DUBAI PORTS WORLD CHAIRMAN: DUBAI CONTROL, BUT NOT PURCHASE,

C O N F I D E N T I A L SECTION 01 OF 02 DUBAI 001010

SIPDIS

SIPDIS

STATE FOR NEA/ARPI, EB/IFD/OIA, EB/TPP/BTA
STATE PASS USTR FOR DOUG BELL
COMMERCE FOR BIS MARY O'BRIEN

E.O. 12958: DECL: 2/25/2016
TAGS: EINV ETRD PREL AE
SUBJECT: DUBAI PORTS WORLD CHAIRMAN: DUBAI CONTROL, BUT NOT PURCHASE,
OF P&O'S U.S. OPERATIONS TO BE DELAYED

REF: ABU DHABI 650

CLASSIFIED BY: Jason L. Davis, Consul General, Dubai, UAE.
REASON: 1.4 (b),(d)




1. (C) Consul General contacted Dubai Ports World (DPW)
Executive Chairman Sultan bin Sulayim (SBS) February 25 to seek
clarification of DPW's February 24 announcement that it was
willing to delay taking over P&O's U.S. operations. Did this
mean that DPW's purchase of P&O would be delayed? SBS stated
emphatically that a delay in the purchase, or its "closing"
date, currently scheduled for March 2, was not possible. The
U.S. portion of the P&O sale was "only 10 percent" of the
overall deal; there were "people working for us all over the
world who are in limbo," and who would be susceptible to
recruitment efforts by DPW's competitors if the sale were put on
ice for a month or more. "We could end up owning a bunch of new
ports but not have enough people to run them," SBS concluded,
adding that delaying the entire sale of the U.K. company would
be "not only unreasonable, but actually impossible."


2. (C) Rather than delaying the actual sale, SBS said, DPW had
decided to "segregate" P&O's U.S. operations. This meant that
DPW would "not exercise any management control" over P&O's U.S.
operations "pending the outcome" of discussions with Congress
and the administration, which would likely mean a delay of 30,
or possibly even 45 days. In practical terms the decision meant
that Michael Seymour, P&O's current "President of North American
Operations," would be the top decision-maker for the affected
ports. There would be no changes in procedures or personnel
during this period. SBS said there had been no request from the
USG or the UAEG for DPW to delay its takeover of U.S. ports;
rather, the decision had been taken "at our own initiative, as a
gesture to make sure there was no confrontation" between DPW,
Congress, and the administration.


3. (C) CG asked SBS about the financing that would be involved
in the purchase. SBS reported that there was no funding coming
from the Dubai Government or ruling family. The bulk of the
financing would come from commercial banks, and would be backed
by income from Dubai Ports and Free Zone Corporation. The banks
had initially wanted Dubai government guarantees, but DPW had
refused this, preferring to keep it an entirely commercial
transaction. The remainder of the funding -- an additional USD
3.5 billion -- was being raised through the issuance of bonds
("suquq").

Background on DPW History and Structure
--------------


4. (U) Giving some background on DPW's role managing port
operations domestically and internationally, SBS said that up
until the creation of DPW last year, Dubai Ports Authority (DPA)
had been responsible for domestic operations, and Dubai Ports
International (DPI) had been responsible for overseas ports. In
September 2005 DPA and DPI had been merged into one new entity,
DPW. DPW's domestic operations were at Jebel Ali and Port
Rashid in Dubai, and at the ports of Abu Dhabi and Fujeirah. CG
asked SBS whether DPW was responsible for port management
operations at Dubai Creek. SBS said it was not: Dubai's Ports,
Customs and Free Zone Corporation (PCFC)'s main presence at
Dubai Creek was the large Dubai Customs operation there. Even
prior to the merger with DPI, DPA had not been involved in
managing off-loading and on-loading of cargo onto the (mainly
small wooden) dhows on the Dubai Creek.


5. (U) SBS explained that while DPW itself played no role in
Creek operations, a small legacy DPA unit there was responsible
for ensuring adherence to port regulations. Elaborating, he
explained that DPA had originally included two elements: (1) a
large port management element related to handling of cargo and
containers, and (2) a regulatory element responsible for
ensuring adherence to government regulations and port
ordinances. After DPA's merger with DPI, it had been clear that
the new entity, DPW, should not be in the "governmental"
business of enforcing regulations and imposing fines on
violators. DPW had thus recently signed an agreement with the
Dubai Government according to which a new PCFC spin-off, to be
known (logically but nonetheless somewhat confusingly) as the
Dubai Ports Authority, would be responsible for regulatory
enforcement at Dubai's ports. Asked whether this new
arrangement was already in place, SBS said "yes, it has been
done." (Note: We understand from a contact at Dubai Customs that
while the deal may be technically "done," in that it has been

DUBAI 00001010 002 OF 002


approved and signed, it is not scheduled to be announced until
the first or second week of March.)
DAVIS