Fast & Curious: Short Takes on Random Things

Has Our SHIP Come In?

My thanks to Tim Bousquet of the Halifax Examiner who has been trawling (not trolling) the NS Registry of Joint Stock Companies on a regular basis for new listings and found this one. Note the date of registration:

NS Registry of Joint Stock Companies entry for Sydney Harbour Investment Partners

I have contacted the registry in an attempt to discover the significance of this registration, which happened three days after the CBRM Council approved a five-year extension to Sydney Harbour Investment Partners’ exclusive deal to promote the municipality’s greenfield site as a potential mega-container terminal. (The firm was referred to as “Harbor Port Development Partners” throughout the debate, even though changed its corporate name to SHIP in October 2016). As you can see from the listing, SHIP (as HPDP) has been registered federally since 26 May 2015.

For now, the only additional information I can offer you is that Maurice P. Chiasson is a lawyer with Stewart McKelvey in Halifax and his experience includes, “Representing the Province of Nova Scotia in connection with commercial agreements relating to the Yarmouth Ferry project” and “Providing commodity tax advice in relation to the acquisition by Sobeys of the assets of Canada Safeway,” so he may indeed be the man for the job.

 

That Time Ports America Declared Bankruptcy

I was reading An Analysis of Port Concessions prepared on behalf of the Manatee County (Florida) Port Authority by R.K. Johns & Associates in June 2010 (yes, I am that far gone) and I came upon this interesting case study from 2009. It involves Ports America and the Port of Oakland, California.

First, here’s how “concession” is defined:

Basically a concession can be viewed as a form of a leasehold agreement.  The concepts are really interchangeable.  In recent years, concessions have come to mean longer-term agreements to operate a business on port authority owned land with annual fees paid for these rights.  This has the same attributes as a lease, but normally today concessions carry with them actual contributing business (minimum annual TEU volume guarantees for a container terminal), as well as the commitment by the concessionaire to invest in facilities and equipment necessary to service that business for an extended period of time.

So, in 2009, Ports America won its bid to take over operation of a Port of Oakland facility that had been run by APM Terminals (it actually beat out APM Terminals in the bidding). This, according to the Manatee County report, was Ports America’s “rationale” for investing in the Port of Oakland:

Capital is needed to be competitive and plan for the future. U.S. ports have limited funds to build or expand, so financing choices are: bonds, bank financing, government funding or private investment. Considering the current financial situation, the best option is a value-creation opportunity that attracts private investors like Ports America, which looks for long-term sustainable growth in commercially viable projects.

The 2009 Port of Oakland’s 50-year concession agreement with Ports America for the 165-acre site of Outer Harbor Berths 20-24 is an example of a new model of shared risk and reward that will provide immediate benefits to the port in terms of upfront financing and transferred responsibility. By taking the facility “as is,” facility maintenance and expansion expense is shifted to the leaseholder. Ports America also bears the commercial risk, but it controls the development design and timeframe.

By sharing control and terminal development/operations risk, port authorities cannot always insure that the economic, environmental and security/safety mandates are being properly addressed.

Ports America recognized these concerns in their assessment of the Port of Oakland, but acknowledges that the implementation decision for such investments by a private company as opposed to a port authority can be influenced by profitability: Equipment investment and the environment are major considerations. A 50-year concession period allows the added time for the investor to achieve return on investment, or ROI, for substantial purchases of state-of-the industry environmental terminal equipment that is necessary to increase throughput productivity, reduce emissions, decrease environmental footprint and augment existing equipment. The environmental issue is a key factor when growing a facility.

That all sounds great, right? Profitability, risk-sharing, the environment? What could possibly go wrong.

Port of Oakland, California. (Photo by By JGkatz|Jeffrey G. Katz (File:Port_Of_Oakland_California.tif) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons)

Port of Oakland, California. (Photo by JGkatz|Jeffrey G. Katz, CC BY 3.0, via Wikimedia Commons)

Well, as it happens, I had recently been pointed to this story (and again, I have to thank Tim Bousquet, that uber-port skeptic, for alerting me to it). Later I looked up the Port of Oakland press release:

 

‘We negotiated in good faith, a shame they’ve taken this step’

Oakland, CA – February 1, 2016: The Port of Oakland expressed disappointment today at a decision by Ports America Outer Harbor to file bankruptcy. The decision follows by 13 days an announcement that Ports America Outer Harbor is withdrawing from Oakland on March 31.  The firm operates one of five marine terminals at the Port.

“We’re deeply disappointed in the action today by Ports America,” said Port of Oakland Executive Director Chris Lytle. “They made a decision to close their business in Oakland. Since then, we’ve been negotiating with them in good faith for a smooth, orderly transition that protects the interests of shipping lines, cargo owners and others who depend on the terminal. It’s a shame they’ve taken this step.”

Reports today said Outer Harbor LLC, formerly known as Ports America Outer Harbor, filed for Chapter 11 protection in U.S. Bankruptcy Court in Delaware. The Port said it will work to ensure the terminal’s customers aren’t left adrift by the decision.

The Port said it is finalizing plans to redirect ships and cargo to other Oakland marine terminals when Ports America Outer Harbor closes. “We’ll find a home for all of the cargo that was going to Ports America Outer Harbor,” said Mr. Lytle. “We’ll implement measures to improve cargo-handling processes and make this transition successful.”

The Port of Oakland is the third-largest container shipping port in California.  It handles more than 2 million 20-foot containers worth of cargo annually.

So the 50-year lease ended after seven.

But don’t worry, Ports America is still in the terminal operating business. Reports the Journal of Commerce:

In an interview earlier this week, Peter Ford, Ports America’s chief strategy officer, said the company is concentrating its resource[s] on those terminals where super post-Panamax cranes, additional cargo-handling equipment and intermodal connectors are needed to handle the cargo surges from today’s mega-ships.

Hello, Sydney!

Which is not to say I’m doubting the credibility of Ports America as a terminal operator — that would be daft, as my British friends would say (and yes, I used the term ‘daft’ solely an excuse to tell you I had British friends). But it is a cautionary tale: if an established, busy port like the Port of Oakland can get burned on a concession deal, a wannabe port like Sydney must proceed with caution.

 

 

 

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