Headquartered in the Philippines, International Container Terminal Services (ICTSI), is a global container terminal operator, and has recently launched an innovative loan programme that is the first such structure of its type established by an Asian corporate. The programme serves as a master platform from which other loan type financing instruments can be issued as required.
Harmonising the capital structure of ICTSI, there is a particular regard to the funds available under the programme that will be used for strategic investments and acquisitions, in addition to general corporate purposes.
Flexible financing
ICTSI has achieved much of its growth internationally by participating in government concession schemes for container terminals, and also recently in conjunction with resale opportunities. It can plot its growth path in terms of trend lines, but ultimately has to have flexibility in its finance arrangements to respond to a winning bid or a resale opportunity in a timely way.
The company’s ability to compete for all categories of the project, ranging from the development of a brand new, high capacity, automated container terminal to the acquisition of an existing container terminal also dictates what’s needed for flexibly financing projects. Different categories of opportunity have different financing requirements, the higher end requirement typically being where new infrastructure development is concerned.
This was the case recently in Manzanillo in Mexico where, under a Build Operate Transfer (BOT) concession, ICTSI invested $250m in the 450,000 TEU (20 foot equivalent) per year in the first phase of a new container terminal. The two-berth facility opened for business in mid-2013 and has two further development phases to be implemented as dictated by demand.
Case study: Manila International Container Terminal (MICT)
MICT is ICTSI’s flagship container terminal offering an annual capacity of 2.5 million TEU. ICTSI has more than quadrupled the overall capacity of the terminal since it took over the facility on a concession basis in May 1988.
The latest expansion programme allowed the $200m development of Berth 6 at MICT, which opened for business in 2012. It features a 300m quay line, raising the overall length of quay available at MICT to 1600m, and a 12 hectare yard area raising the total yard area to 75.4 hectares.
At the same time as Berth 6 was in development the foundation works for the next phase of expansion, Berth 7 was also undertaken, facilitating fast track construction triggered by demand. Underlining its versatility, ICTSI’s remit in Manila is not just to operate as a cargo handling company. As part of the operation of MICT, it functions as a fully-fledged port manager undertaking the management of pilotage, tug boats, berthing and overall vessel traffic management within its basin. The company also undertakes full responsibility for the maintenance of the whole terminal facility including the wharf, seawall and the capital and maintenance dredging of the basin.
Similarly, the group has the type of highly automated facility referred to above – a concession for a state-of-the-art container terminal in the port of Melbourne, Australia under development. The infrastructure requirement in this project coupled with the automated handling systems, which comprise full automation of handling processes in the yard area, dictate a high level of investment.
ICTSI will invest $407m in the first phase investment that is expected to come into operation in December 2016, and $101m in the second phase, which will come into operation hot on the heels of phase one in 2017. Under the first phase of development the annual capacity offered will be 350,000 TEU per year over one berth of 330m, and in the second capacity will rise to one million TEU with the addition of a second 330m berth and expansion of landside handling with storage arrangements.
The company won this project via a new concession offered by the Port of Melbourne Corporation. It was secured against stiff competition and is particularly attractive to the company as it will be the only container terminal in Melbourne able to handle the larger vessels that liner operators wish to introduce into Australasian trades.
Managing risk and reward
The latter mature market project is something of a departure for ICTSI; emerging markets have traditionally been the focus of its main interest where it has proved itself highly successful in managing risk versus reward. Further mature market projects may follow if the returns look right. The group’s policy is never to chase volume for volume’s sake. Its focus is fairly and squarely on yield per TEU where it enjoys the status of being one of the highest performing companies in the sector.
Two emerging market projects that ICTSI has committed to recently are the takeover and further development of the container and general cargo operations in Puerto Cortes, Honduras – which it won via a concession process – and the construction of two new berths at Matadi on the Congo River in the Democratic Republic of the Congo (DRC), a venture undertaken in conjunction with local partner Simobile.
ICTSI is developing new container and general cargo facilities in Puerto Cortes that will ultimately realise a terminal with 1100m of quay for container traffic, 400m for general cargo, which occupies a 62.2-hectare site. There will be 12 ship-to-shore container gantries employed and the terminal, at full development, will provide an annual container throughput capacity of 1.8m TEU. Draught alongside the quay will be 14m, with the possibility to increase this to 15m. The terminal therefore has the ability to not only attract mainline carriers serving Honduras and surrounding countries such as El Salvador and Nicaragua, but also to play a regional transhipment role. ICTSI won the 30-year Puerto Cortes concession with a winning bid comprising an investment package of 624m over 10 years.
ICTSI will invest $407m in the first phase investment that is expected to come into operation in
December 2016
Matadi is the main port of the DRC and the capital of the country’s Bas Congo province. It is situated on the left bank of the Congo River 148km from its mouth and eight kilometres from the point where rapids make the river impassable. It is an established gateway to serve Kinshasa, the capital of the DRC, which possesses one of the world’s fastest growing populations.
In 2005 the population of Kinshasa was around 7.5 million, and by 2015 it is estimated to be 12 million. The two berths under development at Matadi will offer an annual throughput capacity equivalent to 120,000 TEU and 350,000 tonnes per year. Capital expenditure is $100m. A phase two development, adding two more berths could double capacity overall.
Another project ICTSI has on the starting blocks in West Africa is at the new Lekki port in Nigeria, located 60km east of metropolitan Lagos.
On 10 August 2012, ICTSI entered into a sub-concession agreement with Lekki Port LFTZ Enterprise – the promoter of the Lekki Port, to develop and operate a container terminal there for a period of 21 years on an exclusive basis. The project is scheduled to be operational in 2017, and when fully developed will possess a 1200m quay line served by 14 post-Panamax cranes. The terminal is configured to serve the larger dimension vessels expected to enter the West African trades, and to provide modern capacity to meet Nigeria’s burgeoning international trade requirements.
Operating vast challenges
The company is recognised as an international terminal operator with the skill-set necessary to effectively develop and bring into operation highly efficient marine terminal facilities in the most challenging environments. Indicative of this is its container terminal in Toamasina, Madagascar, which has received praise from the World Bank and IFC with regard to the quality of the operation established here from very rudimentary beginnings. ICTSI won the 20-year concession for the operation, management, financing, rehabilitation and development of the container terminal at Toamasina with the transaction formally closed in May 2005.
Subsequent to this, ICTSI implemented an initial $30m investment programme with this including strengthening of the quay, the acquisition of comprehensive new container handling systems for quayside and yard operations as well as the installation of state-of-the-art IT systems. At the same time, safety, security and organisational policies for yard and marine operations were extensively upgraded, a proper entry/exit gate and allied billing operation put into operation and extensive manpower orientation and training was undertaken. Further regular investments have been put in place that has recently culminated in the second phase of development for the terminal.
Now widely acclaimed as one of the most efficient in Africa, the terminal is a testament to what can be achieved in a public private partnership despite the most challenging of environments. There is one further project in the ICTSI portfolio with 29 terminals in 21 countries that is notable – the Pakistan International Container Terminal (PICT), Karachi, Pakistan.
In October 2012, ICTSI, through ICTSI Mauritius (ICTSIML), signed a share purchase agreement with PICT, a publicly listed company on the Karachi stock exchange, to acquire 35 percent of its outstanding shares. ICTSIML then purchased additional PICT shares in November and December 2012, raising its shareholding to 63.59 percent and thereby effectively giving ICTSI control of PICT’s 21-year concession that commenced in 2002. Significant investments are planned for PICT once the Karachi Port Trust grants the extension of PICT’s concession term.
The cross-section of recent projects clearly demonstrates that in forging a path of international expansion there are varying financial requirements according to the different categories of projects involved. One further example of this is highlighted in conjunction with ICTSI’s flagship Manila International Container Terminal (MICT), which now handles in excess of two million TEU per annum (see box-out). MICT is one of the most successful public private partnerships undertaken in the Philippines to-date, resulting in continuous investment by ICTSI since the terminal was originally concessioned to it in May 1988.
