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Ports Advisory Services March 2006
A DV I S O RY
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Foreword
3
U.K. overview
4
U.K. market activity
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How KPMG can help
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A global perspective
7
The KPMG team
8
Appendices
11
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Foreword With a high level of corporate transaction activity and a changing public sector policy environment, the ports sector has emerged as one of the most exciting areas of the U.K. transport market.
“We aim to deliver clear and pragmatic advice to help you make the right choices.”
Volume growth, strong cashflows
The KPMG team strives to deliver
and redevelopment opportunities have
clear, pragmatic advice in order to
stimulated interest in U.K. ports from
assist you in making the right choices
both property and private equity
as opportunities in this market continue
players. Furthermore, the need for
to emerge. If you have any queries on
increased capacity, which is likely to
this, or any of our services to the wider
be underlined by both the Ports Policy
transport industry, then please do not
and Eddington Review, provides great
hesitate to contact me directly.
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.
Dr Ashley Steel Global Chair — Transport KPMG LLP (U.K.)
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4 Ports Advisory Services
U.K. overview The United Kingdom has one of the most diverse ports industries in the world, ranging from major dock installations, terminals and fishing ports to recreational harbors and marinas. “Increased road congestion and a favorable policy
In total, U.K. ports handle more than
examine new ways of making
300,000 shipping movements a year,
distribution more efficient.
including 550 million tonnes of freight and 36 million international
A further stimulus for investment is
passenger journeys.
the increasing size of container vessels, which has required the
environment will
The industry comprises of a mixture of
development of ports access and
private, trust and municipal ports:
quayside infrastructure.
• privately owned account for
Government has acknowledged the
act to stimulate investment in ports.”
64 percent of tonnage
importance of the sector to transport in the U.K. by announcing a major
• trust ports account for 24 percent of tonnage
review of ports policy. Preparatory consultations have been completed and a public consultation is due this
• municipally owned account for 12 percent of tonnage.
year. The review is expected to focus on increasing port capacity and improving access to and from ports.
Source: The United Kingdom Major Ports
These recommendations are likely to
Group (UKMPG), 2006
be echoed by the Eddington Review, which has been commissioned
Factors including greater road
to highlight improvements to
congestion, rising fuel costs and
transport infrastructure that will
regulation such as the EU Working
boost U.K. productivity.
Time Directive have caused a significant increase in inland transport costs.
This combination of upward pressure on volumes and a favorable political
This has led to opportunities at the
environment has helped to make the
U.K.’s regional ports, as customers
U.K. ports sector increasingly attractive to investors.
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U.K. market activity
• In December 2005, Australian
Global trends evident in terminal and
Taking these factors into account, U.K.
ship ownership are having a range of
ports are proving increasingly attractive
infrastructure fund Babcock Brown
impacts on the owners and operators
to new investors due to:
won a takeover battle with the
of U.K. ports. These include:
consortium Endeavour Ports for the
• Growth in volumes and a policy The rise of secondary ports and
environment which is likely to
specialist terminals: increasing
encourage capital investment over
congestion at a number of major
the next decade.
the group at around £260 million.
• Takeover speculation surrounding Forth Ports has resulted in a
ports (e.g. Felixstowe) has already seen nearby and substitute ports
Teesside based PD Ports valuing
• High visibility of earnings and
20 percent increase in share
benefit from trade flows that wish to
strong cash generation due to
both avoid the cost, and increase the
the long-term nature of contracts
certainty that delivery timetables will
and the position of ports as
In addition to these transactions, the
be met.
local monopolies.
Department for Transport has been
price since November 2005.
considering how it might realize the Vertical integration: companies are
• The development potential of land
value from the U.K.’s trust ports.
increasingly moving up and down the
around ports for both residential
Although much of this portfolio has
chain, either through direct asset
and commercial uses.
little commercial activity, it does include major ports such as Dover,
ownership (as evidenced by APM’s purchase of P&O Nedlloyd) or though
This is evidenced by recent
managing trade movements (PSA and
transactions which have included
Hutchison Port Holdings have both
investment from both property players
Details of the U.K.’s largest ports and
recently committed to major freight
interested in development potential
the major port operators are set out in
forwarding systems/companies to aid in
and private equity players seeking
the Appendix.
the management of customer goods).
financing opportunities:
More conferences: in an attempt
• In September 2005, the Mersey
to provide better service and more
Docks and Harbour Company was
effectively utilize ships, shipping
acquired by Peel Holdings Limited
conferences are becoming even more
for U.K.£771 million.
important. This trend, coupled with increasing ship sizes (especially in
• P&O is the subject of a takeover by
container ships) is increasing the
Dubai’s state-owned ports operator.
pressure to expertly handle ships and
Among its many interests, P&O has
minimize transit times.
shareholdings in over 30 port operations on six continents.
Tyne and Milford Haven.
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How KPMG can help KPMG has a team of advisors with strong experience in the ports sector. Our experience allows us to offer an informed and insightful view of the key challenges facing the industry. “Our team offers a broad
KPMG firms have an impressive track
KPMG works together with our firms’
record of providing advisory services
clients to offer tailored support and
spectrum of specific
to the ports industry:
help ensure a successful outcome.
professional services.”
• Advising private companies on
Our services include: acquisitions, from strategic analysis
Corporate finance
through to financial and taxation
• mergers and acquisitions support • financing of capital investment
due diligence
programs
• Providing post-transaction services such as operational audits, assessment of health and safety
• advice on entry and expansion strategies
• advice on regulatory issues.
programs and review of Corporate Social Responsibility (CSR)
Transaction services
reporting best practice
• due diligence • tax and accounting structuring.
• Providing advice on major ‘growth’ projects such as capital
Property advisory services
investment programs, property
• advice on redevelopment and
redevelopment and improving surface access to ports
regeneration projects
• consideration of surface access issues.
• Advising on recent developments in government thinking on the
Debt advisory services:
ports sector
• funding structures including securitization
• Working with the Department
• financial modeling.
for Transport and local authorities on realizing the value from their
Post transaction services:
ports assets.
• environmental, health and safety audits
• operational and IT audits • CSR reviews • assessment of programs and management activity.
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A global perspective Many of the issues within the
KPMG in Hong Kong
Jawaharlal Nehru Port Trust: financial
U.K. ports sector are commonly
PSA International: performed due
adviser to private sector operator on
encountered overseas. KPMG’s
diligence work on the acquisition
its investment in the JNPT Container
Transport team operates on a global
of an interest in Hong Kong
Terminal in Mumbai.
basis and our international experience
International Terminals.
has included advising on acquisition
Port of Melbourne: adviser for the
and financing strategies, regulatory
Hong Kong port company and
Port Philip Bay channel deepening
issues and contract negotiation as well
Chinese shipping company: provided
project, and advised the Victorian
as due diligence and tax offerings.
advice on bids for the Hong Kong
Government on ownership and
Container Terminal.
operating structures for the former
KPMG in the U.K.
Port of Melbourne Authority.
U.K. ports operator: advised on
Hong Kong based port operator:
expansion into the Baltic States and
advised on the acquisition of a port
South Australian Ports: advised on
entering into a joint venture with a
operator in Nantong, Jiangsu Province,
prospective regulatory matters to a
Finnish company to own and develop
operating four berths and a
bidder in the privatization of South
three port facilities.
container terminal.
Australian ports.
KPMG in Russia
KPMG in Australia
Port of Geraldton: advised on the
Russian steel producer: advised on the
China ports privatization: assisted
development of US$75 million
acquisition of a controlling stake in St.
China’s largest port operator on the
deepening of the access channel and
Petersburg seaport operator and Tuapse
potential restructuring of a significant
inner harbor for the Port of Geraldton.
seaport operator. Provided due diligence
portfolio of port assets.
assistance and valuation services.
Dalrymple Bay Coal Terminal: Bahrain ports privatization: advised
advised a bid team on the potential
KPMG in Germany
Bahrain’s Ministry of Finance and
regulatory issues associated with
Major German cargo transport and
National Economy on the privatization
the terminal.
logistics organization: provided various
of the existing Mina Salman Port and
advice on a number of key transactions.
the new Khalifa bin Salman Port.
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The KPMG team You need to know that the team working for you has the skills and commitment necessary to provide you with success.
“KPMG has a dedicated
KPMG in the U.K.
team of professionals
Tony Cates Leads the team’s services in the ports and shipping sector.
who have worked on a Justin Zatouroff
variety of ports projects
Provides mergers and aquisitions (M&A) advice on transactions in the transport and logistics sectors.
for both the private sector Lewis Atter
and government.”
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.
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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.
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“
The KPMG team will aim to deliver clear, pragmatic advice in order to assist you in making the right choices as opportunities in this
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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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U.K. major port operators The major port operators in the U.K. are outlined below. “The U.K. ports
Name
Turnover
Other information
U.K. £ million
sector has recently ABP
492.2
witnessed a high level of
Owns and operates 21 ports including Immingham, Hull, Southampton and Port Talbot. Jointly owns Southampton
transaction activity and
Container Terminal and Tilbury Container Tendril. Other services provided by
takeover speculation.”
subsidiary ABP Connect, Northern Cargo Services, U.K. Dredging, ABP Marine Research, AMPorts. 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
244.6
(U.K.) Ltd Forth Ports
Operates three ports: Felixstowe, Harwich International and Thamesport.
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.
Source: Company Web sites and annual reports, 2004/2005
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Largest 20 U.K. ports
Port
Operator
Annual throughput 2004 (000 tonnes)
Source: Department for Transport (DFT), 2004/2005
Grimsby and Immingham
ABP
57,616
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
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kpmg.com
Contact details Dr Ashley Steel Global Chair — Transport KPMG in the U.K. +44 (0)20 7311 6633 ashley.steel@kpmg.co.uk Tony Cates Head of Shipping KPMG in the U.K. +44 (0)20 7311 6366 antony.cates@kpmg.co.uk Rupert Chamberlain Partner KPMG in Hong Kong +852 3121 9871 rupert.chamberlain@kpmg.com.hk Michael Cooper Director KPMG in Australia +61 3 9288 5833 mcooper@kpmg.com.au
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