DP World says no material effects from Djibouti terminal seizure as UAE expresses support
Company says there is no financial impact as it starts new arbitration process to protect its rights
The government of Djibouti’s illegal seizure of control at Doraleh port will have minimal effect on DP World's finances, the port operator said on Sunday.
And the UAE government came out in support of the world’s fourth biggest ports operator, denouncing the “arbitrary” action of the African nation.
“There will be no material financial impact to the group as a consequence of these events,” the company said in a statement to Nasdaq Dubai, where its shares are traded.
DP World, which has handled 10.1 per cent more in gross container volumes on a reported basis in 2017, did not give further details and referred investors to its statement issued last week for further information.
DP World's shares were relatively unchanged during trading on Sunday closing at $25.06.
On Friday the port operator said that the Djibouti authorities took control of the Doraleh Container Terminal from a DP World-owned entity that designed, built and operated the terminal after winning the concession in 2006.
DP World has commenced arbitration proceedings before the London Court of International Arbitration to protect its rights, or to secure damages and compensation for breach or expropriation, it said in its February 23 statement.
"As per the company’s guidance, there will be no impact. However, this is more of a reflection on the countries that are behaving less systematically and underpins the difficulties which investors like DP World are facing [across the globe]," said Tariq Qaqish, managing director of asset management at financial services firm Menacorp in Dubai.
"It’s time for the DP World management to revisit its external investments. We are confident that the management has done its due diligence but these are risks that can’t be eliminated entirely," he added.
The UAE government in its first official response on Sunday, criticised the unilateral action by the Horn of Africa nation with the Minister of State for Foreign Affairs, Dr Anwar Gargash, calling it “regrettable” on Twitter. “Agreements, commitments and reassurances didn’t hold up to arbitrary measures against DP World,’’ he wrote.
DP World has helped Djibouti to develop its trade for the past two decades, but the consequences of the move will be far worse for Djibouti, the minister wrote in another tweet.
“Success is based on respecting laws and agreements and Djibouti has failed that test.’’
The dispute threatens to sour relations between the governments and could affect how international investors view Djibouti as an investment destination.
In one of his tweets Dr Gargash noted that the Djibouti and Arab investment environment has received a big shock from the events that have unfolded over the weekend.
Djiboutian authorities, according to media reports, have claimed the deal signed more than a decade ago breached its sovereignty.
“The [Djiboutian] government only recently failed in its attempts to unravel the contracts by alleging the contracts were corrupt both before the High Court of England and Wales and before an arbitral Tribunal in London,” DP World said.
It added that the illegal seizure of the terminal is the culmination the Djiboutian government’s campaign to “force DP World to renegotiate the terms of the concession”, which were found to be fair and reasonable by an arbitration court in London.
DP World, which operates ports and terminals across continents, owns a 33 per cent equity stake in Doraleh terminal. The state-of-the-art port is the largest employer and biggest source of revenue in the country and has operated at a profit every year since it opened, DP World said.
The company handled 70.1 million twenty-foot equivalent units (TEUs) last year amid broad-based growth across all regions. Growth on a reported basis includes new terminals. In the UAE, DP World handled 15.4 million TEUs in 2017, up by 4 per cent year-on-year.
In the fourth quarter, volumes grew 10.3 per cent year-on-year on a reported basis.
DP World expects to spend about $1 billion every year for the next three years as it increases investment, adds capacity and acquires new assets to strengthen its global footprint, its chairman and chief executive, Sultan bin Sulayem, told The National in January.
Updated: February 26, 2018 04:08 PM