrease in interest expense and finance cost, net; and (iii) $0.1 million increase in EBITDA. This overall increase of $3.4 million was partially offset by a $1.0 million increase in amortization of deferred drydock and special survey costs.

EBITDA for the six months ended June 30, 2020 increased by $0.1 million to $24.9 million as compared to $24.8 million for the same period in 2019. The increase in EBITDA was primarily due to a: (i) $3.6 million increase in revenue; (ii) $0.7 million increase in other income, net; and (iii) $0.1 million decrease in other direct vessel expenses. This overall increase of $4.4 million was partially offset by a: (i) $2.3 million increase in management fees due to the increase in the number of available days and the increase in the fee for the ship management services, as per the management agreement; and (ii) $2.0 million increase in time charter and voyage expenses.
Source: The Hindu Business Line

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