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Port profits from joint venture

By Graeme Kennedy

Friday 24th November 2000

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Port of Tauranga is booming with a major domestic joint venture and a budding offshore alliance, high profit growth and record cargo volumes boosted by its radical inland port venture.

And chief executive Jon Mayson believes other New Zealand ports could soon follow his company's lead and find new opportunities through expanded co-operation and joint management and ownership.

"There should be a new approach to ownership and operation of ports in New Zealand. Why have separate management for some of the smaller ports when they could have the same management and ownership and get increased efficiencies and better economies?" Mr Mayson said.

"This is happening overseas and in time there could be a review of port ownership here. There would be issues relating to shareholdings where local councils are involved - and they are political issues - but commercial reality will drive it as it would be good for the customers, the ports and the shareholders."

Tauranga has followed that strategy in its 50% joint venture with Northport, a $65 million project to build a deep-water port at Marsden Point.

Mr Mayson said it was recognised in the late 1980s that a deep-water facility would be needed to handle the increasing volumes of Northland forestry products as operations would become difficult at the existing Port of Whangarei with its silting and dredging.

Resource consents were gained this year after a five-year process including appeals that cost $5.5 million. However, the port felt the total $65 million cost of the new project was too big a commitment to make alone.

Mr Mayson said a further complication was, based on projected volumes, it would be only a marginal investment.

"They looked for an equity partner and saw Tauranga, with our vast forest products experience and solid financial strength, as a good joint shareholder. They approached us and we became 50-50 in Northport, the company to operate the new port due to open in 2002 managed by Port of Tauranga," he said.

"Carter Holt Harvey is the biggest customer but to get it off the ground we needed an understanding with them and came to an agreement that they would guarantee throughput for the first five years.

"In return, Carter Holt becomes a 33% shareholder in Northport Operating - the operating company which will handle the land side of the business - with Northport holding the rest.

"Our strategy in going into Northport gets us involved in an area of tremendous forestry growth and major investment by forestry operators and gives us access to other volumes - and that's good for the shareholders."

Jon Mayson said Metroport, which opened in South Auckland in May last year with Australia New Zealand Direct Line (ANZDL) its sole customer, had exceeded all expectations and was largely responsible for a 110% increase in container traffic in the last financial year to 236,000 20ft equivalent units (TEUs).

Tauranga wooed ANZDL from Ports of Auckland and transports its containers between Metroport and the Bay of Plenty port under an arrangement with Tranz Rail.

Mr Mayson said Tauranga was constantly talking with other shipping lines to attract them to the Bay of Plenty but first had to extend the Tranz Rail operation to a daily service, rather than being restricted to weekends due to rolling stock commitments.

"There's no use attracting customers if we can't offer a full service but we are talking with Tranz Rail to solve the problem," he said.

With the huge container traffic growth, Port of Tauranga increased total tonnage to a record 9.7 tonnes, up from 8.5 million, while after-tax profit rose from $18 million to $19.65 million. But Mr Mayson said the $18 million result was inflated by extraordinaries including property sales, and the true increase was 27%.

Meanwhile, Port of Tauranga and the Port of Brisbane Corporation have signed an agreement after nine months' work to explore ways to add value to both their operations in a concept known as Oneport.

Other ports around the world could later join the alliance, which Mr Mayson said was at an early stage. However, ports could form global alliances and work together in the same way shipping and airlines have created wide co-operative unions.

"If international ports have synergies, the ability to work together and if there are things we can learn from each other, we could explore ways to use them to add value to our operations," he said.

"Tauranga and Brisbane do have synergies that should be explored - we have the same information systems, the same customers, philosophies, vision, a similar use of rail and a broad range of other activities.

"And we know them - their chief executive is the former Wellington chief executive Graham Mulligan and their man in charge of the road-rail interchange is ex-New Zealand Rail with whom we have worked here."

Mr Mayson said the idea for the alliance came after Tauranga management consultancy AmZ recognised the many synergies between the two ports while working on the Brisbane port's road-rail interchange.

The agreement is aimed at gaining benefits from an international connection and could include sharing technology, marketing, trade information and specialised expertise.

"Ports working together for the benefit of both makes real sense. There are sister port relationships but they are politically driven rather than commercial relationships," Mr Mayson said.

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