Philippines profits from Australia’s trade gains

ICTSI soon to open world’s most modern terminal 

MELBOURNE – By the time Victoria International Container Terminal Ltd. (VICT) starts operations at its new 34.5-hectare cargo port in Melbourne before the year ends, it would have firmly established its parent firm, International Container Terminal Services Inc. (ICTSI), as a global powerhouse in the industry.

With 30 terminals spread across 20 countries – including highly-industrialized economies such as the US and China – in six continents, ICTSI has gone Down Under, raising the bar in cargo handling as it touts the “only terminal in the world built without any human body on the land site.”

Shelling out A$550 million (about US$415 million) for the project – the company’s third biggest investment after the Manila flagship and Ecuador – ICTSI will utilize cutting-edge technologies and innovations for a fully-automated process from the gate to the quayside.

“This will change the logistics landscape in Australia,” said Christian Gonzalez, ICTSI senior vice president and head of Asia Pacific operations, at a recent briefing for Philippine-based media here.

Gonzalez

“For the first time, post-Panamax cargo ships will be handled in Australia, greatly benefitting both exporters and importers as they can transport larger shipments that otherwise would just pass by and dock in other ports,” he explained.

He noted while the company’s 100-hectare Manila International Container Terminal has the capacity to handle post-Panamax vessels since the early 1990s, MICT is still heavily under-utilized for its size, with a capacity of just 2.4 million twenty-foot equivalent units (TEUs).

Boasting of six, millimeter-accurate Neo-Panamax robotic STS cranes capable of handling up to 1.4 million standard containers annually, Gonzalez said the terminal would substantially reduce the entire cargo processing period from an average 12 days to less than three days.

VICT is completing Phase 1 of the terminal project, slated to start for operations in December, with one berth of 330 meters fitted with three Neo-Panamax robotic ship-to-shore (STS) cranes, 23.7 hectares of yard and off-dock area at an estimated capacity of 350,000 standard containers.

The terminal will be able to handle vessels with a capacity of up to 8,000 standard containers. Complementing the terminal is a 10- hectare empty container park with a working capacity of around 200,000 standard containers annually. 

Phase 2, meanwhile, will involve an additional two Neo-Panamax robotic STS cranes to be completed and operational by December 2017.

VICT, a wholly owned subsidiary of Philippine port giant ICTSI, bagged the right to develop the area after winning in the international bidding in 2014. It marks ICTSI’s first entry into Australia. 

ICTSI said the agreement signed with the Port of Melbourne in May 2014 will deliver a global standard in modern container terminal design, innovation and operations, and will become the flagship facility in Australia’s premier port. The lease concession extends to 2040. 

VICT is located in the Port of Melbourne in Victoria, the capital of Australia’s second most populated state.

When completed, the port will be the largest container and general cargo port in Australia with a capacity of 2.5 million TEUs, expectedly making a substantial impact to ICTSI’s bottom line. 

In the first half of 2016, ICTSI booked slightly lower   revenue from port operations of US$550.8 million, from $552.1 million in the first six months of 2015.

As a result, net income went down 13 percent to $87.3 million from $100.4 million earned in the first half of 2015, which the company attributed due to unfavorable volume mix, lower non-containerized and storage revenues, and lower capitalized borrowing costs and higher depreciation and amortization expenses related to Tecplata S.A., the company’s new terminal in Buenos Aires, Argentina.

ICTSI handled consolidated volume of 4.265 million TEUs in the first six months of 2016, 10 percent more than the 3.888 million TEUs handled in the same period a year earlier. The increase in volume was mainly due to the continuing ramp-up at ICTSI Iraq; new shipping line customers and services in the company’s terminals in Guayaquil, Ecuador, Manzanillo, Mexico, Karachi, Pakistan and Jakarta, Indonesia; and improvement in trade activities at most of the terminals in the Asia region.

In the first six months of 2016, ICTSI has spent $157.8 million, approximately 38 percent of the $420 million capital expenditure budget for the full year, as it allocated funds for the completion of the initial stage of VICT and new container terminals in the Democratic Republic of Congo and Iraq, as well as the continuing development of the company’s projects in Honduras and Mexico.

In addition, ICTSI invested $32.3 million in the development of SPIA, its joint venture container terminal development project with PSA International Pte Ltd. (PSA ) in Buenaventura, Colombia. The company’s share for 2016 to complete the initial phase of the project is approximately $60 million.

Last July, VICT signed a syndicated loan facility worth A$398 million (approximately US$300 million) with seven leading global financial institutions, namely: Citibank N.A., KFW IPEX-Bank, Standard Chartered Bank as mandated lead arrangers and bookrunners, Bank of China Ltd., DBS Bank Ltd., Investec Bank PLC as mandated lead arrangers, and Cathay United Bank as lead arranger.

The facility provides significant financial flexibility with long-dated tenors of seven, 10 and 16 years.

The newly-secured financing will support the on-going construction and development of VICT at Webb Dock East in the Port of Melbourne.

Anders Dommestrup, VICT chief executive officer said: “VICT is extremely pleased to have signed this project finance facility with internationally renowned banks as this is a testament to the viability of VICT. We remain committed to working with all our partners – the Port of Melbourne, local community, our contractors, and now our lenders – to deliver to Melbourne a world-class and industry leading container terminal.”

“The VICT deal has pushed the project finance envelope in Australia on a number of aspects, and this has made the process quite challenging. Thanks to the collaborative effort put in together with our lending partners, we achieved a final debt structure that positions VICT for both short and long term financial strength,” he added.

With this deal, ICTSI continues its streak of successful funding transactions. In addition to deals done at the corporate level every year since 2010, ICTSI secured a major project finance facility last October 2015 when Contecon Manzanillo S.A. de C.V. signed a $260 million loan for its port development and operations in the Port of Manzanillo, Mexico.

Gonzalez said the confidence of the banks in both VICT and ICTSI that this transaction demonstrates is a confirmation of both the robustness of the VICT business plan as well as the strong track record of ICTSI in effectively implementing container terminal projects.

ICTSI is widely acknowledged to be a leading global developer, manager and operator of container terminals in the 50,000 to 2.5 million TEU/year range. ICTSI has an experience record that spans six continents and continues to pursue container terminal opportunities around the world.