Portland to solicit private investors for container terminal
The Port of Portland Commission is expected today to hire Morgan Stanley as its financial advisor to market its container terminal as a long-term concession to a private sector operator, Port Executive Director Bill Wyatt said at an industry conference.
The decision to be taken at its monthly meeting will essentially authorize the port and Morgan Stanley to commence issuing requests for qualifications for firms interested in a concession agreement to operate the port’s Terminal 6. It is the first step towards selecting finalists to bid on the property.
Private equity players having identified infrastructure in North America as a new market opportunity in the past two years. After watching private terminal operators rake in huge profits by selling out, local governments with ports are seeking ways to monetize the value of their assets for financial gain and to leverage the private sector to take more of the risk associated with infrastructure enhancements.
Portland will explore both a concession-type arrangement as well as more conventional landlord-leasing model, Keith Leavitt, project manager for the Terminal 6 initiative, said in phone interview. Either way will mark a significant change for the port, which has handled terminal operations itself. At Terminal 6, the port uses Marine Terminals Corp. as its stevedore.
“We would review all types of proposals,” Leavitt said. “Our goals are we want a really good operator who is able to drive more volume through our facility, to grow the business over the long term and invest in the business with some form of capital commitment. We want to provide better access to markets for our local and regional shippers, and we want to create a stable rent stream to the ports. Whether that's in an up front payment or more of an annuity-style payment we have haven't decided that yet.”
A competitive solicitation process would probably start in January or February and could take the better part of the year, he said.
The port’s experience as a hands-on container terminal operator should prove helpful in evaluating the concession proposals, Wyatt said on the sidelines of the first North American Port and Intermodal Finance and Investment Summit held Dec. 3-5 in Miami.
Portland, which has had difficulty at times attracting container lines up the Columbia River, is at a disadvantage trying to act as a solitary actor in a global business, Wyatt said.
“We are not operating on a global scale. So we end up loading up all the costs associated with operating a global business on one little container terminal. A large enterprise can spread its costs amongst its global operations,” Wyatt said of the rationale behind the privatization.
Companies like Dubai Ports World and SSA Marine, for example, have terminals around the world. That gives them a network of locations through which they can provide cargo handling services and spread best practices to operate more efficiently.
Wyatt said the port would entertain a concession of 40 to 60 years, or longer if the circumstances make sense.
Some infrastructure fund executives say shorter term arrangements may be better for engendering public trust in concessions of public assets. But much of that discussion focuses on highways, which are pure monopolies compared to the very competitive port business.
“If you’re asking people to make a substantial investment in capital they need time to make it work,” Wyatt said, adding that the port would still own the property and could step in if the concessionaire did not meet performance requirements.
“That’s the key. What kind of performance requirements come with the concession,” he said. “If someone invests a lot, they’ll have a powerful incentive to make sure that they are generating returns.”
Hanjin and Yang Ming are the primary container lines that serve Portland from Asia. Hapag-Lloyd has a service that arrives every 10 days from Europe. Israeli carrier Zim Integrated Shipping Services dropped Portland as a port of call after one year.
Earlier this year Taiwanese carrier Yang Ming began using larger ships calling on Portland, which increased the container volume moving over the docks.
The port will probably record the strongest year for overall cargo tonnage in its history, Wyatt said, with the container volume subset up 10 percent versus 2006 to about 250,000 TEUs. In 2005, container volumes had dropped to 160,500 TEUs. Total capacity is 500,000 to 750,000 TEUs without any enhancements.
He attributed the rise in import growth to higher trade volumes and the difficulty of greenfield development to expand capacity along the West Coast. And he suggested that Portland could benefit if any labor dispute arises during upcoming negotiations between terminal operators and the International Longshore and Warehouse Union, because the port is the only operator on the West Coast that is not part of the Pacific Maritime Association that negotiates on behalf of waterfront employers.
While small in terms of container business, Portland is the nation’s largest export gateway for potash, and processes about a half-million auto imports per year. The port set fiscal year records for export grain (4 million tons) and mineral bulk (4.8 million tons) volumes, as well as import steel (1.1 million tons). ' Eric Kulisch