DP upbeat on Aden

On 1 December 2008, DP World officially took over operations at Aden Container Terminal – in an agreement that includes the lease of both this facility and the nearby Ma’alla Container Terminal, and involves a joint venture commitment to invest about $200m in further developing the port.

In the current climate, two issues immediately spring to mind – the scourge of piracy in the Gulf of Aden, with the allied threat of ships avoiding the area altogether, and the impact of the global financial meltdown.

But DP World is upbeat about Aden’s prospects.

“Aden is a key domestic cargo gateway for Yemen and has been experiencing average annual growth in domestic throughput of around 18% over the past seven years,” says Capt Faisal Al Qahtani, senior vice president and managing director of DP’s Middle East region.

“In addition, the port of Aden is strategically located to capture significant growing regional transhipment volumes. We are excited about the growth potential for Aden over the long term.”

Piracy, he concedes, “is a concern to us and needs a solution”.

“However, we don’t see piracy as a real issue in the short term. Because of the strong domestic growth in Yemen, there will continue to be a demand for ships to call at Aden.”

The Aden agreement, signed in July 2008, is based on a long-term joint venture between DP World and the Yemen Gulf of Aden Port Corp. DP will operate and develop the container facilities; the joint venture is committed to investing a total $220m within five years, including building a 400 metre berth extension to Aden Container Terminal.

Transhipment is an important part of the activity at Aden, but the growth of the domestic economy is a strong driver of volumes, says Capt Faisal. “Our preference is always to focus on origin and domestic cargo when we look at investing, as it is more stable and also something we can contribute to. Efficient infrastructure is good for local importers and exporters and stimulates trade – which in turn grows our business. We see it as win-win for all.”

Capacity at Aden is currently around 700,000 teu – this is expected to grow to about 1.5m teu by 2012, with the joint venture planning to expand capacity according to market demand.

A series of new agreements brought DP’s terminal tally to 48 by the end of 2008. Full year results are not due until the end of March, but half-year figures for 2008 (for the 44 terminals in operation to the end of June) showed throughput growth of 21% to 13.6m teu, compared with 11.2m teu in the equivalent period 2007.

Revenue was up 32% to $1.59bn, and profit after tax from continuing operations more than doubled from $129m to $287m.

In an update issued in November for the first nine months of 2008, DP reported continued throughput growth in the third quarter, with volumes for the nine months to the end of September up 16% compared with the same period last year.

In the first half of 2008, new terminals at Dakar, Senegal and at Sokhna, Egypt jointed the portfolio. “Both benefited from investment in new equipment and DP World management expertise to deliver good results,” says Capt Faisal.

In the second half of 2008, DP acquired Tarragona in Spain, which joined the portfolio on 1 July.

“We next added Aden and Ma’alla, and Algiers and Djen Djen in Algeria to the portfolio, and also renewed our concession in Brisbane, Australia, for a further 40 years, says Capt Faisal.

Also during 2008, DP increased its shareholding in two of its most important terminals in the Indian subcontinent – at Chennai, India and Karachi, Pakistan.

So what are the challenges? No surprises here. “They are, of course, related to the financial turmoil that is affecting business around the world, including trade, which has seen a slowdown in some areas,” says Capt Faisal.

However, he says: “DP World is a global business with a well-balanced portfolio in both developed and emerging markets, so we are well placed to weather the storm and benefit when it begins to abate.

“Meanwhile, we have a strong balance sheet which we actively manage. DP World has a long-term debt profile, which is aligned with the long-term concession structure of the business, so while there is certainly a slowdown in the industry under the current conditions, our long-term growth and expansion plans remain unaffected, including those for the London Gateway.”

As for further investment in 2009, Capt Faisal says DP World constantly explores business opportunities around the world “and we are looking at a number of projects at any given time”.

He will not be drawn on details – “as a policy, we do not comment on any specific opportunity until there is something to announce”. Was DP interested in the concessions at Piraeus and Thessaloniki? “We were interested in Thessaloniki, but at the right price,” he says.