ADVISORY Ports Advisory Services March 2006
Mar 21, 2016
ADVISORY
Ports AdvisoryServicesMarch 2006
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Foreword 3
U.K. overview 4
U.K. market activity 5
How KPMG can help 6
A global perspective 7
The KPMG team 8
Appendices 11
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Volume growth, strong cashflows
and redevelopment opportunities have
stimulated interest in U.K. ports from
both property and private equity
players. Furthermore, the need for
increased capacity, which is likely to
be underlined by both the Ports Policy
and Eddington Review, provides great
opportunity for existing operators.
The activity in the U.K. market is part of
a wider global picture. Increasing
shipping volumes, driven predominantly
by strong Chinese economic growth,
have stimulated large scale investment
in ports infrastructure. Governments
have also sought to realize the value of
their ports assets through a number of
corporatization and privatization models.
Whether you are a new entrant,
considering investing in the ports
sector or whether you are an existing
player seeking to develop your
strategy in a changing policy
environment, KPMG’s global network
of firms have the experience and
knowledge to assist you. We have an
international team with an impressive
record of both advising on transactions
and working with governments as
ports policy has evolved.
The KPMG team strives to deliver
clear, pragmatic advice in order to
assist you in making the right choices
as opportunities in this market continue
to emerge. If you have any queries on
this, or any of our services to the wider
transport industry, then please do not
hesitate to contact me directly.
Dr Ashley Steel
Global Chair — Transport
KPMG LLP (U.K.)
“We aim to deliver clear
and pragmatic advice to
help you make the
right choices.”
With a high level of corporate transaction activityand a changing public sector policy environment,the ports sector has emerged as one of themost exciting areas of the U.K. transport market.
Foreword
Ports Advisory Services 3
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“Increased road
congestion and a
favorable policy
environment will
act to stimulate
investment in ports.”
In total, U.K. ports handle more than
300,000 shipping movements a year,
including 550 million tonnes of
freight and 36 million international
passenger journeys.
The industry comprises of a mixture of
private, trust and municipal ports:
• privately owned account for
64 percent of tonnage
• trust ports account for 24 percent
of tonnage
• municipally owned account for
12 percent of tonnage.
Source: The United Kingdom Major Ports
Group (UKMPG), 2006
Factors including greater road
congestion, rising fuel costs and
regulation such as the EU Working
Time Directive have caused a significant
increase in inland transport costs.
This has led to opportunities at the
U.K.’s regional ports, as customers
examine new ways of making
distribution more efficient.
A further stimulus for investment is
the increasing size of container
vessels, which has required the
development of ports access and
quayside infrastructure.
Government has acknowledged the
importance of the sector to transport
in the U.K. by announcing a major
review of ports policy. Preparatory
consultations have been completed
and a public consultation is due this
year. The review is expected to focus
on increasing port capacity and
improving access to and from ports.
These recommendations are likely to
be echoed by the Eddington Review,
which has been commissioned
to highlight improvements to
transport infrastructure that will
boost U.K. productivity.
This combination of upward pressure
on volumes and a favorable political
environment has helped to make the
U.K. ports sector increasingly attractive
to investors.
4 Ports Advisory Services
U.K. overviewThe United Kingdom has one of the most diverseports industries in the world, ranging from majordock installations, terminals and fishing ports torecreational harbors and marinas.
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Global trends evident in terminal and
ship ownership are having a range of
impacts on the owners and operators
of U.K. ports. These include:
The rise of secondary ports and
specialist terminals: increasing
congestion at a number of major
ports (e.g. Felixstowe) has already
seen nearby and substitute ports
benefit from trade flows that wish to
both avoid the cost, and increase the
certainty that delivery timetables will
be met.
Vertical integration: companies are
increasingly moving up and down the
chain, either through direct asset
ownership (as evidenced by APM’s
purchase of P&O Nedlloyd) or though
managing trade movements (PSA and
Hutchison Port Holdings have both
recently committed to major freight
forwarding systems/companies to aid in
the management of customer goods).
More conferences: in an attempt
to provide better service and more
effectively utilize ships, shipping
conferences are becoming even more
important. This trend, coupled with
increasing ship sizes (especially in
container ships) is increasing the
pressure to expertly handle ships and
minimize transit times.
Taking these factors into account, U.K.
ports are proving increasingly attractive
to new investors due to:
• Growth in volumes and a policy
environment which is likely to
encourage capital investment over
the next decade.
• High visibility of earnings and
strong cash generation due to
the long-term nature of contracts
and the position of ports as
local monopolies.
• The development potential of land
around ports for both residential
and commercial uses.
This is evidenced by recent
transactions which have included
investment from both property players
interested in development potential
and private equity players seeking
financing opportunities:
• In September 2005, the Mersey
Docks and Harbour Company was
acquired by Peel Holdings Limited
for U.K.£771 million.
• P&O is the subject of a takeover by
Dubai’s state-owned ports operator.
Among its many interests, P&O has
shareholdings in over 30 port
operations on six continents.
• In December 2005, Australian
infrastructure fund Babcock Brown
won a takeover battle with the
consortium Endeavour Ports for the
Teesside based PD Ports valuing
the group at around £260 million.
• Takeover speculation surrounding
Forth Ports has resulted in a
20 percent increase in share
price since November 2005.
In addition to these transactions, the
Department for Transport has been
considering how it might realize the
value from the U.K.’s trust ports.
Although much of this portfolio has
little commercial activity, it does
include major ports such as Dover,
Tyne and Milford Haven.
Details of the U.K.’s largest ports and
the major port operators are set out in
the Appendix.
Ports Advisory Services 5
U.K. market activity
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“Our team offers a broad
spectrum of specific
professional services.”
KPMG firms have an impressive track
record of providing advisory services
to the ports industry:
• Advising private companies on
acquisitions, from strategic analysis
through to financial and taxation
due diligence
• Providing post-transaction services
such as operational audits,
assessment of health and safety
programs and review of Corporate
Social Responsibility (CSR)
reporting best practice
• Providing advice on major
‘growth’ projects such as capital
investment programs, property
redevelopment and improving
surface access to ports
• Advising on recent developments
in government thinking on the
ports sector
• Working with the Department
for Transport and local authorities
on realizing the value from their
ports assets.
KPMG works together with our firms’
clients to offer tailored support and
help ensure a successful outcome.
Our services include:
Corporate finance
• mergers and acquisitions support
• financing of capital investment
programs
• advice on entry and
expansion strategies
• advice on regulatory issues.
Transaction services
• due diligence
• tax and accounting structuring.
Property advisory services
• advice on redevelopment and
regeneration projects
• consideration of surface
access issues.
Debt advisory services:
• funding structures
including securitization
• financial modeling.
Post transaction services:
• environmental, health and
safety audits
• operational and IT audits
• CSR reviews
• assessment of programs and
management activity.
6 Ports Advisory Services
How KPMG can help
KPMG has a team of advisors with strongexperience in the ports sector. Our experienceallows us to offer an informed and insightful viewof the key challenges facing the industry.
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A global perspective
Many of the issues within the
U.K. ports sector are commonly
encountered overseas. KPMG’s
Transport team operates on a global
basis and our international experience
has included advising on acquisition
and financing strategies, regulatory
issues and contract negotiation as well
as due diligence and tax offerings.
KPMG in the U.K.
U.K. ports operator: advised on
expansion into the Baltic States and
entering into a joint venture with a
Finnish company to own and develop
three port facilities.
KPMG in Russia
Russian steel producer: advised on the
acquisition of a controlling stake in St.
Petersburg seaport operator and Tuapse
seaport operator. Provided due diligence
assistance and valuation services.
KPMG in Germany
Major German cargo transport and
logistics organization: provided various
advice on a number of key transactions.
Ports Advisory Services 7
KPMG in Hong Kong
PSA International: performed due
diligence work on the acquisition
of an interest in Hong Kong
International Terminals.
Hong Kong port company and
Chinese shipping company: provided
advice on bids for the Hong Kong
Container Terminal.
Hong Kong based port operator:
advised on the acquisition of a port
operator in Nantong, Jiangsu Province,
operating four berths and a
container terminal.
KPMG in Australia
China ports privatization: assisted
China’s largest port operator on the
potential restructuring of a significant
portfolio of port assets.
Bahrain ports privatization: advised
Bahrain’s Ministry of Finance and
National Economy on the privatization
of the existing Mina Salman Port and
the new Khalifa bin Salman Port.
Jawaharlal Nehru Port Trust: financial
adviser to private sector operator on
its investment in the JNPT Container
Terminal in Mumbai.
Port of Melbourne: adviser for the
Port Philip Bay channel deepening
project, and advised the Victorian
Government on ownership and
operating structures for the former
Port of Melbourne Authority.
South Australian Ports: advised on
prospective regulatory matters to a
bidder in the privatization of South
Australian ports.
Port of Geraldton: advised on the
development of US$75 million
deepening of the access channel and
inner harbor for the Port of Geraldton.
Dalrymple Bay Coal Terminal:
advised a bid team on the potential
regulatory issues associated with
the terminal.
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KPMG in the U.K.
Tony Cates
Leads the team’s services in the ports and shipping sector.
Justin Zatouroff
Provides mergers and aquisitions (M&A) advice on transactions in the
transport and logistics sectors.
Lewis Atter
As former Head of Transport at the U.K. Treasury, Lewis has insight into the
direction of Government policy across the transport sector. He advises
KPMG firms’ clients on their responses to the recent White Paper and The
Eddington Review.
Tony Rocker
Leads the provision of due diligence services to the transport
infrastructure sector.
Liam Duffy
Advises public sector agencies and private operators on port projects in the
U.K. and Australia.
Bob Wharton
Carries out strategic appraisals for port developers, provides advice on port
privatization and evaluates proposals for port development.
Jane Evans
Advises on regeneration and redevelopment of transport infrastructure,
including surface access.
Clive Gibbard
Advises on corporate refinancing and securitization opportunities.
8 Ports Advisory Services
The KPMG team
You need to know that the team working foryou has the skills and commitment necessary toprovide you with success.
“KPMG has a dedicated
team of professionals
who have worked on a
variety of ports projects
for both the private sector
and government.”
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Global contacts
Michael Cooper (KPMG in Australia)
Adviser to both the public sector and to private consortia on both privatization and
infrastructure investment projects.
Julian Vella (KPMG in Australia)
Advises the public and private sector on ports projects.
Honson To (KPMG in China)
Provides financial advice and due diligence services for port acquisitions.
Rupert Chamberlain (KPMG in Hong Kong)
Advises on projects for port authorities and port operators as well as provision of
advice on ports acquisitions.
Michael Jiang (KPMG in China)
Provides financial advice on port acquisitions.
Soeren Soerensen (KPMG in Denmark)
Delivers a range of financial and transaction services to a major shipping and
port operators.
Hans Bongartz (KPMG in the Netherlands)
Provides advice on ports transactions in the Netherlands including privatizations
and valuation advice.
Ports Advisory Services 9
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10 Ports Advisory Services
“”
The KPMG team will aim to
deliver clear, pragmatic
advice in order to assist you
in making the right choices
as opportunities in this
market continue to emerge.
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Appendices
U.K. major port operators 12
Largest 20 U.K. ports 13
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Owns and operates 21 ports including
Immingham, Hull, Southampton and Port
Talbot. Jointly owns Southampton
Container Terminal and Tilbury Container
Tendril. Other services provided by
subsidiary ABP Connect, Northern Cargo
Services, U.K. Dredging, ABP Marine
Research, AMPorts.
492.2ABP
Name Turnover
U.K. £ million
Other information
12 Ports Advisory Services
“The U.K. ports
sector has recently
witnessed a high level of
transaction activity and
takeover speculation.”
Peel Holdings 341.5 Peel Holdings Limited is a British
transport and property company which
also operates Doncaster and Liverpool
Airports. The Group acquired the Mersey
Docks and Harbour company in
September 2005, substantially boosting
its ports operations.
Hutchison Ports
(U.K.) Ltd
244.6 Operates three ports: Felixstowe,
Harwich International and Thamesport.
Forth Ports 167.2 Operates nine ports: Dundee, Tilbury,
Leith, Grangemouth, Granton,
Methil, Burntisland, Kirkaldy and
Rosyth. Owns 33 percent of Tilbury
Container Services.
PD Ports 133.6 Operates the Teesside and Hartlepool
ports. It owns smaller ports in Howden,
Keadby and the Isle of Wight.
U.K. major port operatorsThe major port operators in the U.K. areoutlined below.
Source: Company Web sites and annual reports,2004/2005
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Ports Advisory Services 13
Grimsby and Immingham
Tees and Hartlepool PD Ports 53,819
London Forth Ports/Trust Port 53,289
Milford Haven Trust Port 38,452
Southampton ABP 38,431
Forth Forth Ports 34,892
Liverpool Peel Holdings 32,233
Sullom Voe Municipal Port 23,939
Felixstowe Hutchison Ports (U.K.) Ltd 23,413
Dover Trust Port 20,753
Orkneys Trust Port 17,934
Medway Peel Holdings 14,535
Belfast Trust Port 13,559
Hull ABP 12,443
Clyde (including Ardrossan) Peel Holdings 11,507
Bristol The Bristol Ports Company 10,759
Port Talbot ABP 8,555
Manchester Ship Canal Peel Holdings 6,634
Glensanda Foster Yeoman 5,189
Larne Larne Harbour Ltd 4,984
Largest 20 U.K. ports
ABP 57,616
Port Operator Annual throughput
2004 (000 tonnes)
Source: Department for Transport (DFT), 2004/2005
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kpmg.com
Contact details
Dr Ashley Steel
Global Chair — TransportKPMG in the U.K.+44 (0)20 7311 [email protected]
Tony Cates
Head of ShippingKPMG in the U.K.+44 (0)20 7311 [email protected]
Rupert Chamberlain
PartnerKPMG in Hong Kong+852 3121 [email protected]
Michael Cooper
DirectorKPMG in Australia+61 3 9288 [email protected]
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