Kinder Morgan Deal Is Dead
In today’s Open Thread, SussexWatcher points us to the news. Both the NJ and WDEL have reports up providing a summary of what was in the Kinder Morgan letter and some local reaction. EDIT — WDDE has put up their report with some additional detail on why KM walked away. It looks like the deal is off of the table, although the NJ discussion with KM seems to leave a slim bit of wiggle room for everybody.
Kinder Morgan blames this failure on one of the union leaders at the Port, and it looks like they are pointing the finger at Julius Cephas, who is ILA 1694-1 President. While there isn’t much known about the details here, it seems odd to me that they would blame Cephas, who wasn’t a party to the contract negotiations. Especially since there wasn’t a contract ready to present to the Board next week. And that there were lots of others with serious issues with this deal who own and operate perfectly good businesses just outside of the fence. Still — I’m betting that there is more to this story.
EDIT: from the WDDE report:
Schlosser [KM President – ed.], in his letter, said Cephas’ declared intention not to meet with Kinder Morgan again until the General Assembly approved a lease deal, combined with some legislators’ position that they would not approve a lease deal unless a new union deal is in place puts the company in “an impossible position.”
“Simply put, we have choices in terms of where we will invest substantial resources and the current union leadership at your facility does not make Delaware a good choice at this time,” Schlosser wrote Port Chairman Alan Levin in his letter. Levin is also Director of the Delaware Economic Development Office.
In any event, it gives all of these parties a chance to rethink what needs to happen at this port. Shame though, that Jack Markell is persisting in this bit of delusion:
In a statement, provided to WDEL, Governor Markell calls the failed deal “unfortunate,” adding that the Port of Wilmington won’t be able to capitalize on an opportunity for increased jobs and a capital investment beyond what the state can afford.
We aren’t supposed to remember that KM investment wasn’t going to be especially big at this Port — certainly not at the level that would build out onto the Delaware. It is time, though, for much better strategic planning for this State asset and working at making the kinds of investments that maybe the State can afford. Perhaps the State could start by not giving up revenue to casinos.
Post whatever you are hearing on how this deal fell apart.
Tags: Kinder Morgan
The deal failed b/c the deal that was represented to us by Markell and Levin had no passing resemblance to the reality of the deal at all.
They either lied to us, or these brilliant businessmen just didn’t understand the deal.
They might even have gotten away with it were it not for those pesky bloggers and legislators who went looking for facts.
They should feel embarrassed and chastened. They have nobody to blame but themselves.
To help make amends, they should immediately release the funds that they’ve been sitting on for close to a year now. You know, invest in the Port instead of deliberately starving it.
Much was revealed on the radio Wednesday – http://www.wdel.com/features/port-kinder2013-03-06.mp3
The port is not losing money really – depreciation is not a cash value for non-profit corps. And Levin admitted that the administration was looking for KM to automate the warehouses to stay competative READ: the jobs would be gone, gone, gone for blue collar Wilmingtonians.
Thanks for the link, Nancy. I’ll listen to it when I get a minute. I was working on a few charts to show the Port’s financial situation, but it is good that they finally admitted that it isn’t in the dire straits they were portraying.
But automating the warehouses? That might be right, but there have been a few stories they’ve been telling about why they wanted a port partner, so who knows what to believe. But still — why didn’t KM talk about that in their presentation last month? I would think that automating the warehouses *is* a major investment and one that might secure the support of the fruit importers. And I’d guess that if the fruit importers supported this thing, it would have happened. But the money that KM discussed in their presentation was for construction of their needs and for 5 years of O&M — not (that I can tell for certain, really) for the costs of automating the warehouses.
What seems more plausible to me is that after there was more public scrutiny, they needed a real capital project to be heroes for and KM wouldn’t commit — KM is not, after all, in the fruit business. But again, I don’t know for certain since they decided they needed to work within their Cone of Silence.
Levin’s economic development roofies were not potent enough to induce the required levels of sleep needed to close the deal.
heh, good one Jason.
If you listen to the WDEL podcast, it was very interesting to hear Levin try to assert that SB3 meant that legislators were only allowed to ask questions about the deal during the Bond Bill hearing and that the chamber votes would be up or down with no debate allowed. That got a reaction from Kowalko.
Plus, I just read Kinder Morgan’s letter. It is one hundred percent about Julius Cephas even to the point of asserting that
“we have choices in terms of where we will invest substantial resources and the current union leadership at you facility does not make Delaware a good choice at this time.”
And
“As a $100 billion customer focused, capital and service provider, …..[the deal]…..would very likely result in hundreds of new jobs, significantly more capital investment, with significant work being done by local Building Trades and substantially increased competitiveness for the Port of Wilmington. However, none of this is realistic if the local workforce is not productive because a volatile union leader is not even willing to negotiate, let alone agree to a reasonable contract.”
Nice way to try to pit the unions against each other. Pretty much KM is suggesting that they will come back and talk if Cephas goes away.
One thing strikes me now from sitting in on the Feb. DSPC meeting is that KM kept saying that day that this deal going through would be a model, set a great example for Delaware on other Public Private Partnerships planned elsewhere in the state. I hope I get the heads up from whoever has some idea of what other PPPs are possibly now being drummed up for us.
Longshoremen are tough. In the privatization game Markell will have better luck with teachers.
What struck me about the letter is the allegation that Cephas was working with another group that has bid on the project.
Let’s not assume Julius Cephas has nothing to answer for. This is the guy who squeezed $80,000 out of Coons for doing nothing, if you’ll recall.
The reason I find that significant is that it would mean that the opposition to the KM deal was actually being manufactured for other than benign motives.
Well, there are a lot of details over at DSPC that are still hidden that will probably never come to light. Levin, in that podcast, also asserts specifics in the RFP response of “that other bidder” along the lines of no guarantees for union jobs etc. compared to KM’s three year offer. If true, why would unions work with the other bidder….
From what I remember being told, the other bidder is the team now involved in business at the port. I don’t know what their terms were but they would have had to have offered the capital improvements too. They were the successful bids after 70 responses, 17 determined ‘realistic’ and two final competitors with KM winning the final.
KM implying any one thing or another at this point is probably just what it smells like….
“If true, why would unions work with the other bidder….”
One union was in favor of KM, Cephas’ was not. If he’s in cahoots with the other bid, that would explain a lot, wouldn’t it? We already know what he is — you of all people remember the $80,000 he got from Coons — so would it surprise you to find him acting in his own interest rather than the union’s?
“KM implying any one thing or another at this point is probably just what it smells like….”
It smells to me like Julius Cephas has conducted another successful shakedown.
One union was in favor of KM
This isn’t true. The other union was trying to be somewhat neutral until Levin publically claimed that they were on board and he was corrected on that. However, at the City Council hearing, the other union specifically spoke out against the deal.
Thanks, Cassandra. I was going off what Levin said.
Either way, the KM letter is quite specific in its reasons for placing the blame on him. Whatever happens with the port is now on the head of Julius Cephas. I certainly hope he has garnered the support of enough people in Dover to fund improvements to the port.
I was going off what Levin said.
Did he say this in his interview this week? If he did, then this looks like all of them are trying to isolate Cephas for some reason. For all I know they may have good reason, but if Levin is continuing to repeat something that hasn’t been true for months, it looks like we have one more data point that is had to fit.
On the other hand, you can’t underestimate how badly this looks to the Port customers and other businesses. The “jobs” Governor who has been throwing money at Amazon and the refinery isn’t looking all that committed to the Port, which should be a really big signal to all of the overseas clients they have been trying to court.
“this looks like all of them are trying to isolate Cephas for some reason.”
I believe the reason is that he did everything he could to sink the deal. They specifically said they wouldn’t be able to work with his union given his antagonistic attitude. If he took that posture because he’s involved with the other bid, he has a lot to answer for. And we already know what kind of sleaze he is for the Coons shakedown.
“you can’t underestimate how badly this looks to the Port customers and other businesses. The “jobs” Governor who has been throwing money at Amazon and the refinery isn’t looking all that committed to the Port, which should be a really big signal to all of the overseas clients they have been trying to court.”
Good luck trying to spin that one. The clock is now ticking. If Julius Cephas’s group doesn’t come up with the money and the port withers away, who are you going to blame then?
Not going to blame Cephas — if anything because I’m certainly NOT going to take Kinder Morgan or Alan Levin at their word for why this thing died. Neither have earned any credibility here.
The DSPC Board has alot to answer for here. Starting with how it is that the Port has banked a previous year’s capital funds while telling everyone that they need upgrades. And including how they could make a selection of a firm that would have every incentive to throw the businesses already operating outside of the Port under the bus. And also including how their financials could get so topheavy with wages and salaries without boosting operating revenues.
And I don’t think I know what the Coons shakedown is.
“I’m certainly NOT going to take Kinder Morgan or Alan Levin at their word for why this thing died. Neither have earned any credibility here.”
I find Alan Levin far more trustworthy than Julius Cephas.
“And I don’t think I know what the Coons shakedown is.”
Ask Nancy. When Coons took office as NCCo exec, he gave Cephas $80,000 — split into two under-$50,000 contracts so bidding rules didn’t apply — as a “community liaison” to the “black community.” As far as anyone could tell, Cephas was not required to produce any actual work product, so there’s no evidence he did anything whatsoever for the money.
“how they could make a selection of a firm that would have every incentive to throw the businesses already operating outside of the Port under the bus.”
Easy. They were the only bidder with any funding.
Why should anyone find it surprising (indeed, why shouldn’t people find it perfectly predictable) that the very first obstacle that a big company would represent as an obstacle to a deal is the position of a labor union? And what better way to stagger and disempower a labor union than to go after its leader and, thereby, subtly make the case that the union leader should be removed from his position? And what is particularly wrong with Cephas holding the position that he wants to see what position the General Assembly will take before he starts negotiating with a company about a deal that might not even be politically feasible with the General Assembly?
This is why I think that pretty much everyone asked (including the Chamber, for cryin’ out loud) are scratching their heads over the focus on Cephas here. I’m not trying to defend him, but I’m having a hard time seeing what KM’s issue is — especially singling out one union when there are two who are objecting. And there were multiple businesses working hard at objecting to this too. And some of the Port’s customers who were certainly nervous. When I read the NJ article last night I suspected that KM might be lazily dogwhistling in blaming one unions (not them both) and the letter reinforces that for me.
And I’d forgotten about the Coons Cephas thing.
Easy. They were the only bidder with any funding.
I’m not trying to be difficult about this, but funding for what? The losing bidder was a consortium or JV of firms at the Port and I’m having a hard time thinking that they couldn’t have come up with $200M. Because that is all that KM was committing to, at least that we could tell. And they wouldn’t have needed all $200M immediately since approx 140M of was part of the lease payment over 50 years. You would need the deeper pockets if there was a commitment to building into the river or undertaking a large automation project, but that wasn’t on offer.
The press makes it sound like the General Assembly deferred their veto to the union, who would not even meet with Kinder Morgan. When you have cash you can go anywhere.