Case Studies: Durrës Port East Terminal, Albania

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Project Overview
Durres1.png
Figure 1: Port of Durres, East Terminal (EMS APO Shpk), Albania
Port of Durres East Terminal (EMS APO Shpk), Albania
Project Type: Both
Contract Duration: 35 years
Budget: n.a
Project Time Line
Project conceived: 2003
Call for Tender: January 18th 2013
Contract Approved (signed): May 6th 2013
Date of Financial Close: July 15th 2013
Other important dates for the project:

Law 9130/08.09.2003 by which the Port of Durres is defined as a landlord port with services to be transferred to private sector operators.

The Government of Albania, with decision 493/01.08.2012 approved a competitive selection procedure (unsolicited proposal) for granting the concession of the East Terminal of the port of Durres to EMS Shipping and Trading GmbH.


Introduction

The Port of Durres is located on the Adriatic Sea, 40 km from the capital of Tirana and 30 km from Tirana International Airport. It is the largest port in Albania representing 80% of all seaborne export –import activity, while it also serves the neighboring countries of FYROM and Kosovo.

The East Terminal of the Port of Durres has two berths (10 and 11) with an area of 500 m, and corresponds to roughly one quarter of the total quay length of the port (2275m). Its key dimensions feature in Figure 2.

Items Berth 10 Berth 11
Quay length (m) 250 250
Design depth (m) 11.5 9.85
Dredged depth (m) 11 7.3-9.8
Design Load ( tons/m²) 4 4

Figure 2: Key characteristics of infrastructure of the Durres Port East Terminal

The Port is connected to the national and international road and railway network. The increasing traffic density of these connections provides enormous growth potential and supports the country’s integration with the European Union.

By Law 9130/08.09.2003, Article 1, the Albanian Government defined the Port of Durres as a landlord port and decided to transfer the provision of port services to the private sector. The concession of the East Terminal has been conducted within this framework.

The tender procedure was undertaken by The Ministry of Public Works and Transport (MPWT) of the Republic of Albania following Decision 493/01.08.2012. The call was issued in December of the same year. In May of 2013 the concession agreement was signed between the Albanian Government and the German-interest company EMS Shipping and Trading GmbH, which was formed by the merger of two subsidiaries: Albania Stevedoring Company (ASC) and German-Albanian Logistic Agency (GALA).

Eastern terminal has the exclusivity of Bulk cargo such as minerals, mineral concentrate, coal, clinker, scrap, cement, edible oil, etc within the Port of Durres, while the competing Port of Vlore lacks the necessary infrastructure.

The concession is for “The management, operation construction and maintenance as well as the technical upgrading and adaptation to meet current and future traffic demand of the Durres East Terminal”, and is for a duration of 35 years.

Finally, the Port of Durres Authority, as regulator, coordinates all port activity and creates opportunities for common services.

Durres2.png
Figure 3.Plan of Durres Port

The Contracting Authority (Public Party)

The Ministry of Public Works and Transport serves on behalf of the Albanian Government as the Contracting Authority under law 9663/18.12.2006 (Law on Concessions) and its amending laws 9995/22.09.2008; 10137/11.5.2009; 10157/15.10.2009 and the normative Act no.1/05.05.2010, which concerns the legal framework for concession projects in all sectors of the economy.

More specifically with respect to the transport sector, a concession is defined as "an agreement between the Contractor Authority (Ministry of Public Works and Transport) and the Operator by which the latter obtains the right and obligation to invest, manage, operate, finance and maintain the facility for public use for a period of time, after which the facility will return to the state”.

The call for tender was announced following government Decision 493/01.08.2012, which was made within the general policy adopted after 2000 for the development of transport infrastructure supporting trans-European integration.

The Concessionaire (Private Party)

The concessionaire of the East Terminal of the Port of Durres, EMS Shipping and Trading GmbH, has been formed by the merger of:

  • Albania Stevedoring Company;
  • German and Albanian Logistic Agency Ltd.

Albanian Stevedoring Company (ASC) was founded in 2009 and is located in Durres, Albania, a strategic port for the Balkans area. ASC is a well equipped port operator with skilled workers and experience in the loading and unloading of dry bulk cargoes, including coal, steel and scrap metal, grain, fertilizers and ore, as well as multi-purpose vessels. It has invested almost EUR 2M in heavy machinery.

German and Albanian Logistic Agency Ltd (GALA) is a member of the EMS Fehn-Group. Its activities include a wide variety of shipping services (international and domestic transportation, customs services, forwarding, etc.).

According to the concession contract EMS Shipping and Trading GmbH is obliged to make the following investments:

  • Rehabilitation of Berth 10 and 11;
  • Filling and compacting of the new reclaimed area;
  • Warehouse demolition (existing cement shed);
  • Rehabilitation of terminal yard behind Berths 10 and 11;
  • Pavement of the stacking area using gravel;
  • Construction of an administration building, workshop and amenities, two gates and fencing;
  • Road, rail and utilities connections.

With respect to equipment, the following investments have been agreed:

  • 2 mobile cranes;
  • 2 mobile loaders (300t/h each);
  • 1 weighbridge;
  • 1 dumping pit for trains;
  • 2 pay-loaders at the stack;
  • 10 dump trucks;
  • 500m of conveyor;
  • 2 mobile hoppers for import of coal.

Users

Traffic through the East Terminal represents around 20-25% of the total volume transported through the Port of Durres. It is dedicated to minerals, coal, scrap and other similair bulk commodities (see Figure 4).

Items/ Year 2010 2011 2012
Exports 348 368 230
Imports 371 316 422
Total 719 684 652

Figure 4: East Terminal freight traffic 2010-2012(‘000 tons)

Key Purposes for PPP Model Selection

The Port of Durres with the assistance of the World Bank, in 2000 piloted the transfer loading and unloading operations to two private companies. In 2009, a further transfer of activities to the private sector was considered following a negotiation procedure for concessions. This concerned the concession of the East Terminal and the Container Terminal.

The concessions were within the framework of the wider policy of the Government of Albania with respect to including the private sector in the provision of transport services, enforced by the positive experience with Tirana International Airport.

Project Timing

The concession of the East Terminal of the Port of Durres coincides with efforts and measures undertaken to support the country’s integration with the European Union.

Project Locality and Market Geography

The Durres East Terminal (DET) is located in the City of Durres city, in an urban environment. The project is located in Tirana-Durres region and is connected to important national and international transportation routes in Albania, including Corridor VIII of the TEN-T (Bari/Brindisi- Durres – Tirana-Skopje – Sofia – Burgas/Varna).

In the past Albania was the 3rd largest exporter world wide of chrome ore. Minerals are the main export product of Albania through the port of Durres. After a slow-down, exports have risen again from a total of about 124 thousand tons in 2003 up to 223 thousand tons in 2006. Albania is reported to have substantial reserves of these minerals still, and a further increase of exports to more than 600,000 tons is expected. It is envisaged that coal, which is currently absent in the Port of Durres, will be imported after 2011 for cement and clinker plants, with imports estimated at 850,000 tons/year.

Procurement & Contractual Structure

Tendering

The Ministry of Public Works and Transport, as the Contracting Authority, invited interested domestic and/or foreign investors to take part in a selective competition procedure for the concession of the East Terminal in the Port of Durres. The concession consists of the management, operation, construction, maintenance and technical improvement of the terminal, as well as meeting its current and future traffic needs.

Terminal operations would include loading and unloading mainly bulk cargo vessels, but also general cargo shipping and project cargo. The concessionaire was required to achieve a high degree of specialization in order to increase productivity and reduce unit costs.

Only one offer was submitted that of EMS Shipping and Trading GmbH.

Contract Structure

The Concession Agreement for Durres East Terminal was signed by the Albanian Government on 6 May 2013. Its duration was set to at least thirty five (35) years.

All existing assets and activities were transferred from Durres Port Authority to EMS APO Ltd on 15 July 2013.

The concession fees include:

  • Concession Fee: 2% of annual revenues payable by the concessionaire to the State;
  • Royalty I: 11% of all processing fees payable to Durres Port Authority;
  • Royalty II: a fixed percentage added for Durres Port Authority;
  • Terminal Leasing Fee: An annual fee of ALL 544 (EUR 3.95) per m2 payable to Durres Port Authority.

The Concessionaire is obliged to invoice and collect tariffs determined by Durres Port Authority and prevailing Albanian fiscal laws.

The concessionaire was also obliged to submit a Performance Bond equal to 8% of the project or service value computed by the Contracting Authority during the appraisal of the financial offer.

Risk Allocation

Risk allocation is illustrated in the detailed risk matrix below.

Durres3.png
Figure 5: Risk allocation

With respect to design and construction some risks are allocated to the private partner, while some still remain with Durres Port Authority. Regulatory risks are linked mostly to the Ministry of Public Works and Transport and Durres Port Authority, which require Albanian Parliament approvals. Finally, the most serious social risk has been the loss of business due to industrial action.

Performance

The concessionaire is required to operate the terminal on a 24/7 basis and achieve the productivity benchmarks found in Western European ports for similar commodities and activities.

There were no Key Performance Indicators included in the contract. However, the concessionaire is obliged to establish quality systems in accordance with ISO standards within two years (by 6 May 2015). More specifically these concern:

  • Quality Management System: certification of the concessionaire’s management system according to ISO 9001:2008;
  • Environment Management: certification of sound management of economic, social and environmental issues ensuring sustainable development, in accordance with ISO 1400;
  • Safety & Security Management: certification with respect to quality of occupational health and safety and security management systems, in accordance with BS OHSAS 18001, and ISO 28000;

Regarding traffic in the East Terminal of the Port of Durres, the concessionaire has promised to double throughput in the next ten years, depending on market demand and the operation of the rail network.

References

  • Albanian legislation on concessions and all regulatory acts for the implementation of their laws. Official Journal of the Republic of Albania. www.qbz.gov.al/(1995, 2006, 2007, 2008, 2009, 2010).
  • The Port Authority Law No.9130 dated 08.09.2003.
  • Council of Ministers No. 493, dated 1 August 2012 for granting a concession to the eastern terminal of the Port of Durres.
  • Council of Ministers “On approval of the transport sector strategy” Decison No.1214, dated 3 September 2008, Official Journal of the Republic of Albania (2008), 145(22) .
  • Council of Ministers of the Republic of Albania “ On approval of the transport sector strategy” Decision, No.27 dated 19 January 2008, Official Journal of the Republic of Albania No.145, dated 22.09.2008, 10(12).
  • Macro-Economic Indicators of Albania 2004-2014. INSTAT, Bank of Albania, Ministry of Finance and World Bank. http://www.minfin.gov.al; www.instat.gov.al; www.bankofalbania.org/;
  • Reports of various materials from the business operation of concessions in Albania INFOARKIV (Albanian Media Archive).
  • Newspaper articles about Durres East Terminal Concession and its operator EMS APO Ltd
  • A. Dedej, V. Shiko, 2014, Durrës Port East Terminal, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8