Ports Advisory Services

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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

5

How KPMG can help

6

A global perspective

7

The KPMG team

8

Appendices

11


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Ports Advisory Services 3

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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Ports Advisory Services 5

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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6 Ports Advisory Services

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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Ports Advisory Services 7

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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8 Ports Advisory Services

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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Ports Advisory Services 9

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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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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12 Ports Advisory Services

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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Ports Advisory Services 13

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

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent firms operating under the KPMG name. KPMG International provides no audit or other client services. Such services are provided solely by member firms of KPMG International (including sublicensees and subsidiaries) in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any other member firm, nor does KPMG International have any such authority to obligate or bind any member firm, in any manner whatsoever.

Š 2006 KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent firms operating under the KPMG name. KPMG International provides no services to clients. Each member firm of KPMG International is a legally distinct and separate entity and each describes itself as such. All rights reserved. Printed in the United Kingdom.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Designed and produced by KPMG LLP (U.K.)'s Design Services Publication name: Ports Advisory Services Publication number: 300-924 Publication date: March 2006

Corporate finance services, including Financing, Debt Advisory, and Valuation Services, are not performed by all KPMG member firms and are not offered by member firms in certain jurisdictions due to legal or regulatory constraints.


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