DP World sues Adani Group

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Oct 2007

DP World is suing the Adani Group for not allowing it to operate the second container terminal at Gujarat state's port of Mundra.The Adani Group manages and owns a stake in Mundra which is India's largest privately owned and operated port. The legal redress has been sought according to a previous deal between the Adani Group and P&O Ports (later acquired by DP World) which gave P&O Ports rights to run the port's first container terminal – Mundra International Container Terminal (MICT). Under the deal, the Adani Group is mandated to hand over the second terminal for $70 million after the first terminal handled 700,000 TEUs per year or eight years of operating the first terminal (February 17 2009), whichever was earlier. Local news reports say that MICT handled 521,000 TEUs in the 12 months ending in March 31 this year and according to original agreements MICT has to pay the Adani Group 10% of its gross revenue. The Adani Group meanwhile, had in August begun operations of the 1.25 million TEUs per year second container terminal at the Mundra Port and Special Economic Zone (Mundra Port and SEZ). Mundra Port and Special Economic Zone Ltd is part of the Adani Group of companies. DP World then filed an application before the Ahmedabad civil court seeking to prevent the Adani Group from operating the new facilities on its own but the court rejected the application on September 13. DP World is now challenging the order before the Gujarat high court and has submitted the matter for arbitration. Adani Group chairman Gautem Adani has replied the suit stating that MICT has ''neither reached the 700,000 TEUs nor completed eight years of operations for staking claim to run the second terminal which is ready for operations.'' ''Still they don't want us to operate the second terminal until either of this is achieved. Do they want the assets to remain idle till these milestones are achieved?'' he said. According to Mundra Port and SEZ chief finance officer Ameet Desai, the Adani Group had invested close to $161 million building the new terminal and ''we will incur a loss if we were to hand over the second terminal for a consideration that was less than what we had spent to build the asset.'' Industry players have however, pointed out that efforts by DP World to secure rights to the second terminal may be in vain, as the Gujarat Maritime Board is currently deciding whether to revoke DP World's entire Mundra contract. DP World had come into ownership of the Mundra agreements only because DP World acquired the original operator - P&O Ports. According to the Gujarat Maritime Board, the transfer was a breach of an undertaking given by P&O Ports when it acquired the facilities from the Adani Group. The undertaking required P&O Ports to hold a minimum shareholding of 51% in MICT for seven years from the date of acquisition. The Gujarat Maritime Board maintains that the company also agreed to seek prior approval before selling any part of its 51% stake in MICT. Now the Gujarat Maritime Board has issued a show-cause notice to DP World requesting a reason why the contract should not be canceled. MICT has replied saying that there has been no violation of any agreement as P&O Ports still continues to own 100% shareholding of MICT. Meanwhile, an IPO of 10% of Mundra Port and Special Economic Zone Ltd has been confirmed. The Adani Group intends to raise as much as $450 million through the issue which will be floated from November 1-7. Mundra Port and Special Economic Zone Ltd will be the first Indian port to be listed.