The House of Representatives yesterday approved two motions for the transfer of the ship repair facilities of Malta Shipyards to Palumbo SpA and the Manoel Island Yacht Yard to the Manoel Island Yacht Yard Ltd. The opposition voted against the motions.
Prime Minister Lawrence Gonzi said Parliament was living a surreal experience where the opposition MPs spoke like they were living in another world when they discussed the dockyard.
At the same time as Greece was suffering the consequences of not having reformed itself, and at the same time as the world was continuing to weather a financial crisis caused by unjustified spending, the opposition was trying to continue to try to justify what had happened at the drydocks along the years.
Dr Gonzi said the opposition was being irresponsible to the detriment even of the dockyard workers who were "used and abused".
Most - but not all - of the workers at the dockyard had done what they could at their place of work. Some had even paid the ultimate sacrifice. But there was no escaping the fact that the dockyard had had an excessively large workforce and even if the yard had reached high productivity levels, it could still not make money.
Far from having "thrown out the workers" as the opposition had claimed, the government spent €50 million on voluntary early retirement schemes introduced in agreement with the GWU.
What he regretted, Dr Gonzi said, was that some decisions on the dockyard were not taken earlier, when world economic conditions were better.
He had headed a task force which included representatives from the government, the opposition and the GWU, aimed at bringing about reforms at the dockyard. As a result of that work, the EU had agreed to allow a period of several years of state aid in order to give time for the reforms to work and for the dockyard to break even.
The opposition MPs, however, ignored all this, with Labour leader Joseph Muscat even claiming that the privatisation of the dockyard was an act of vindictiveness against his party.
Dr Gonzi recalled how the workforce of the dockyard had been gradually reduced from a high of 3,300, with the task force having introduced the first early retirement schemes. As a result the number of workers dropped to 1,300, although the target had been at around 700.
Dr Gonzi said that the dockyard started reducing its losses in the first couple of years after the task force decisions and there was some hope that the yard could turn the corner. At the time the dockyard had an accumulated debt of Lm300 million which was absorbed by the government, raising the national deficit to close to 10 per cent.
But the surreal opposition also completely forgot about this and claimed the government wanted to close the dockyard.
The dockyard had had a seven-year window of opportunity, but then all manner of problems started being raised such as when the workers wanted to be paid for 'walking time'.
Efforts were made, with some initial success, to diversify the dockyard into ship conversion work, until losses were made on two contracts. But even without that complication, the dockyard's problems were still such that it could not achieve break-even by the target date of 2008.
The government could have sought to negotiate an extension of the state aid period given by the EU, but that would only have meant allowing the wound to fester. The government, instead, decided to tackle the problem head-on and 'bite the bullet'.
Had the government heeded the opposition advice not to privatise, the dockyard would have been declared bankrupt and 1,300 workers would have been redundant, without any early retirement schemes.
The workers had been assisted to find productive work. Some were better off, others less so, especially those who used to earn as much in overtime as their salary despite working for a loss-making company.
Dr Gonzi said the privatisation of the shipyard meant the opening of a new chapter for the enterprise. Italian company Palumbo had been selected after an international call for bidders overseen by the EU.
It was the EU, he stressed, which had insisted that the call for bids could not limit the use of the site for ship repair activities and eventually it was agreed that the site would be used for maritime activities.
Concluding, Dr Gonzi said the dockyard question was of course emotional, but the country must look forward and take all necessary decisions on a 60-year-old problem with the best possible solutions.
Winding up the debate, Finance Minister Tonio Fenech said a number of MPs had queried if the government had obtained a good deal or given away important assets. The truth was that it was hard, anywhere, to put a price on a permanent loss-making enterprise. The government needed to shed a financial burden by passing it on to an enterprise that could make headway.
The government had achieved better prices than the various valuations that had been made. There had been three original bidders that had started out with very poor bids, putting into question whether the government should proceed. He put on the table of the House a summary of the original offers from Cantieri del Mediterraneo, Palumbo and CMA-CGM.
Cantieri del Mediterraneo had offered €101,000 and a ground rent of €l.65 million plus 10 per cent of eventual profit.
Palumbo had offered €5 million and ground rent of €1.66 million plus 10 per cent of net income of €2.3 million.
CMA-CGM had offered €32.5 million spread over 30 years with deferred payments but none in the first two years, with conditions of upgrading facilities to state-of-the-art to be done by the government, which at net present value would have fallen substantially short of expectations.
Not wanting permanent closure for the dockyard, the government had invited the bidders to re-bid with minimum up-front payments of €18 million and annual ground rent. Cantieri del Mediterraneo and CMA-CGM had shown interest in a joint bid, while Palumbo had re-bid independently.
Minister Fenech said that Palumbo had bid €18 million staggered over the first 10 years with a cumulative total of over €90 million, which when discounted would amount to €52 million. Cantieri del Mediterraneo and CMA-CGM had jointly bid €19 million from the third year up to 15 years, which at net present value would have meant €35.3 million. This was effectively substantially less than Palumbo's bid because the latter was ready to make its own investments in machinery, whereas to accept the joint bid would have meant the government re-investing almost all the revenue in upgrading.
The government had done everything possible to get the best value. The call for tenders had been publicised on the international media, including the ubiquitous Lloyds list.
In the case of Manoel Island Yacht Yard, the discrepancy among the three tenders received had been very clear. In line with the EU imposed condition that preference goes to the highest bidder, the best offer on net present value had been €13 million by MIYY Consortium, as against bids of €11.6 million by Azimuth and €9.8 million by MYC Marine Ltd.
Referring to other specific points in the opposition's speeches, Mr Fenech said Chris Bell had had no role in the negotiations on the dockyard. He had not been a member of the privatisation unit, and his only role as CEO up to July 15, 2009, was to supply all requested information and facilitate inspection visits. He had never been involved in the selection process or the negotiating team.
There had been five bidders for the super yacht sectors, none of which reached the government's expectations. When a re-bid still fell short, the process had been annulled.
As to whether the government could have got more money for the machinery at the dockyard, he said the machinery, even if obsolete, had been part of the request for proposals. He tabled an inventory of the stocks and machinery at the dockyard.
Fielding comments and questions as to why the government was giving Palumbo berthing rights for just €1, Minister Fenech said the government could not have given a shipyard any length of quays without allowing it to berth vessels afloat. The Malta Maritime Authority could not be seen as selling the sea but only as giving a licence. Nothing had changed from the original offer, so Palumbo had effectively agreed to pay out €1 over the accepted bid.
There could be no suspicion that the contract could give place to different uses of the land. The operator could not change scope or use unless with government permission. The facilities, such as the sheet metal workshop, could indeed be used for the manufacture of non-marine-related products, but with government permission to ensure that the facilities were being used for the original scope.
With the take-over of the dockyard Palumbo would now be increasing its capital. But if it operated on the strength of loans, any debts still to be paid at the end of the concession would not fall on the government.
Interjecting, opposition finance spokesman Charles Mangion said he had asked what would happen if the company incurred debts with the property as collateral. Would the property make good for the debts if the company went bankrupt? Mr Fenech said the lending bank would lose title after 30 years of concession.
Regarding Owen Bonnici's (PL) question on why the government would be obliged to compensate Palumbo for any investments made in the last 10 years of concession, Mr Fenech said that without this clause the company would not make any investment in the last 10 years. But any such investment would have to be sanctioned by the government, and compensation would be given only after depreciation.
Palumbo's current total workforce of 150 was expected to grow with the investment in Malta.
Concluding, he said the government had always highly respected dockyard employees. The GWU, as well as different groups of workers, had been informed and listened to throughout the whole privatisation process. The government was not closing down the dockyard but opening its doors for viable contributions to the country and the dockyard's future workforce.
Both motions were carried with 35 votes for and 34 against after divisions.