Whether a good or bad thing, some ports are more prone to funds’ attentions than others.
Holman Fenwick Willan's Alistair Mackie points out that container gateway terminals are naturally attractive as transhipment is usually too fickle, but bulk doesn’t really have the right profile, as it’s specifically set up resting on a singular business with not much in the way of diversification. “Bulk tends to be two-dimensional with only one key customer, so it isn’t usually that attractive.”
However, Napier University's Professor Alf Baird adds that a tacit withdrawal from the port sector as happened in the UK, where the 1980s government sold off ports in their entirety and let the market ‘self regulate’, leaves the gate wide open for some decisions which when viewed long term simply aren’t that great.
For a lot of these funds it’s as much about the asset play as the steady revenue. “You know you are going to get the rent, but a bigger incentive might be the projected gain from selling at the right time,” says Mr Mackie. Of course this “right time” may not be particularly good for the port.
Prof Baird explains you can have operations that are sold from one PEF to another, each withdrawing when the bonds they have used to buy the port mature: this can leave a financial burden that can hamper not just a port but a market.
“Take for example the UK’s ports which are now all sitting on old infrastructure saddled with debt which hasn’t helped the cargo flows or the economy at all. In stark contrast to this is Hong Kong where the government has long term plans for the ports because they have long term plans for trade growth,” he says.
Prof Baird says that although it might not always seem so, the best promise of healthy ports is for them to stay under a country’s regulatory wing, while the concessions are let out to a reputable global operator. Yes, there may be tensions, but at least there is a watchful eye that has more than a profit on its mind.
He adds that on the other hand, if a port is bought by a private fund, “someone will eventually have to pay for the inflated sale price” and both importers and exporters, trade and consumers will suffer. “Selling an entire port to a PEF may come at a high cost to future generations,” Prof Baird concludes.
