The best of all worlds

When port operators speak of equipment leasing, discussions tend to be centered around the financial pros and cons of such an arrangement relative to owning and operating the equipment themselves. But in my view such a discussion fails to do justice to the broader benefits of equipment leasing.

Sceptics of equipment leasing point to the scarcity of large scale equipment leasing in modern container terminals today as evidence that there is no real benefit to equipment leasing, and then to the prevalence of equipment ownership by operators themselves as vindication of that assertion.

My view is that equipment leasing has not, so far, ‘taken off’ in any meaningful way because it has almost always exclusively been offered as a pure financial solution, offering the equipment lessee the means to have the equipment without large initial capital outlay. This may be helpful to an operator who may not have the necessary funds, but to another who has the means of raising such funds in the capital markets, equipment leasing does not make sense.

However, in my view, holistically combining equipment leasing with a number of value-add solutions offers a whole new perspective to the operator. Such solutions include equipment specification during the terminal conception and design stage. I have seen a number of operators who have made many painful mistakes in equipment specification because this was not done in conjunction with terminal layout design, quay design and other consideration during the terminal conception stage.

This can lead to less than optimal equipment specification resulting in unnecessary equipment modification costs and adaptations to the equipment that had not been envisaged in the first place.

Other value-add solutions include equipment tendering and procurement – this is again a task which is often not done with sufficient levels of scrutiny given that operators may not have the suitable technical expertise for a task; quality control during manufacturing of equipment – a job which is normally reserved for consultants; and equipment testing before delivery and handover, with a full commissioning check list and endurance test to minimise any downtime during operation.

One final solution involves equipment maintenance with guaranteed equipment availability. The recruitment and retention of experienced and skilled technicians/engineers to maintain the equipment usually poses a great challenge to many terminal operators. This challenge can be overcome by outsourcing maintenance to the equipment lessor who has an interest in proper maintainence of the equipment because the lessor still ultimately owns the equipment. The equipment lessor in this case would also have access to greater economies of scale in equipment and spares procurement and any savings may be passed on to the operator.

If equipment leasing can be combined with these value-add activities then the lessee has not only a pure financial solution but also a universal solution that not only enables him to avoid large capital outlay for equipment purchasing, but also affords him the peace of mind that all the equipment has been suitably specified, procured, delivered, commissioned and maintained. The operator’s equipment costs are fixed by the leasing/maintenance agreement which enables it to more accurately determine its return on investment.

In my view, this will free up valuable management bandwidth to focus on the all-important business of attracting customers to the terminal and serving them well.

Through a holistic leasing solution, the operator can effectively fully ‘outsource’ his equipment needs and also reduce his operational and financial risk.

Tok Soon Chong is the chief executive of Portek Systems & Equipment and is also the chief technical officer of the Portek Group. Portek, a subsidiary of Mitsui & Co., Ltd, is both an operator of ports as well as an end-to-end provider of port equipment engineering solutions. Portek currently leases cranes on operating lease to operators in Indonesia and Philippines.