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The negotiations between the port of Piraeus and the Chinese company Cosco for the drawing up of a new contract that provides for the freezing of the guaranteed returns with parallel investments to the amount of 220 million euro in the construction of the west side of pier ΙΙΙ, so that its capacity increases from 3.7 million TEU in the original contract to 6.2 million TEU, took a bad turn.

After the signing of the record of cooperation by the two sides on 30 August 2013 it seemed that everything was clear. The only major problem, however, was the position of the supervisory Troika which, from the very beginning, had been negative to the amicable agreement reached between the parties because it believes that the implementation of the agreement between them will reduce the sale price of the majority stake in the port of Piraeus.

Minister of Merchant Marine and Aegean

After the explanation of the Greek Minister of the Merchant Marine and Aegean, Miltiadis Varvitsiotis, that if the amicable agreement is not extended it will lead to legal complications which will hamper the sale of the port, the Troika has changed its position and is now playing a waiting game. Nevertheless, it has clearly specified that the procedures for the sale should progress in parallel.

However, the course of developments is not smooth, as the port of Piraeus has included in the new agreement new terms that are not contained in the record of cooperation, because it wants to better protect its interests with regard to the concessionaire.

It seems that the negotiations between the port of Piraeus and Cosco have stalled because the two procedures, namely the sale of the port and the amicable agreement, have turned into a real "rally" since mid-September, as the one which is completed first will win. On the other hand, the efforts aimed at the direct sale of the port’s shares supported by the Troika are gaining the lead.

Reactions to two issues

The port of Piraeus has sent to Cosco the new agreement offered by it. However, it contains clauses that have provoked the sharp reactions of the Chinese company. In particular, the port of Piraeus wants to participate in the awarding of activities on the part of "Container terminal - Piraeus" SA to subcontractors, i.e. to approve them on the grounds that, in this way, it would be able to ensure its profits.

The second issue relates to the rent of the widened part of the third pier, as the port of Piraeus wants it to be equal to the rent of pier ΙΙ and to that of the eastern part of pier ΙΙΙ. The port of Piraeus also wants guarantees and penalties for the construction of the western part of pier ΙΙΙ and for the pier for oil and petroleum products, which will be built by Cosco and managed by the port of Piraeus. The required capital will be repaid to Cosco on a long-term basis and at a low interest rate. Cosco does not want to enter into such detail because it believes that the new agreement should include only the terms of the record of cooperation which have been negotiated for ten months already.

In the event that the two sides continue to hold their ground the amicable agreement will totally fail despite the assurances by Prime Minister Antonis Samaras, and the government will continue to try to sell the port of Piraeus.

The "trump cards" of the companies

In the negotiations with Cosco the port of Piraeus relies on the fact that the company does not want to change the rules regarding the ownership of the port of Piraeus nor does it want to begin a new round of negotiations with a rival company which does not exist at present anyway.

Cosco, however, holds more "trump cards" since it can refer the case to arbitration and the probability of it winning at least part of what has been agreed in the record is high. This, in turn, might change the conditions of the tender for the sale of the port or further delay it at least.

Cosco has another advantage in terms of the pier for petroleum products, which is the responsibility of the port of Piraeus. Under the original amicable agreement, the port should complete it next month, which is technically impossible. In this situation Cosco has the right to request to be paid penalties amounting to 10 thousand euro a day and to start receiving them.
 
Cosco’s most important "trump card", if things go too far, is the interpretation of the concession contract according to which the company should approve the sale of the majority stake in the port of Piraeus.

Conditions for participation in the tender for the sale of the port of Piraeus

So far, Cosco is considered as the favourite buyer of the majority stake in the port of Piraeus. However, during the negotiations, the company has set as a condition for participation in the tender for the sale of the biggest Greek port, the enforcement of the procedure for master concession. If Cosco materializes its warnings, the negative development regarding the amicable agreement will lead to the failure of the investment programme of the fund for the development of state property relating to the port of Piraeus.

What does the protocol of cooperation provide for?

In the protocol the two companies have agreed as follows:

• To settle the dispute about the changes in the agreement under the present procedure.
• To carry out the activities regarding the increase in the capacity of pier ΙΙ and pier ΙΙΙ to 6.2 million TEU per year as proposed by "Container terminal - Piraeus" SA. "Container terminal - Piraeus" SA will pay the price specified in the concession contract (21% by October 2017 and 24.5% thereafter) on the basis of the total revenues from pier ΙΙ and pier ΙΙΙ, including the revenues from the western pier ΙΙΙ.
• To build a pier for petroleum products. The project budget will be agreed following the completion of the technical study and the agreed price will be paid within 22 years, including a two-year grace period from the completion of the site, and at an interest rate equal to Euribor plus 4%.
• The guaranteed returns provided for in the existing concession contract have not been cancelled. Their enforcement as of 2013 will be delayed due to the increase in capacity and the additional benefits for the port of Piraeus, and they will be linked to the GDP, until the GDP reaches 2008 levels plus 2% per year.
• In the event of any judicial or administrative controversies and disputes with a third party exclusively due to specific changes in the concession contract, "Container terminal - Piraeus" SA will undertake to complete the appropriate procedures and exempt the port of Piraeus from any liability arising from the above contradictions, indemnifying it for any losses or expenses incurred by it.
• Based on the above, a draft amendment to the contract will be immediately drawn up which will be submitted for approval under the following procedure: a) approval by the general assembly of "Piraeus Port" SA, b) notifying the DG COMP, c) preliminary control by the Court of Auditors, and d) ratification by parliament.