Port failure: $65m cost is just the start
Comment: It’s ratepayers who’ll end up paying, writes Andrea Fox
While we wait for the skeletons to tumble out of an investigation into Ports of Auckland’s abandoned container terminal automation project, the city’s ratepayers can add another couple of certainties to death and taxes.
One is that they’ll end up paying for the six-year debacle. The other is that the cost doesn’t stop at the $65 million write-off signalled by the Auckland Council-owned port when it pulled the plug this week.
The port says the write-off is mainly for automation software and associated technology.
But as at October, $330m had been spent on terminal development — to which automation was central — to increase capacity, according to a port report to council.
Of this, $70m was for 27 new autonomous straddle carriers, $60m for three new ship-to-shore cranes, and $61m for “automation only projects”. (Councillors were advised that “most” of this expenditure would have been necessary regardless of the automation intention.)
New chief executive Roger Gray suggests all the investment hasn’t been lost.
The new cranes, for example, are essential for growth, and the straddle carriers — designed for use in an automated system and not requiring drivers — can be converted for manual operation, he says.
But here’s the sting.
Those carriers, which cost $70m remember, don’t have a driver’s cab. Retrofitting them is likely to be expensive, according to sector opinion.
Those port observers also claim the company paid a premium for the new cranes because they have a remote operation feature. (However, a port spokesman denies this feature was integral to automation.)
Even before the supply chain crisis and pandemic labour shortages, the port didn’t have enough drivers to make full use of its cranes. The situation has continued, meaning that at a time of high shipping pressure, some have sat idle.
The port says it will be six to 12 months before we know the cost of converting the straddle carriers.
Other costs incurred while New Zealand’s main imports gateway struggled to marry its choice of automation system with a manual operation may never be fully quantified.
The cost of business lost as ships waited up to two weeks to unload, or skipped Auckland entirely; the costs to the economy of resulting supply congestion; the extra costs to Auckland importers and exporters of congestion charges imposed by frustrated shipping lines; the cost of lost export business and opportunities because empty containers have been stranded in Auckland.
Notwithstanding the automation misadventure, the port’s financial performance has disappointed for some time. With more spending needed to fix the straddle carrier issue, and the port planning to deepen the shipping channel for bigger visitors as soon as it’s allowed, how much more capital expenditure will its cashflows sustain?
Gray, in the job for 10 weeks, has promised a back-to-basics business approach and says performance is already improving.
The port’s lenders, as well as NZ
As senior councillor Chris Darby put it, the council’s been ‘a lazy port owner’.
Inc, will be counting on it — though the bankers are undoubtedly comfortable knowing the council, aka Auckland ratepayers, will foot the bills.
Meanwhile, we’ll have to wait for the council-ordered investigation to learn how the then leaders of this critical piece of national infrastructure got it into this mess, and why it’s taken so long for the red flag to go up.
It’s too late for heads to roll. The directors who signed off on the management-driven plan and then apparently switched off, have mostly gone. The chief executive who launched it exited last year.
While the council has ordered an investigation, it’s not off the hook.
As senior councillor Chris Darby put it, the council’s been “a lazy port owner”. It didn’t engineer a top table shakeup until after then-chair Liz Coutts had left the building in January last year and the port’s awful health and safety record was in the spotlight, along with its disappointing dividend returns to the council.
The investigation is to be done by the new board, and the council wants it started smartly.
The port can’t yet say what shape it will take, exactly who will do the probing, and when we can expect the findings.