Podcast looking at new funds coming to Ports sector and the RAMP billBy james tweed • Mar 6th, 2012 • Category: Ports
Thank you for downloading this podcast from Coracle Online. This podcast is from our ‘ports’ series and is produced in association with Port Strategy Magazine.
In this episode we ask, “Is the entrance of pension funds, infrastructure funds, private equity funds and other non-core investors into the international port investment arena a good thing?” and then we look at an important piece of US legislation, the Realize America’s Maritime Promise (RAMP) proposal, that could free up money for harbour maintenance and how it’s kicking around Washington, DC.
So, first off, the entrance of those non-core investors and, well, of course it’s a good thing…
Some might claim that they have led to a major inflation in the price of terminal assets, but as they say what goes up must come down, and guess what, in general this happened with terminal assets.
You can even take the view that EBITDA multiples are half what they were in the heydays of 2008. So we have to say “get real” to those that decry the entrance of parties other than international terminal operators into global port investment.
Indeed, many international port operators have been invested in by such entities – so it is a little ironic to hear the recent view that non-port operators investing in the sector are distorting the market.
Equally, it seems a little unrealistic to say that port operators are unable to compete with them . There is some overlap but we suggest that, in the main, the type of investments made by both entities tend to fall into two different categories. The majority of international terminal operators tend to invest in individual terminals – only two or three have the resources to buy out a whole chain of terminals or a large port. The latter arena is where the funds tend to come in.
By their own admission, international terminal operators also recognise that they alone cannot meet all the investment requirements.
More interesting, the sector overall is only just beginning to embark on the journey of how non-core investors and international terminal operators can work together. This promises to be a relatively slow process but one that over time may make larger projects open to a greater number of parties and make some projects viable that have hitherto have not been viewed as such.
One of the fundamental determinants of this will be the willingness of funds to stay in a project for longer than a token period, i.e. to “make a quick turn”.
Now let’s look at that US legislation, and amid all the political thrashing, it may be getting caught up in a bigger transportation funding debate in the Capitol, namely the $260 billion, five-year transport funding initiative proposed by Republican Congressman John Mica.
Invariably, the bigger issues related to highway funding are at the front of the pack, and when the scrum clears, maritime and port related considerations are at the back – if they haven’t been completely jettisoned.
For the past three years, transport funding has gone hand to mouth, in crisis mode rather than part of a long term plan. Deep within the Mica bill, there is some talk, without any money actually authorised, about development of a national freight policy, and a blueprint for advancing intermodalism of the type that would keep trucks off the roads. This is all about congestion mitigation; if you continue to build roads, traffic will come, and clog them up.
All this analysis is good stuff for consultants who could shift containers off the road to rail links with the stroke of a computer mouse. However, for the theories to work, real deep-drafted ships need to get into ports.
Though we don’t expect every single East Coast port to assume “megaport” status, deeper is better. To many, the RAMP bill (which would enable funds to be spent on dredging and deepening) should stay separate from the $260 billion package.
Even though the AAPA has applauded the Mica bill (which includes language similar to RAMP), many believe that a separate bill has a better chance of not getting drowned out, and so, would focus law-makers minds’ on the port business.
Take for example, Brooklyn, where they can’t build any roads even if they wanted to (and had unlimited money, which they don’t). The CBP, which deploys customs inspectors, is actually considering pulling its personnel out of an import terminal at Red Hook – which is closer to the ultimate destination for boxes coming in. According to box counters around the docks, this would result in something like 4,000 annual truck trips across the Verrazano-Narrows Bridge to Staten Island or New Jersey for inspections. Er, hello…anybody home at CBP?! If national policy is looking for ways to reduce truck traffic on the roads, the cry for starting with the no-brainers seems understandable.
So, what do you think? Are these sources of finance good for the ports sector, should the RAMP bill be part of, or separate from the 5 year transport funding plan in the US? Please let us know what you think by leaving a comment on ShippingPodcasts.com