Palumbo to invest €30m

The final chapter in the privatisation of Malta Shipyards opened yesterday when motions for the transfer of the ship repair facilities in Grand Harbour and the Manoel Island Yacht Yard, started being debated in Parliament.

Finance Minister Tonio Fenech moved a motion for the transfer of the ship repair facilities to Italian company Palumbo and explained that the transfer included docks 4, 5, 6, and 7. He said that the land would remain government property and was being transferred on a 30-year emphytheusis. Similar arrangements applied for the transfer of the Manoel Island Yacht Yard to Manoel Island Yacht Yard Ltd.

Mr Fenech told the House that Palumbo Malta Shipyard Ltd would invest €23 million in the first five years of operation, increasing by another €7 million over the remaining 25 years. Manoel Island Yacht Yard Ltd would invest €6 million in the facility.

Turning to the contract signed by the government with the two operators, Minister Fenech said that at today's value, the exchequer would get €52.8 million from Palumbo Ltd and another €13 million from Manoel Island Yacht Yard Ltd.

Palumbo would be paying an annual rent of €1.66 million increasing by 15 per cent every five years for the dockyard, and €225,000 every year for the Manoel Island facility, also increasing by 15 per cent every five years.

Palumbo and Manoel Island Yacht Yard Ltd were to pay upfront the sums of €18 million and €5.2 million respectively.

Mr Fenech said that despite various experiments, the dockyard remained unsustainable even though the workforce had been reduced from 2,600 to 1,700. This untenable situation was the result of endemic problems, the high workforce and work practices. The Dockyard's debt had reached €1 billion amounting to 25 per cent of the country's public borrowing. Interest on this debt amounted to €50 million annually.

The government believed that the only way viable was to privatise the dockyard. This could contribute to economic growth when most dockyards around the world, including China, had been privatised.

Privatisation was a difficult process because of various problems. The government kept contact with the General Workers' Union.

The government had been accused that its aim was to close the yard.

The greatest problem was that a private investor would not be ready to take on 1,700 workers. The Prime Minister had indicated that workers had to increase productivity, the dockyard had to search for strategic partners and Boiler Wharf had to be used for cruise liners.

The GWU had acknowledged reality. A number of assessments had been made and agreement had been reached with the government on a workforce not exceeding 400 workers. At first, both sides had started with 700. The 2007 assessment showed that there was need to shed labour.

As a result the government and the union had agreed on the voluntary retirement schemes which were issued in September 2008. The voluntary schemes cost the government €50 million but in return the government was saving €45 million in interest every year.

Minister Fenech said that, although the European Commission had insisted on liquidating the dockyard, the government had insisted on leaving the dockyard open with a core number of workers without the need of giving any subsidy.

The EC, which did not offer room for manoeuvrability, had accepted that the offer to the new operator be limited to setting a local plan with an area dedicated to maritime services but necessarily to ship repair.

Mr Fenech said that the fact that only 50 workers did not opt for the voluntary retirement scheme attracted a number of investors.

The dockyard was divided into four sections with Palumbo and Manoel Island Yacht Yard operators taking over two of these sections. The Marsa Shipbuilding and Super Yacht facilities were left out of the process.

A new offer for the privatisation of the super yacht facility would be issued in the near future because the previous negotiations did not lead to any conclusion. As Mr Fenech started introducing the motions, opposition MPs Alfred Sant and Helena Dalli raised a number of points.

Dr Sant asked the government to table all relevant documents because members were debating the transfer of national assets. These documents included the Privatisation Unit report on the selection process and the diligence report on Palumbo Ltd. MPs were given the Dockyard management accounts for the last three years only yesterday, added Dr Sant.

Dr Dalli said that Mr Fenech had promised her a copy of the diligence report but this did not materialise.

Mr Fenech said the report asked by the House Public Accounts Committee was handed to the committee secretary earlier that day. He said he could only hand reports to an MP.

Dr Sant said only the due diligence report was presented and others should be forthcoming.

Mr Fenech said that originally the debate had to be held tomorrow Friday but was rescheduled for yesterday. The evaluation reports could not be tabled because of their commercial nature.

Dr Sant said that it was precisely because of their commercial interest that members had the right to see them before agreeing or otherwise to this transfer of national assets.

The minister said the sitting was not a company's shareholders' meeting. The law dictated that the contract be table in the House in support of the motion and that every member had the right to ask questions. Nothing different from previous privatisation processes was being made.

Meanwhile, Infrastructure Minister Austin Gatt, replying to a parliamentary question by Frederick Azzopardi (PN), said that in the past 40 years the government spent €1 billion to support the dockyard. Malta Drydocks in the past 40 years only made a profit in nine years and made losses in the remaining 31 years.

Malta Shipbuilding in 22 years only made a profit in its first two years: 1982 - €9,287 and 1983 - €5,693.