Plipdeco CEO: Port needs to benefit from Panama Canal

from Business Guardian..


June 8, 2013

Trinidad &Tobago must upgrade all aspects of its port operations if it is to compete against larger ports globally and increase its volume of trade, says Ashley Taylor, president, Point Lisas Industrial Port Development Corporation (Plipdeco).

He said 44 per cent of vessels on order globally are large-class vessels which cannot presently be accommodated in T&T’s ports and smaller-sized vessels would eventually become obsolete worldwide.

“We are actually approaching capacity, so whether we like it or not, we have to expand. The longest length of our largest berth is 200 metres and that is the largest vessel we can accommodate. That is several iterations below the largest size vessel that is on the market. A 200-metre vessel equates to about 2,000 20-foot equivalent unit (TEU) vessel.

“To put it in context, the largest size vessel that passes through the Panama Canal is 5,000 TEUs. With the expansion of the canal, that will move to 12,500 TEUs. That is a substantial increase from where we are at,” Taylor said.

T&T was placed at position 68 of the 155 countries around the world ranked in the 2013 Logistics Performance Index (LPI), placing it higher than Guyana, the Bahamas and Jamaica, but lower than Panama and other highly-developed economies.

Panama is widely regarded in this region as an official leader as far as logistics is concerned, but that has not really been formalised. Only now Panama is seeking to take its official place in the region. The Panamanian government has formed a logistics committee and is in the process to ensure Panama becomes a global leader in trade and logistics.”

For T&T to catch up to Panama and other world leaders in port operations and logistics, Taylor said there must be better training of the workforce, modification of legislation, improvement in Customs and Excise, technology and labour reform.

He said it is urgent T&T improves its port operations to get a bigger share of the growing trade in a globalized world.

“The Latin American market is growing and that is an opportunity for us where trade is concerned. A lot of manufacturing is moving away from China back to Latin America, Mexico, in particular, where a lot of United States companies are looking at outsourcing to keep the price of their products competitive. The labour rates in China are close to Mexico and, at times, even more than Mexico.”

Taylor spoke to the Business Guardian and CNC3 in a joint interview on Monday at his office, Plipdeco, Point Lisas Industrial Estate, Couva.

Plipdeco: Growth-oriented

Taylor said Plipdeco is not ready to give details of how much money Plipdeco will spend to expand the port at the industrial estate in Point Lisas as the company is in the early stages of doing feasibility studies. However, he did say a project of this size anywhere else would cost $100 million.

“I am not saying that this is how much it will cost us, but an expansion of that type will cost this much. The expansion will be done on a phased basis,” Taylor said. “That process will take between 24 to 36 months.”

He said Plipdeco is seeking to improve operations through training and development of the workforce, the introduction of new technology and port expansion.

“We are growth-oriented, and as everyone knows, the Panama Canal will be completed soon and we want to be ready to position ourselves on the path of growth and expansion.”

Taylor spoke about new capital acquisitions and technology. For the year so far, Plipdeco has spent roughly $6 million.

“We recently embarked on a programme to improve the infrastructure of the port. These include roadways and storage areas. We feel that unless those things are taken care of, the level of productivity that we want to achieve will not be achieved. We acquired a new container handler in January.

We recently concluded a tendering process for the acquisition of a new mobile harbour crane and an award is to be made shortly. Before the end of the year, we will acquire three additional yard trucks.”

He said unlike Panama and Jamaica that are naturally situated on trade routes, T&T is the most southern of the Caribbean islands and so must add value to its ports to attract traders and shippers.

Lines of business

Plipdeco has two major lines of business: port operations and the industrial estate.

Taylor said the port operations account for 65 per cent of Plipdeco’s overall annual revenue and the estate for 35 per cent. In 2012, Plipdeco’s reported revenue of $242 million, a seven per cent increase compared with the $225 million in turnover in 2011.

Port operations are broken down into three major revenue earners: handling of container cargo, management of the Point Lisas harbor and warehouse operations.

Some of the goods that pass through the port are manufactured imports from the Far East and foodstuff from the United States.

What is exported is manufactured goods intended for Caricom territories.

“We act as the landlord for the industrial estate, which is approximately 865 hectares and 100 tenants. So we are responsible for the maintenance of the infrastructure, roads, drainage, lighting and so on and to ensure that the clients abide by the existing environmental governance and so on.”

He said revenue from the industrial estate tends to be stable as the estate is full.

“Revenue from industrial estate management accounts for about $50 million annually. We operate on a commercially viable basis. We do not allow the cost of operations to flounder and then use revenue from the port to make up the shortfall. We want to ensure that each operating centre can operate on its own and be profitable.”

Taylor said revenue from the management of the industrial estate is important, but Plipdeco’s management does not solely rely on it.

“It would not be as profitable without that $50 million revenue, but we would still function as a going concern.

He said there was a “small increase” in profitability from $17.6 million in profit before tax in 2011 to $17.9 million in 2012.

“That profit would have been substantially higher were it not for us having concluded in early 2012 negotiations with the majority union, the Seamen and Waterfront Workers’ Trade Union (SWWTU) and the retroactive payments that had to be made. Were it not for that, profits would have been substantially higher.”

He attributed profits in 2012 to revised tariffs in September 2012 and a 14 per cent increase in containerised cargo movement.

“We have actually seen an increase in market share in containerised cargo of 46 per cent to 54 per cent. We are actually the dominant player locally as far as containerised domestic cargo. We have now surpassed the Port of Port-of-Spain. The main reason for this is service, productivity and efficiency.”

For the first quarter of 2013, he said there was a profit before tax of $13.5 million.

“The tariff increase was only implemented in September 2012, so that would have taken effect in the first part of 2013. There was also an increase in the amount of general cargo of nine per cent.”

Plipdeco vs Port of Port-of-Spain

He compared the Port of Port-of-Spain to the Point Lisas port and the differences in how they are run.

“Plipdeco is required to operate on commercial terms. We are 51 per cent state owned and 49 per cent private sector and we are actively traded on the T&T Stock Exchange. We do not receive any subventions from the Government. We are required to be profitable and, as a result, we must operate with a private sector mentality to ensure we are viable and sustainable.”

He said Plipdeco has been successful because of little government interference.

“The Government does not get involved in the day-to-day operations of Plipdeco. Of course, we have requirements where we have to report to the state on certain information on a monthly and annually basis. But in terms of setting objectives, we are allowed to operate as a viable entity. The board is appointed by the Government, but it is also supportive and it recognises its roles and recognises that returns for shareholders must be maximised.”

While Plipdeco is run along business lines, he said the Port of Port-of-Spain depends heavily on government support.

Compared to other ports internationally, Taylor said Plipdeco is the “mid-range.”

He said he would “shy away” from giving any advice to the Port of Port-of-Spain as it has its own unique situation.

“I am sure that there are things that the Port of Port-of-Spain is doing that we can learn from and vice versa. However, that port has its own unique circumstances. That port has been in existence for several decades and they have survived on Government subventions. That is part of their culture, but we also have to work towards a culture of self-sufficiency.”

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