For port operator, APM bid a wake-up call

Published 9:52 pm Wednesday, July 18, 2012

The state official who could have the biggest role in deciding who gets to run the Port of Virginia says the company currently doing the job may have grown complacent during its decades-long monopoly.

After extending the deadline for rivals to APM Terminals’ unsolicited bid to take over port operations in Virginia, state Secretary of Transportation Sean T. Connaughton has directed Virginia International Terminals to submit a plan for the future.

APM unexpectedly lodged its offer to operate Virginia’s ports for 48 years with Virginia’s Office of Public-Private Proposals at the end of May.

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Worth up to an estimated $3.9 billion to the state, the subsidiary of Danish shipping giant Maersk would pay Virginia a fixed monthly payment and variable monthly payments based on operating revenues.

APM would pay state and local taxes and fund capital improvements at the terminals, including a major expansion of APM Terminals Virginia, ownership of which the company would also turn over to the state.

The deadline for submissions from other groups interested in running the port was extended to Aug. 13 after potential APM rivals requested more time.

VIT is a nonstock, nonprofit private corporation, and its service agreement with Virginia to operate the ports “can be terminated on 30-days’ notice,” Connaughton said during a phone interview Wednesday.

Virginia’s ability to exploit economic opportunities presented by the port is closely tied to the performance of VIT, which operates APMT, Norfolk International Terminals, Newport News Marine Terminal and the Virginia Inland Port.

Moreover, port customers are increasingly viewing Suffolk and surrounding Western Tidewater locales as prime locations for warehouse and distribution facilities.

VIT has existed without competition for 30 years, Connaughton said, saying, “Now that we have APM — and we expect several other (bidders) — we want VIT, if they want to continue to be the operator of the state’s container terminals, to lay out a long-term plan and budget and program for how it intends to grow cargo in the port and to create jobs throughout the state.”

“Any time you have a 30-year monopoly that has never had any competition, you are likely to see that competitive edge slip,” he added.

Meanwhile, gate hours at APMT are being expanded for customers after a sizeable up-tick in cargo throughput in June.

The port handled 168,430 TEUs — equivalent to a 20-foot container — in June, up 11.2 percent from June 2011, it reported in a press release.

So far in 2012, the port has handled 994,727 TEUs — 5.4 percent more than during the same period last year.

Virginia Port Authority Executive Director Jerry A. Bridges said it was “the best June in the history of the port for TEUs, containers and rail.”

“I think we are going to continue to gain ground as indicators continue to point to growth for (the port),” he said.

While general cargo in June decreased 24.6 percent against June 2011 to 34,347 tons, so far this year, tonnage has increased 11 percent on the same period last year, to 187,762 tons.

Total rail containers handled in June rose 9.3 percent on the previous June to 30,954, and year-to-date rail containers are up 12 percent to 179,748.

VIT will expand weekday gate hours at APMT by three hours, from 6 p.m. to 9 p.m., Chief Operating Officer Joe Ruddy said.

The move responds to “double-digit growth over the past few months, driven by three new vessel services calling the port,” he said.

In the approach to the traditional peak season, he added, “I anticipate volumes to remain strong through November.

“That being the case, we will be forthcoming with a plan to address gate hours at Norfolk International Terminals in the very near future.”

The 64 Express barge service between the ports of Richmond and Hampton Roads moved 803 containers in June, up 147 percent from May.

The barge has moved 4,797 containers so far this year, a 104 percent increase from the same period in 2011.

Connaughton credited the current port board of commissioners for the increased activity, saying, “For the first time in a long time, we have a Virginia Port Authority Board that is demanding results from our port operations.”

He said a team of consultants is reviewing the APM bid, saying that the “threshold question” is “do we focus our efforts on reform and (the) revitalization of VIT, or do we look to an outside operator?

“We could end up taking a dual track, or making a decision to go one way or the other.”