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Godfathers of ports

01 Jul 2007
Freestyle: HPH has not neglected its existing prots, such as Freeport in the Bahamas, in its quest for investment opportunities

Freestyle: HPH has not neglected its existing prots, such as Freeport in the Bahamas, in its quest for investment opportunities

Felicity Landon asks whether the flurry of concessions and expansions being announced by the world’ s major port dons is sustainable

The stream of port investment opportunities isn’t exactly running dry – but according to Drewry Shipping Consultants’ research director Neil Davidson, terminal operators looking for further expansion opportunities may just have to be a little more inventive in future.

“They are already having to look harder to find opportunities – maybe looking for smaller terminals with growth capacity,” he says. And an obvious example might be the east coast port of Great Yarmouth,where PSA International has entered a 60-40 joint venture to develop a new container terminal with Alistair Baillie’s International Port Holdings (IPH). “Who would have thought that Great Yarmouth was something PSA would have gone for five years ago?” asks Mr Davidson.

In global terms, the “big four”– DP World, Hutchison, APM and PSA – have pulled even further away from the runners-up in port operations in the past year, he says. “Their throughput by whatever means you measure it is a quantum leap from the next batch of operators.

“The four big players are just looking for opportunities and each project either makes sense or it doesn’t. In other words, whether it is in North America or on the Ivory Coast, either it meets their criteria and adds up and meets their return and risk requirements, or it doesn’t. But the key thing is they are all having to focus on smaller operations than before, to a large extent because a lot of the larger operations are already gone and the privatisation opportunities have been taken.”

And as the opportunities decrease, so the price goes up:“Obviously they are having to pay more than in the past for these opportunities. So the price is increasing, which also pushes you downline to finding smaller terminals that have potential, rather than big terminals that are already expensive to buy.”

There is also increasing interest in non-container terminals, including bulk, multipurpose and car operations, says Mr Davidson. In this special feature, Port Strategy examines the investment strategies of the ‘big four’ port operating groups, as well as profiling the moves of other international port operators with growth potential. Hutchison Port Holdings

“We regularly review our business development opportunities, which include container and noncontainer operations,” says a spokesman for Hutchison Port Holdings (HPH).“We evaluate each port project as a stand-alone business and review it on its own merits, and do not follow a strategy that requires us to be in any specific countries or region.”

That statement certainly stands true when you examine the HPH global spread. The group operates 257 berths in 45 ports spanning 23 countries in Asia, the Middle East, Africa, Europe and the Americas. In 2006, it handled a combined throughput of 59.3m teu.

A recent new entry to the portfolio is the port of Izmir in Turkey, where an HPH-led consortium won a 49-year concession, announced in May. The terminal, with total quay length of 3.3 kms, was previously owned by the Turkish State Railways Company. In April, HPH was named as preferred operator for the Port of Brisbane’s new container berths; the Australian government is to invest $200m over five years in Berths 11 and 12 and associated terminals. Construction work has begun and Berth 11 is expected to be operation by mid 2012. 

Earlier in the year, Oman International Container Terminal (OICT), a joint venture between HPH, the Oman government, Steinweg and Omani investors, celebrated the opening of its Terminal B, phase 1, at the Port of Sohar, in January.

In February, HPH announced an agreement with Siagon Investment Construction & Commerce Company (SICC) to jointly construct, develop and operate a new container terminal in Ba Ria Vung Tau Province in Vietnam.

The new terminal is expected to come onstream in 2011, with a quay length of 730 metres, depth alongside of 14 metres and a total yard area of 33 hectares.

Also in February, HPH signed a joint venture agreement for the construction of two new container berths in the Quanwan Port Zone of Huizhou Port. “Apart from new port developments and acquisitions, HPH has been actively expanding and upgrading its terminal facilities, including the implementation of our proprietary terminal management system – nGen,construction of additional quay decks, and procurement of modern container handling equipment,”says the HPH spokesman.

Major expansion or upgrade works are being carried out by HPH at its container terminals in Hong Kong, Yantian (Shenzhen), Xiamen, Karachi, Rotterdam (ECT), Manta (Ecuador), Freeport (Bahamas), Lazaro Cardenas (Mexico) and the ports of Balboa and Cristobal, in Panama.

PSA

PSA International’s investments this year have taken it to Turkey, Panama, Vietnam and Pakistan – as well as the UK, where it has entered an agreement with International Port Holdings to build a £30m ($59.9m) new container terminal.

In February, SP-PSA International Port Co, a joint venture between Saigon Port and PSA’s Vietnam subsidiary, was granted an investment licence to develop a new container port project in the Vung Tau province in Vietnam.

Situated near the mouth of the Cai Mep-Thi Vai river, the terminal will serve the fast-growing container traffic of Vietnam and become a major hub for Indochina, says PSA. It will be developed in two phases, with the first to be operational in 2009. When both phases are completed, the terminal will have estimated annual capacity of 2m teu.

In Pakistan, PSA signed a 40-year concession agreement with Gwadar Port Authority to operate a multipurpose and container terminal. The port currently has a quay length of 602 metres with 14.5 metres depth alongside. Depth could be increased to 16 metres in the future, and the port has significant room for expansion.

Last year, PSA handled 51.3m teu of containers at its facilities.The company’s flagship operations are at PSA Singapore Terminals and PSA HNN, and until this year its network of 25 ports were spread across – but restricted to – Asia and Europe. In March, PSA announced its first ever port investment in the Americas – in the development and operations of a container terminal at the Pacific entrance of the Panama Canal.

The PSA Panama International Terminal project, at Rodman,involves the construction,in its first phase,of a 330-metre container and ro-ro berth able to handle about 450,000 teu of containers a year. The facility will have 14 metres depth.

“Both Panama and Singapore are located at the major crossroads of shipping – the Panama Canal and the Malacca Straits represent the two most important and strategic waterways in the world,”PSA’s group chief executive, Eddie Teh, said in announcing the project. “Both nations have major roles to play and contribute towards the facilitation of world trade.”

In May, PSA and Akfen Holding, through their joint venture company Mersin International Port Management, signed an agreement with the Turkish Privatisation Authority and the Turkish National Railways Authority to transfer the full operational rights of Mersin Port to MIP.

MIP won the 36-year concession in return for a tender price of $755m – the third single largest investment by PSA outside Singapore, said Mr Teh. Mersin, which handled 17m tonnes of cargo last year, has proved to be an ideal transit port for trade with the Middle East, thanks to its position on the Eastern Mediterranean coast of Turkey and its good road and rail links, says PSA.

APM Terminals

APM Terminals, which operates over 45 container terminals in its global network, has this year launched Gateway Terminals India’s new container terminal at Jawaharlal Nehru Port in Sheva.

A joint venture between APM and Container Corporation of India (Concor), the Gateway project is India’s largest container terminal, with 1.3m teu capacity. It was opened six months ahead of schedule.

Other recent investments by APM include a concession agreement signed with the Bahrain government for the operation of Mina Salman and then Khalifa bin Salman Port,the new port facility,when it is completed – probably in the third quarter of 2008.

APM has been awarded the concession to operate the commercial ports in Bahrain for 25 years from the start of operations at the new port. Khalifa Bin Salman Port is planned to have 1.8 kms of quayline and will have 900,000 sq m of land.

DP World

For DP World, the big news this year has been the British government’s approval – at last – of the London Gateway container terminal. Approval was a long time coming – the plans were considered at a public inquiry four years ago, and were originally submitted by P&O Ports, which was acquired by DP in 2006.

“This is important news and we are very pleased with the UK government’s decision,” said DP chairman Sultan Ahmed Bin Sulayem. “DP World is planning to invest approximately £1.5bn ($3bn) to develop London Gateway over a ten to 15-year timeframe. This is the single biggest investment project for DP World.”

Construction is due to start later this year, with a target of having the first container berths open in 2010. When fully operational,the terminal will include a 2,300 metre long container quay with capacity of 3.5m teu. “This is a huge and significant project for the UK,” says London Gateway chief executive Simon Moore.

“Ministers are convinced and satisfied that the London Gateway will meet the very clearly identified requirements for additional deepwater capacity in the UK.Trade volumes have been very strong and continue to be very strong into and out of the UK and London Gateway, with its connectivity and one of Europe’s biggest logistics parks [to be developed next door] is a product that will have no equal in the UK.”

Gulftainer

Gulftainer may not be in the “big four” league but that can have advantages, according to commercial manager Keith Nuttall.

“We are certainly looking to expand further with overseas ventures in the port, logistics and transport fields and discussions are currently being held in several countries,”he says.

“Certainly there are still many places where local authorities and managements prefer to deal with smaller port operators/management who can work with them to give the qualitative improvements coupled with the personal service that they would prefer – rather than dealing with an industry giant,”he says.

Gulftainer is looking at several ventures in the Indian Ocean region and the Mediterranean, he adds. The company, established in 1976, has as its prime role the management and operation of the container terminals in Port Khalid and Khorfakkan on behalf of Sharjah Port Authority.

Gulftainer says it has now become “truly global”, through the success of its joint venture with Al Marwan in gaining an operating licence to manage all stevedoring and warehousing in the port of Moroni, Grande Comoros.

“Having just celebrated 30 years in the port industry, Gulftainer proved it has the ambition and resources to continue expanding by not only starting its first venture in the southern hemisphere, but also developing the general cargo side of port management,”said the company. A 15-year agreement has been signed with the government of the Union of the Comoros.

GTL-MTI, Gulftainer’s new joint venture in Pakistan with the Pak Shaheen Group, started operations in December. The transport services company is headquartered in Karachi. Closer to home,Gulftainer’s phase two expansion of Khorfakkan, to provide another 400 metres of quay and up to six super post-panamax cranes, is due for completion at the end of next year (2008),and expansion is also under way at Sharjah.

ICTSI

One of the most recent developments announced by Manila-based International Container Terminal Services, Inc. (ICTSI) has been a contract with the port authority of Guayaquil (APG) for the 20-year concession to manage and operate the container and multipurpose terminals at what is Ecuador’s main port. In the deal, announced in June, ICTSI will pay APG $30m over the next four years as well as a fixed fee per year during the 20-year term.

ICTSI is to invest $80m in equipment and infrastructure in the first year of the concession. The terminals handle containerised, general and bulk cargoes, and the port handled 600,000 teu last year. Earlier this year,ICTSI took over operations of the Yantai Gangtong Terminal in China.The company also operates the Manila International Container Terminal, Suape Container Terminal in Brazil, Baltic Container Terminal in Poland,the Madagascar International Container Terminal, Naha International Container Terminal in Japan, and the Makassar Container Terminal in Indonesia, and is set to start operations in the Tartous Container Terminal in Syria.

ICTSI is looking to expand further,says executive vice president Edgardo Q. Abesamis, but he says the company is not looking to catch up on size or geographical coverage with the “big four”operators.

He agrees that most of the “big” projects may have been taken up, but says:“As the overall world trade keeps growing, small out-of-the-way ports also grow large enough to be developed as ‘modern container terminals’.” ICTSI has been most successful with smaller projects with big potential, he says.“We are mindful of projectby- project profitability. We figure that if we get that right, the rest of the issues will be manageable.”

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