22 September 2016
MUSCAT: Port Services Corporation (PSC), which operates and manages Muscat's Port Sultan Qaboos, is throwing down the gauntlet in its bid to extract better terms from the government for operating the maritime gateway beyond the current concession due to expire by the end of this year, say industry analysts.

Yesterday, PSC's Board of Directors announced that it had resolved to convene an Extraordinary General Meeting (EGM) of PSC shareholders to consider its proposal for the liquidation of the Corporation.

The decision, it declared, was motivated by concerns "that the (proposed) renewal of the Concession Agreement to operate and manage Port Sultan Qaboos for one more year (2017) will not be economically viable and will not generate adequate returns to the shareholders based on the revised scope and conditions offered by the Ministry of Transport and Communications vide their letter dated August 31, 2016."

Yesterday, the price of PSC shares jumped 10 per cent to 242 baisas per share in trading on the Muscat Securities Market.

The spike was attributed to the liquidation proposal, as well as Tuesday's announcement by the Ministry of Finance to transfer the government's stake in the Corporation to local wealth fund, Oman Investment fund (OIF).

Significantly, the liquidation move represents the latest twist in a saga that began when the government decided to relocate Muscat Port's commercial cargo operations to Sohar Port two years ago and to convert the facility into a maritime-based tourism and leisure destination.

As a result of the relocation, PSC has seen its operations and revenue earnings dramatically plummet in the ensuing period. However, the port continues to receive a modest number of cruise vessels, bulk grain carriers, bitumen tankers, vegetable oil carriers, cement carriers, livestock carriers and visiting naval and passenger ships. Earlier this year, the government mandated its tourism investment arm Omran to drive the transformation of Port Sultan Qaboos into a major maritime-based tourism and leisure hub. The Mina Sultan Qaboos Waterfront Development, as it is dubbed, envisages a mix of maritime, residential, hotel, resort, leisure and retail components.

According to observers, the planned convening of an EGM amounts to an ultimatum to the authorities to either concede the Corporation's demand for improved concession terms or risk a liquidation of the company.

That ultimatum was first articulated by Mohammed Jawad bin Hassan bin Suleiman, Chairman of the Board of Directors, in the recent Directors' report of PSC's financial and operational performance for the first six months of 2016. Citing the continued "uncertainty of the Corporation's future and its role", the Board had urged the government to consider acquiring all of the private shares in the corporation, or alternatively liquidating it altogether.

According to sources, the revised concession agreement proposed by the Ministry of Transport and Communications seeks to, among other things, limit PSC's operations only to five berths (1 - 5), with Omran taking operational control of the remaining berths.

Consequently, projected shipping traffic - which will include cruise liners and naval vessels, among other bulk grain carriers and cement ships, will have to be accommodated alongside the first five berths -- a scenario that the source described as potentially "challenging and constricting". Additionally, some areas that have hitherto helped generate rental revenues for PSC are also proposed to taken away as well -- measures that would constrain the Corporation's financial viability, the source explained.

Analysts are however quick to point out that an early liquidation is unlikely until alternative arrangements are in place for a smooth transition to a new operator. Furthermore, with state and public sector entities owning roughly half of the total shares in PSC, a vote in favour of liquidation is unlikely to be smooth.

To preempt the liquidation of the corporation, one option that the government could likely consider is the buyout of PSC, according to analysts. Any takeover would satisfy the expectations of private shareholders, who are likely to reap a premium on their shares in the event.

© Oman Daily Observer 2016