‘Predatory’: Napier Port’s play for CentrePort’s container operations
Documents reveal more about the play Napier Port recently made for CentrePort’s container operations, to which Greater Wellington Regional Council (GWRC) has said thanks, but no thanks.
GWRC owns 77 per cent of CentrePort, with Horizons Regional Council owning the remaining 23 per cent.
In December last year Napier Port chief executive Todd Dawson sent a letter to GWRC outlining the company’s position on CentrePort’s future development plans.
He said CentrePort was not a natural container port due to its urban centre location and being off the main internal shipping route between the North and South islands.
“Ratepayers’ continued subsidisation of CentrePort’s container trade is a source of frustration for Napier Port as the commercial operator of a genuine container port that is focused on delivering acceptable shareholder returns and better customer services.
“We can currently easily handle all of our own cargo requirements, plus Wellington’s”, Dawson wrote.
The Herald has obtained the correspondence under the Local Government Official Information and Meetings Act.
The letter is accompanied by a 10-page presentation.
In 2019 Hawke’s Bay Regional Council listed 45 per cent of Napier Port in an initial public offering using the proceeds to invest about $200m in a new container wharf.
Meanwhile, CentrePort is in the middle of rebuilding its container wharf capacity after it was significantly damaged in the 2016 Kaikōura earthquake.
Dawson said it was a “source of concern” to see CentrePort spend what he estimated to be $200m of its insurance payout on building additional container services.
He suggested that investment would struggle to stack up commercially and said CentrePort already has one of the lowest dividend payout ratios of any New Zealand port.
Dawson said a clear alternative was for shareholders to be paid a special dividend of $200m, which could then be invested in a future fund to go towards much-needed infrastructure across the Wellington region.
He concluded his letter by saying the solution would reduce waste and inefficiency across New Zealand’s freight industry.
“I see only downside for all parties if we all simply keep doing what we’ve always done and make uneconomic investments.”
CentrePort has spent $66m of the company’s earthquake insurance payout on urgent repairs for its container wharf and reinstating crane width operational capability from 125m to 250m.
It is currently working with an international port design expert on options for its future footprint, including increasing its container capacity in the long term.
Dividends were suspended for a year after the earthquake. CentrePort has paid $24m in dividends to shareholders over the past six years.
But to recognise the suspension and lower dividends as the business recovered from the earthquake, an additional special dividend of $15m is being paid to shareholders later this month.
CentrePort chairman Lachie Johnstone said operating as a full service port matched market demand and made economic impacts across central New Zealand like helping to support 26,000 jobs and contributing $2.5 billion to GDP
He said the impact of the Kaikōura earthquake provided clear evidence of the value of the container service for exporters and importers.
“Some of our container customers experienced increased transport costs of up to 400 per cent during the 11 months CentrePort’s two gantry cranes were out of action. The movement of cargo was also more complex for customers during this period because of the greater distance and different modes.
“Once the emergency repairs were completed in 2017 a large proportion of our container customers came back to CentrePort immediately.”
GWRC chairman Daran Ponter said ports were competitive.
“They are highly predatory, as a consequence they will nick each other’s containers as quick as looking at each other.”
GWRC has not sought to indicate to Napier Port their support or otherwise for the takeover proposition, but it was effectively a thanks, but no thanks, Ponter said.
“I think they pretty much know how we feel about what they have put on the table.”
Ponter questioned the motivation of the proposal and wondered whether Napier Port had invested too much money for the amount of container traffic it was actually going to service.
A Napier Port spokesperson said this was “absolutely not” the case and its new wharf was based on an investment case underwritten by the natural cargo catchment within the Hawke’s Bay region only.
The port stood by its statement that there is no commercial need for CentrePort to reinvest in its container terminal services business, the spokesperson said.
Source: Read Full Article