0. GLOBAL CONTAINER TERMINAL OPERATORS: FROM DIVERSIFICATION TO RATIONALIZATION? Theo Notteboom ITMMA - University of Antwerp and Antwerp Maritime Academy, Belgium Jean-Paul Rodrigue Dept. of Global Studies & Geography, Hofstra University, New York, USA European Conference on Shipping & Ports – ECONSHIP 2011 Chios, Greece, June
TIMEFRAME: 25 minutes

1. Global Terminal Operators: An Emerging Geography of Intermodal Assets
1) Emergence
3) How Global?
2) Entry and Expansion
4) Rationalization?
Tangier Med (Eurogate & APMT)

2. The Emergence of Global Terminal Operators

3. Typology of Global Port Operators: Three Sides of the same Coin
Stevedores
Maritime Shipping Companies
Financial Holdings
Horizontal integration
Vertical integration
Portfolio diversification
Port operations is the core business; Investment in container terminals for expansion and diversification.
Maritime shipping is the main business; Investment in container terminals as a support function.
Financial assets management is the main business; Investment in container terminals for valuation and revenue generation.
Expansion through direct investment.
Expansion through direct investment or through parent companies.
Expansion through acquisitions, mergers and reorganization of assets.
PSA (Public), HHLA (Public), Eurogate (Private), HPH (Private), ICTSI (Private), SSA (Private).
APM (Private), COSCO (Public), MSC (Private), APL (Private), Hanjin (Private), Evergreen (Private).
DPW (Sovereign Wealth Fund), Ports America (AIG; Fund), RREEF (Deutsche Bank; Fund), Macquarie Infrastructure (Fund), Morgan Stanley Infrastructure (Fund).

4. Port Terminal Operations Inland Modes and Terminals
Vertical and Horizontal Integration: Moving along the Foreland and Hinterland
Horizontal
Integration
Vertical
Integration
Maritime Services
Port Holding
Inland
Port
Port Services
Port
Intermediate hub
Inland Services
Terminal
Port
Rail / Barge
Distribution Center
Maritime Shipping
Port Terminal Operations
Inland Modes and Terminals
Distribution Centers
Commodity Chain

5. Top Twelve Global Container Terminal Operators in Equity-Based Throughput
Source: Drewry (2009), Annual Review of Global Container Terminal Operators – 2010

6. Number of Terminals and Total Hectares Controlled by the Twelve Largest Port Holdings14 16 13 14 10 20 11 9 42 50 38 47

7. ENTRY AND EXPANSION STRATEGIES IN THE TERMINAL OPERATOR INDUSTRY

8. Factors behind the Interest of Equity Firms in Transport Terminals
Asset (Intrinsic value)
Globalization made terminal assets more valuable.
Terminals occupy premium locations (waterfront) that cannot be substituted.
Traffic growth linked with valuation.
Same amount of land generates a higher income.
Terminals as fairly liquid assets.
Source of income (Operational value)
Income (rent) linked with traffic volume.
Constant revenue stream with limited, or predictable, seasonality.
Traffic growth expectations result in income growth expectations.
Diversification (Risk mitigation value)
Sectorial and geographical asset diversification.
Terminals at different locations help mitigate risks linked with a specific regional or national market.

9. Major Port Terminal Acquisitions Since 2005
Date
Transaction
Price paid for transaction compared to EBITDA
2005
DP World takes over CSX World Terminals
14 times
Early 2006
PSA acquires a 20% stake in HPH
17 times
Mid 2006
DP World acquires P&O Ports
19 times
Goldman Sachs Consortium acquires ABP
14.5 times
End 2006
AIG acquires P&O Ports North America
24 times
Early 2007
Ontario Teachers’ Pension Fund acquires OOIL Terminals
23.5 times
Mid 2007
RREEF acquires Maher Terminals
25 times
July 2007
Goldman Sachs acquires a majority share in Carrix, the parent company of SSA Marine
Not disclosed

10. The Strategies of Terminal Operators
Financial Assets
Large financial assets and the capacity to tap global financial markets. Terminals as equity generating returns.
Managerial Expertise
Experience in the management of containerized operations.
IT and compliance with a variety of procedures.
Gateway Access
Establishing hinterland access.
Creation of a “stronghold”.
Provides a stable flow of containerized shipments.
Development of related inland logistics activities.
Leverage
Negotiate with maritime shippers and inland freight transport companies favorable conditions.
Some are subsidiaries of maritime shipping companies.
Traffic Capture
Capture and maintain traffic for their terminals.
Global Perspective
Comprehensive view of the state of the industry.
Anticipate developments and opportunities.

11. World’s Main Intermediate Hubs and Markets, 2008

12. HOW ‘GLOBAL’ ARE GLOBAL TERMINAL OPERATORS?

13. Dimensions of the Global Orientation of Terminal Operators
Geographical coverage
Regional orientation
Equity sharing agreements
Global financial institutions

14. Geographical Coverage: Container Terminal Surface of the World's Major Port Holdings, 2010

15. Container Terminals of the World's Four Major Port Holdings, 2010

16. Container Terminals of Some of the World's Minor Port Holdings, 2010

17. Regional Share in the Terminal Portfolio of the Twelve Largest Global Terminal Operators (Hectares, 2010)

18. FROM DIVERSIFICATION TO RATIONALIZATION?

19. Potential Rationalization Strategies followed by Global Terminal Operators
Intensified cost control
Review, postponement and cancellation of terminal projects
More selective investment decisions
Complex ownership and partnership structures to hedge risks
Divestment in terminals
Revisiting inland strategies

20. Intensified cost control helped to keep margins level
GCTO
2008
2009
2010
HPH
60.6%
60.3%
58.6%
PSA
29.8%
28.9% NA
APMT
18.4%
24.4%
25.3%
DPW
40.8%
38.0%
40.3%
Eurogate
28.3%
26.5%
Note: EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
Source: company websites (2010 figures) and Drewry 2010 (2008 and 2009 figures)
Revision of investment plans, equipment maintenance schedules,
asset deployment strategies and renegotiation of concession
agreements and throughput levels.

21. Hedging the risks Inter-firm Relationships in the Three Main Container Ports of the Rhine-Scheldt Delta, 2010
HUTCHISON PORT HOLDINGS
PSA
20%
Majority
shareholding
100%
ANTWERP
ECT
Minority
Shareholding (4)
MSC
50%
MSC Home terminal
50%
North Sea Terminal
NYK
PSA
(Antwerp/
Zeebrugge)
Europe Terminal
100%
Delta Terminal
100%
CYKH Alliance
Deurganck Terminal
50%
Waal- and Eemhaven
100%
50%
Antwerp International Terminal (AIT)
50%
New World Alliance
Shipping Line
Euromax
phase 1
50%
DP World Delwaidedock
100%
(Global) Terminal Operator
60%
DP World
42.5%
Rotterdam World Gateway
(Maasvlakte 2)
Operational by 2013
30%
ZIM Line (1)
Antwerp Gateway
10%
Terminal
10%
Cosco Pacific
20%
PORT
APM Terminal Maasvlakte
CMA-CGM (2)
10%
Source: Notteboom, T. and J-P Rodrigue (2010) “The Corporate Geography of Global Container Terminal Operators”
Financial Holding
35%
65%
CHZ
Terminal 1
(Maasvlakte 2)
Operational by 2014
100%
100%
APM Terminals
(AP Moller Group)
Albert II-dock north
100%
ROTTERDAM
75%
Shanghai International Port Group (SIPG)
APM Terminal
25%
ZEEBRUGGE

22. Hedging the risks Inter-firm Relationships in the Three Main Container Ports of North America, 2010
Ontario Teachers' Pension Plan
APL
100%
Global Gateway South
NYK
100%
Yusen Terminals
100%
Mitsui OSK
TraPac Los Angeles Berth 136
100%
Global Container Terminals
APM Terminals
(AP Moller Group)
APM Terminals Pier 400
100%
100%
Evergreen
50%
Evergreen Terminal
50%
New York Container Terminal
Yangming
West Basin Container Terminal
40%
60%
100%
LOS ANGELES
Global Terminal and Container Services
Deutsche Bank RREEF
LONG BEACH
APM Terminals Port Elizabeth
Terminal C60
100%
MSC
50%
Terminal A
Maher Terminals
100%
Maher Terminal
50%
OOIL
Long Beach Container Terminal
100%
Ports America
Port Newark Container Terminal
100%
K-Lines
100%
Pier G Berth
100%
NEW YORK
Source: Notteboom, T. and J-P Rodrigue (2010) “The Corporate Geography of Global Container Terminal Operators”
Hyundai
100%
California United Terminals
Stevedoring Services of America
AIG Highstar Capital
Cosco Pacific
51%
Pacific Container Terminal
49%
Hanjin
Macquarie Infrastructure
60%
Total Terminals International
40%
Shipping Line
Terminal Operator
Terminal
PORT
Financial Holding

23. Hedging the risks Inter-firm Relationships in the Main Container Ports of the Pearl River Delta, 2010
GUANGZHOU
Cosco Pacific
APM Terminals
(AP Moller Group)
Guangzhou South China Oceangate Container Terminal
39%
20%
41%
Guangzhou Port Group
China Shipping Group
60%
40%
Nansha Container Terminal
Nanhai International Container Terminals
50%
ZHUHAI
Guangzhou Huangpu Xingang Terminal
49%
Zhuhai International Container Terminals
50%
PSA
Guangzhou Huangpu Xinsha Terminal
49%
10%
50%
Shenzhen Yantian Port Group
Dongguan Container Terminal
Moderns Terminals
COSCO-HIT Terminal
30%
10%
33%
Yantian International Container Terminals
HUTCHISON PORT HOLDINGS
Hong Kong International Terminals
70%
67%
20%
100%
Shenzhen Municipal Government
Da Chan Bay Terminal One
35%
Asia Port Services
65%
Modern Terminals
20%
Shekou Container Terminals
66%
DP World Hong Kong
33%
Source: Notteboom, T. and J-P Rodrigue (2010) “The Corporate Geography of Global Container Terminal Operators”
80%
China Merchants Holdings International
DP World
25%
55%
Asia Container Terminals
Chiwan Container Terminal
75%
HONG KONG
SHENZHEN
Shipping Line
Terminal Operator
Terminal
PORT
Financial Holding

24. Changes in the Terminal Portfolio of APM Terminals Between April 2008 and April 2011

25. Changes in the Terminal Portfolio of DP World Between April 2008 and April 2011

26. Conclusion: A Globalized but Highly Regionalized Industry
Four major terminal operators (HPH, APM, PSA and DPW) have a strong globally-oriented portfolio; Regional orientation remains prevalent.
More selective investment policy.
Cancellation or postponement of terminal projects.
Sale, equity swaps & divesture.
Rationalization inevitably leads to concentration?