Shares hike after port lands big freight deal

SHARES in Port of Tauranga have risen sharply after the company announced a major freight deal which will see modern big ships berthing at the port.

The port, which is midway through a $250 million dredging project to allow the larger ships to berth, has unveiled a 10-year deal with New Zealand freight business Kotahi.

Kotahi, a joint venture between Fonterra and Silver Fern Farms, will put up to 1.8 million TEU (twenty foot equivalent units) export cargo containers through the port in return for two million Port of Tauranga shares.

Kotahi will also receive a 49.9 per cent stake in Port of Tauranga subsidiary Timaru Container Terminal, subject to freight commitments.

In a separate deal, Kotahi will provide 2.5 million TEU containers of the next 10 years to global shipping line Maersk.

In early afternoon trade, Port of Tauranga shares had soared 4.45 per cent or 64c to $15.01, closing on $15.

Greg Steed, a former president of the New Zealand Shippers Council, said the move was significant.

‘‘Our output keeps going up and up, and we obviously need the most efficient ships to move it, so I’m glad people have put themselves on the line to commit the volumes.’’

Port of Tauranga chief executive Mark Cairns said the agreement with Kotahi would increase profits immediately.

Mark Lister, Craigs Investment Partners head of private wealth research, said the move was ‘‘another good strategic move’’ by Port of Tauranga over its rivals.

‘‘They’ve always had an ambition to be a hub port, for bigger ships to come into New Zealand and have the smaller ports around the country as the feeder ones.’’

Finer details would emerge over the next couple of months.

‘‘In terms of Port of Tauranga’s profitability, the immediate impact is relatively modest but it really is something that will see a structural increase in volumes from about 2017.’’

Kotari chief executive Chris Greenough said bringing in bigger ships would be a boost for New Zealand Inc in terms of transit times.

Being part of an Australian hub would add seven to 10 days to export transit times, he said.

‘‘We do need to secure direct options to New Zealand not just now but in the long term to remain competitive as a country overseas.’’

Maersk Line New Zealand managing director Gerard Morrison said his company would be starting a new additional service between New Zealand and Malaysia in October.

It would initially use a 4500 TEU-sized ship and was the first step towards bringing larger ships into the New Zealand market.

However, both Kotahi and Maersk indicated the Port of Tauranga deal did not preclude it talking to other ports, including Port of Tauranga’s key rival, Ports of Auckland.