Will in­vest in port ex­pan­sion as needed, says Gu­jarat Pi­pavav MD

Ap­proach­ing the last 10 years of the 30-year con­ces­sion pe­riod will not de­ter in­vest­ments: Keld Ped­er­sen

The Hindu Business Line - - NEWS - P MANOJ

Gu­jarat Pi­pavav Port Ltd (GPPL), the en­tity that runs In­dia’s first pub­lic-pri­vate-part­ner­ship (PPP) green­field port, said it has not closed the op­tion of in­vest­ing fur­ther for ex­pand­ing the port lo­cated at Am­reli dis­trict as it ap­proaches the last 10 years of its 30-year con­ces­sion, that ends in 2028.

“That would be wrong to as­sume,” said Keld Ped­er­sen, Manag­ing Direc­tor of GPPL, when asked whether the ap­proach­ing 30-year con­tract time­line in­hib­ited fur­ther in­vest­ment in the port.

APM Ter­mi­nals Man­age­ment BV, the largest share­holder in GPPL with a 43.01 per cent stake, is the con­tainer op­er­at­ing unit of Dan­ish con­glom­er­ate AP Moller-Maersk Group A/S.

“Some­thing that we are open about to the in­vestors is that in our con­ces­sion agree­ment, we have some­thing called ‘de­pre­ci­ated re­place­ment value of as­sets’. This is a very good thing. It will never put any com­pany in a po­si­tion where it could stop in­vest­ing be­cause the time­line (to get re­turns) would be too short,” Ped­er­sen told Busi­nessLine.

“We would in­vest as needed and at the same time we hope that we can ex­tend our con­ces­sion agree­ment with the Gu­jarat Mar­itime Board on rea­son­able terms and con­di­tions,” Ped­er­sen said.

Ped­er­sen’s state­ment as­sumes sig­nif­i­cance as ru­mours are do­ing the rounds that APM Ter­mi­nals is look­ing to exit Pi­pavav port but is hand­i­capped by the short resid­ual con­ces­sion pe­riod for a new buyer to get re­turns on in­vest­ment amidst un­cer­tainty over its ex­ten­sion beyond 2028.

On ex­piry of the con­ces­sion pe­riod, Gu­jarat Mar­itime Board will take over im­mov­able con­tracted as­sets and es­sen­tial move­able con­tracted as­sets at the de­pre­ci­ated re­place­ment value worked out by an in­de­pen­dent ap­praisal team.

GPPL, one of the two listed port com­pa­nies in In­dia, is in a pe­cu­liar sit­u­a­tion.

“To­day, we are a com­pany that has got rid of all our carry-for­ward losses, we are debt-free and pay div­i­dend to our share-hold­ers – we have done so thrice in the last 18 months,” said Ped­er­sen.

Growth flat

The port’s over­all year-on-year growth has re­mained flat. But, LPG and roll-on-roll-off (RoRo) have been con­tin­u­ously grow­ing to com­pen­sate for the de­cline in bulk cargo. RoRo and LPG are also ar­eas that have scope for ca­pac­ity ex­pan­sion, says Ped­er­sen.

Pi­pavav Port han­dles 100,000 cars — medium-sized Ford cars — on an an­nu­alised ba­sis, a two-year old busi­ness that be­gan in Au­gust 2015. The port has ca­pac­ity to han­dle 250,000 ve­hi­cles and would be keen to ex­pand it to 300,000 ve­hi­cles and beyond.

Ped­er­sen ac­knowl­edges that the growth in Ro-Ro busi­ness came at a very op­por­tune time for GPPL. “One of the ar­eas where we face chal­lenges is in the coal busi­ness which has been con­tin­u­ously go­ing down,” he said. This is an in­vest­ment that has turned un­vi­able for APM Ter­mi­nals.

“The steep drop in coal load­ings led to un­der-util­i­sa­tion of some as­sets which we will try to op­ti­mise through other means of busi­ness whether it is liq­uid, Ro-Ro or project cargo. But, there would be no ex­pan­sion be­fore we have op­ti­mised our util­i­sa­tion on the ex­ist­ing as­sets,” Ped­er­sen ex­plained.

Con­tain­ers is a bal­anc­ing act now for GPPL. “The growth in con­tain­ers has been flat in a very tough com­pet­i­tive mar­ket,” says Ped­er­sen, sur­pris­ing for a com­pany that has Maersk Line, the world’s big­gest con­tainer line, un­der its fold.

In April 2016, GPPL in­vested ₹360 crore to raise its con­tainer ca­pac­ity to 1.35 mil­lion twenty-foot equiv­a­lent units (TEUs) from 850,000 TEUs. The port cur­rently han­dles 685,000 TEUs a year, prompt­ing Ped­er­sen to say that GPPL has “be­come a fair player in the con­tainer busi­ness”.

No rate hike

A rate hike at the port was not on the cards. “We would like to see more util­i­sa­tion of our as­sets. Pi­pavav last raised rates in Jan­uary 2015. Another rate in­crease is not what the port is look­ing at right now. We would much rather like to see more util­i­sa­tion of the con­ces­sion. So, if we can go from 100,000 to 200,000 cars and grow our con­tainer busi­ness, it’s more im­por­tant to grow the busi­ness than look at price (in­creases),” Ped­er­sen added.

ZY KELD PED­ER­SEN, Manag­ing Direc­tor of GPPL YZ

“To­day, we are a com­pany that has got rid of all our carry-for­ward losses, we are debt-free and pay div­i­dend to our share-hold­ers”

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