[090114.EN.LOG] Investment In Port Expansions To Cope With Growing Box Trade

THE growing container trade and the increasing size of vessels have prompted recent investments in terminals and has also opened the door to various financing options available to ports looking to expand their facilities, according to associate at law firm Holman Fenwick Willan, Gudmund Bernitz.

The international law firm is advising both Investec Bank on the Petredec LPG terminal financing in Mauritius and COSCO Pacific Limited on its investment in the Piraeus Container Terminal, reports Port Strategy.

The Panama Canal's widening at both entrances will require a number of Atlantic ports to expand and modernise to accommodate larger vessels designed to transit the upgraded canal. While a number of greenfield terminals are under construction or planned to accommodate these new, larger ships, upgrades to existing terminals are also underway to allow larger ships to be handled.

The previously largest vessels will look to call at smaller, regional ports as larger terminals will increasingly accommodate only the largest vessels. These regional ports, which until now have handled 2,000 TEU-4,000 TEU vessels, will need to expand to accommodate 4,000 TEU-8,000 TEU ships.

All these projects will require funding, according to Mr Bernitz, who pointed out that the European Investment Bank is providing a loan to Associated British Ports to deepen and widen channels and install larger cranes at the Port of Southampton.

European and other western banks have traditionally dominated ports and terminals finance. More recently, terminal owners have increasingly turned to additional forms of finance to fund projects. This is partly due to the lending capacity of a number of European banks becoming more constrained as a result of the credit crunch and the introduction of Basel III's capital ratio requirements.

With more limited bank liquidity, different forms of equity finance, including mergers and acquisitions, share issues and indirect investment have become more common in the market. Pension funds have also become involved in the sector, attracted by lower volatility and protection against inflation.

For example, GCT Global Container Terminals Inc, a wholly owned subsidiary of the Ontario Teachers' Pension Plan, operates four container terminals in New York, Vancouver, British Columbia and New Jersey.

State investment funds have also started investing heavily in terminal construction and expansion. China Investment Corporation and the Government of Singapore Investment Company both invested US$500 million in the construction of two LNG export terminals in Louisiana in 2013.

Source : HKSG.