Investment fund manager The Carlyle Group informed the state of Virginia this month that has withdrawn its proposal to operate the Port of Virginia.
State officials, including the Virginia Port Authority (VPA), are still considering offers from APM Terminals and RREEF, the real estate arm of Deutsche Bank, to take operational control of the state's marine terminals in Hampton Roads and an inland port in Front Royal for 48 to 50 years in exchange for large payments and infrastructure investments.
APM Terminals ignited the process last spring with an unsolicited offer worth an estimated $3.1 billion to $3.9 billion to the state, which then asked other interested parties to submit alternative proposals.
Officials are also evaluating whether to continue with Virginia International Terminals, the VPA's non-profit business that currently operates the terminals.
"As you know from our pursuit of a similar transaction in 2009, we believe there is substantial opportunity for economic growth by charting a new course for the terminal operations at the Port of Virginia. However, after substantial analysis and deliberation, we have determined that it is in the interests of our partners and investors that we withdraw from the transaction process," Managing Director Robert Dove wrote to
the Office of Transportation Public-Private Partnerships on Oct. 5.
In its initial expression of interest, Carlyle valued the Port of Virginia's assets at $1.8 billion to $2.1 billion.
The state is seeking firm bids from the remaining parties next month.
Carlyle was one of three private groups in 2009 that made unsolicited offers to operate the Port of Virginia. Those proposals did not include the APM Terminals facility. Gov. Bob McDonnell's administration said it ended consideration of the proposals because they did not offer enough value.
No reason was given by Carlyle for canceling the offer, but one factor that looms as a possible disincentive to other proposers is that APM Terminals essentially has veto power over any deal that involves its privately-owned terminal, which is part of the VPA's terminal network. In 2010, APMT leased its ultra-modern new container terminal in Portsmouth to the VPA for 20 years. Under that transaction, it has the right to approve of any transfer or sublease of the APM Terminal facility. That could potentially act as a disincentive for third-party bidders because the value proposition for a concession is to operate the port facilities as an integrated whole. APMT is also the crown jewel of the facilities in the region in terms of its operating efficiency. If APMT doesn't agree to some kind of arrangement that would mean a private operator would have to compete against APMT for container business.
The Virginia General Assembly's House Appropriations Committee held a hearing Monday to learn more about the privatization process. - Eric Kulisch