Change of tack

The move is in stark contrast to the unusual swap shop that went on back in 2010, when APMT leased its $540m highly automated Portsmouth terminal back to the port authority’s operator Virginia International Terminals for $40m a year for 20 years in a strategic move to tackle the economic downturn. It’s more usual to see operators lease property from the port authority, not the other way around.

APMT puts the worth of this latest offer at between $3bn and $4bn to the authority, an amount not to be sniffed at over the proposed 48-year lease. The figures look even better when you take into account the $8.9m operating deficit incurred last year by the VPA and its operating entity.

Virginia Port Authority operates terminals in Norfolk, Portsmouth, Newport News and Richmond through its subsidiary, Norfolk International Terminals. Under the APMT proposal, it will operate the Norfolk, Portsmouth and Newport News terminals and said it would be open to taking over the Richmond river-barge facility as well.

APMT has also made clear that it remains committed to the second stage of its Portsmouth terminal expansion, which would boost annual capacity to 1.2m teu. However, as part of the proposed deal, the operator will transfer ownership of its Portsmouth terminal to the state, pay concession fees, make additional capital investments and provide a share of the operations’ revenue to the VPA.

It’s an unusual deal for the US market, and one that speak volumes of the operator’s belief in the recovery.
APMT, as you would imagine, is solidly upbeat about the proposal, with Americas region president Eric Sisco describing the deal as “an excellent opportunity for us to do what we do in a place where we’ve already made a very significant investment”.

VPA, for its part, is more reserved. While admitting that the port is ‘flattered by the interest’, VPA Board chairman Michael J Quillen said the port has an obligation ‘to evaluate all options’. Indeed, because it is an unsolicited offer, the state must seek possible alternative proposals, which must be submitted by July 12. A bun fight is sure to ensue.

State Governor Bob McDonnell has been openly pro privatisation, but in December 2009, three companies tried and failed to buy the port facilities and lease them back to the state. No doubt those bidders – all equity houses – will be looking on this proposal with interest.

At the time, Governor McDonnell said that companies would have to offer “an intensely compelling financial offer” for the state to sell it.

Therefore, the question has to be is APMT’s multi-billion long term offer ‘intensely compelling’ enough?