Guaranteed return a must for ABP
ABP's policy required contracts with a guaranteed 15% return
Long-term demand planning has always been paramount; but it's the level of protection that is built into those forecasts that varies widely.
Associated British Ports used to have a rule that unless a development could be backed up by clear long-term contracts and a guaranteed return of 15%, it wasn’t a goer, explains Peter Barham, founder of Peter Barham Environment and a partner in UK Port Advisers.
"Running slightly parallel to this, we had the government initiative on masterplanning,” he says. “It was a case of throwing everything into the masterplan; if you didn’t include it, the DfT was saying it wouldn’t be accepted. So port companies were forced to consider what might happen in the future simply as a predication for long-term development through masterplanning.
“In a sense, it was a catch-all, because what really mattered was actually back-up from the customer.”
However, ABP’s (then) policy of requiring a signed deal guaranteeing 15% return before making any capex commitment could be something of a catch 22, says Mr Barham.
“Some customers would want to know how definite the planning application was going to be before they would make their commitment. Customers want to see proof you are going to build – but the port doesn’t want to plough a lot of money into what might be an uncertain planning application – the consents process is expensive – until it has the commitment.”
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