Level Playing Field & Private Sector Participation in …4 September 2014 BPO Conference 11 Level...

maritime & transport business solutions

Level Playing Field &

Private Sector Participation in ports

BPO Conference - Rønne

Victor van Leengoed 4 September 2014

4 September 2014 BPO Conference 2

MTBS: Maritime & Transport Business Solutions

Leading Port Advisor in EMEA region

Ongoing MTBS Transaction

Successful MTBS Transaction

Completed MTBS Advisory Project

• International Port and maritime Advisory Firm, HQ in Rotterdam, The Netherlands

• Specialised in Port Transactions: Preparation & Implementation

• Global Project Portfolio: EMEA core market



Selection of Closed & Ongoing Transactions

Port of Durban,

South Africa

Transaction Advisor

PPP-scheme Durban

Dig-out port

Concession

Sell Side

Greek Marinas and

Ports, Greece

Transaction Advisor

Privatisation of Greek marinas

and commercial ports

Concessions

Sell Side



From Strategy to Financing


• Level Playing Field European Port Context:

• Fairness concept: the game must be played by the same

set of rules.

• All Port Costs should be born by port users

Level Playing Field

Ambition or illusion?


• How relevant are port costs in supply chain?

• Level playing field in hinterland transport?

• Subsidies

• Tolling

• Political projects

Level Playing Field

Port costs in value chain

Sealeg (40%-60%) Handling Rail (20%-40%)

PA Port costs

(2%-5%)

Far

Eas

t Eurpoe


Level Playing Field

With whom are we competing?

530 Mt*

150

Mt

• Level playing field for European ports?• Or is our industry bigger than just EU?

Recent key shipping

economic developments

Recent key political

developments

390

Mt


Level Playing Field

SECA - Who will serve what part of Europe?

Main arterial East-West lane

Non-SECA AREA


Level Playing Field and Private Sector Participation

Multiple terminals in one port – same conditions?

Entrant: Tender

Entrant: Direct

negotiations

Incumbent


• How to fight tough conditions?

Level Playing Field

Illusion?


Level Playing Field and Private Sector Participation

Private sector participation strengthens public sector

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000Containers in Piraeus / TEU

• Piraeus, Greece, Cosco Pacific (Operational)• Since 2007 following privatization: Cosco responsible for quay walls & basin dredging

• They resolved all strikes, Chinese management


Private Sector Participation

How structure it? Smart compensation structuresFI

NA

NC

IAL

RE

VE

NU

ES

PA

Low

High

CERTAINTY OF REVENUES - PALow

(highly variable)

High

(largely fixed)

Balance sheet

relief

Profit sharing

Revenue sharing

Royalty ($/TEU)

Royalty ($/TEU) plus

volume guarantee

Fixed lease fee

($/m2)

Fixed lease fee plus

financial securities

Fixed lease fee plus financial

securities assigned to

DBFM contractor

Upfront fees

Port management

model

Private

participation Re

gu

lati

on

Infr

a

Su

pe

rstr

uct

ure

Eq

uip

me

nt

Lab

ou

r

Na

uti

cal

serv

ice

s

Public service port Zero Public Public Public Public Public Public

Tool port Very low Public Public Public Public PrivatePublic or

private

Landlord + Public-

private terminalMedium Public Public

Public

Private

JV

Public

Private

JV

Public

Private

JV

Public or

private

Landlord port Medium Public Public Private Private PrivatePublic or

private

Landlord + DBFM High PublicPublic &

Private2)Private Private Private

Public or

private

PDMC Very high Public

Public

Private

JV

Private Private Private Private

Private port MaximumPublic or

privatePrivate Private Private Private Private



How to structure it?

Smart port management models



New port management models – From standard landlord …

Private terminal

operator

Private terminal

operator

TO Concession

Agreement

Private terminal

operator

Superstructures &

Equipment

Handling

charges /

Storage feesClient s/

offtakers

Client s/

offtakers

Users:

Shipping linesPublic Port

Authority

Marine

Infrastructure

Port management

Marine services

Port land

Infrastructure

Port Dues



… to Landlord plus DBFM

Private terminal

operator

Private terminal

operator

TO Concession

Agreement

DBFM

Concession

Agreement

Private terminal

operator

Superstructures &

Equipment

Handling

charges /

Storage feesClient s/

offtakers

Client s/

offtakers

Users:

Shipping linesPublic Port

Authority

Marine

Infrastructure

Port management

Marine services

Port land

Infrastructure

Port Dues

DBFM consortium

(SPC)

Marine

Infrastructure

Marine services

Port land

Infrastructure



No port Landlord + DBFM example yet, but DBM in Rotterdam



New port management models – Landlord plus DBFM

Benefits &

disadvantages

Description Realised in

DBM

Life cycle approach Optimise capex vs. Maintenance ��

Integrated

approach

Reduce interfaces��

Accelerated

delivery

”We have succeeded in constructing this phase of

Maasvlakte 2 according to schedule and…. ��

Risk reductionwell inside budget.. (…) approx. €150 million less

expensive than estimated. ��

FlexibilityIn DBFM no flexibility due to disciplinary effect

In DBM relative flexibility due to System engineering ��

Additional

financing costs

Not additional financing costs in DBM

State contribution: EUR 1.25bn ��

(1 400)

(1 200)

(1 000)

(800)

(600)

(400)

(200)

-

15%-20%

Cost savings

(1 400)

(1 200)

(1 000)

(800)

(600)

(400)

(200)

-

What about

financing costs?



Typical Public Sector Comparator in normal infra DBFM

Port management

model

Private

participation Re

gu

lati

on

Infr

a

Su

pe

rstr

uct

ure

Eq

uip

me

nt

Lab

ou

r

Na

uti

cal

serv

ice

s

Public service port Zero Public Public Public Public Public Public

Tool port Very low Public Public Public Public PrivatePublic or

private

Landlord + Public-

private terminalMedium Public Public

Public

Private

JV

Public

Private

JV

Public

Private

JV

Public or

private

Landlord port Medium Public Public Private Private PrivatePublic or

private

Landlord + DBFM High PublicPublic &

Private2)Private Private Private

Public or

private

PDMC Very high Public

Public

Private

JV

Private Private Private Private

Private port MaximumPublic or

privatePrivate Private Private Private Private



How to structure it?

Smart port management models



New port management models

Port Development Management Company (PDMC)

Draft 18m

Capacity 1.2m-3m TEUpa

Quay: 1,050m – 2,000m

Draft 12.5m

Capacity 0.4m TEUpa

Quay: 400m



New port management models

Capacity development & Volume growth with PDMC

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

2008 2009 2010 2011 2012 2013

TRANSHIPMENT

CAPTIVE/TRANSIT



PDMC: Government contributed only 23% of in $400m investment

Superstructures &

Equipment

Dolareh Container

Terminal S.A.

Marine

Infrastructure

Port operations, management

and maintenance

(DP World)

Marine services

Port land

Infrastructure

DP World Djibouti

FZCO

$44m

PDSA 2)

$90m

Government of Djibouti

(through DPFZA)

BOTConcession

Islamic Financing

Syndication $160m

DFI Lenders

$103m

MIGA

Loan agreements,

debt contribution

Shareholders

agreements

99% cover1)

1) MIGA provides cover against Currency transfer restriction, expropriation, breach of contract, war and civil disturbance2) PAID is transformed from a public entity into a private company limited by shares and will be renamed as PDSA.

Direct Financing Agreement

Equity

contribution

USD5m cover1)



Other strategic shareholder entering the structure through direct

negotiations… DPW out? - Competive tender needed

Superstructures &

Equipment

Dolareh Container

Terminal S.A.

Marine

Infrastructure

Port operations, management

and maintenance

(DP World)

Marine services

Port land

Infrastructure

DP World Djibouti

FZCO

PDSA 2)

$90m

Government of Djibouti

(through DPFZA)

BOTConcession

Islamic Financing

Syndication $160m

DFI Lenders

$103m

Loan agreements,

debt contribution

Shareholders

agreements

1) MIGA provides cover against Currency transfer restriction, expropriation, breach of contract, war and civil disturbance2) PAID is transformed from a public entity into a private company limited by shares and will be renamed as PDSA. 3) Shareholders Agreement and Share Purchase Agreement

Direct Financing Agreement

Equity

contribution

SHA &

SPA3)

CMHI

��

��



How will Pireaus work as PDMC model after tender?

Superstructures &

Equipment

Piraeus Container

Terminal

Marine

Infrastructure

Port land

Infrastructure

COSCO

PIRAEUS

Port Authority

BOT Terminal

Concession

Lenders

Loan agreements,

debt contribution

Equity

contributionTender New Investor

(67%)

Ship repair facility

Future concessions

HELLENIC

REPUBLIC

ATHEX

(26%)

HR FUND

74% → 7%


• Level playing field is an ambition, but consider:

• Hinterland transport

• New entrant vs. incumbent

• Compensation structure

• Modern Private Sector Participation to strengthen position

• Risk reduction from DBM & system engineering

• Gains from private sector in upcoming PDMC model

• Tailor made deal structure & transaction process

Conclusions

Competitive Port PPP transaction offers best combination of Private

Sector Participation and Level Playing Field

maritime & transport business solutionsmaritime strategy & finance advisors

| +31 10 2865940

| [email protected]

| www.mtbs.nl

Wijnhaven 3E

P.O. Box 601

3000 AP Rotterdam

The Netherlands

White House, Rotterdam

t

e

w


Level Playing Field

Non- EU countries having strong influence on European Ports

Region Impact European Ports impacted

(primary/ non exhaustive)

Maghreb � Transhipment hubs (Tanger) competing on 50% of

transhipment market share in West and central Med

� Maghreb economies direct impact on direct port

demand (e.g. Marseille)

� Algeciras, Gioia Tauro, Cagliari,

Marsaxlokk, Valencia, Barcelona

� Marseille, Valencia, Barcelona

Egypt (&

Libya)

� Suez Canal importance

� Transhipment in East Med

� All

� Piraeus, Limassol, GT, Marsaxlokk

Black Sea

& Turkey

� Transhipment volumes for Russia and Ukraine

through Constantza or Marmara?

� Increasing direct calling to Russia?

� Ukrainian Ports share for Russian cargoes? (bulk and

ferro)

� Turkish privatisation and expansion

� Constantza, Marmara, Piraeus

� Constantza, Marmara, Piraeus

� Odessa, Illichevsk, Yuzhny,

Sebastopol

� All East Med & Black Sea

Baltic � Russian and CIS cargo through Russian Ports (St

Petersburg or Black Sea), or through Baltic States/

Finland

� Transhipment in NW Europe?

� KotkaHamina, Klaipeda, Latvian

and Estonian Ports

� Hamburg, Bremerhaven,

Rotterdam, Antwerp

Arctic � Development of Energy Ports (Sabetta, Teriberka,..)

� North Sea Route impact

� Rotterdam

� All

Level Playing Field & Private Sector Participation in …4 September 2014 BPO Conference 11 Level...

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