© Copyright 2015 by K&L Gates. All rights reserved.

Michael J Neylan

Partner

The Impact of Port Privatisation:

Challenges and opportunities

Africa Australia Infrastructure Conference, 17 November 2015 - Melbourne

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PRESENTATION HEADINGS

1. Introduction and nature of ports

2. Different port operating models

3. Port privatisation models

4. Africa: Opportunities and challenges

5. Africa: Major private sector port players

6. Conspectus of African port privatisation experience

7. Future of African port privatisation

Acknowledgements

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1. INTRODUCTION AND NATURE OF

PORTS

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Economic geography

of African ports

Ports as:

Local monopolies

Regulated public

utilities

Strategic land and

asset owners

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Port competition paradigms

Inter-port competition

Contestable hinterlands

Intra-port competition (Australian experience)

Combination of functions

Regulator

Landlord

Trade facilitator

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2. DIFFERENT PORT OPERATING

MODELS

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Service Port Model

All infrastructure /

superstructure

owned by Port

Authority (PA)

All services

provided by PA

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Tool Port Model

PA owns

infrastructure /

superstructure

PA contracts out

services delivery

Landlord Port Model

PA owns

infrastructure

Private sector

operator holds

concession and

provides

superstructure and

services

Operating risks

contracted away

AFRICA AUSTRALIA PRIVATISATION

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3. PORT PRIVATISATION MODELS

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• Uncommon

• Port state control issues

• Intrinsic value of port precinct land

• Creation of private monopoly

Outright sale

• Separation of powers

• PA is port owner and leases terminal(s) to lessee/concession holder

• Reversion

• PA continues to perform core regulatory and port state functions

• Private sector operator responsible for all terminal operations (Greenfields / Brownfields)

Landlord

RATIONALE OF PORT PRIVATISATION

Facilitate trade

Improve port efficiency

Reduce costs for users [query]

Reduce level of public investment

Technology and know how transfer

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PORT PRIVATISATION SPECTRUM*

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Public Sector Operation

Management Contract

Lease

Full Concession: BOT/BOOT Scheme

BOO Scheme

Sale to Private Sector* Sudi Mwasinago (2006)

4. AFRICA: OPPORTUNITIES AND

CHALLENGES

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Opportunities

High growth economies

Emerging and highly

educated middle class

Resource rich continent

Africa as a BRIC

Strategic geopolitical

location

Challenges

Low concentration of

ports

Scale and number of

ports is low

Lack of physical

infrastructure

Political instability

Low levels of domestic

capital formation

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5. AFRICA: MAJOR PRIVATE SECTOR

PORT PLAYERS

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MAJOR PRIVATE SECTOR PORT PLAYERS

Bolloré (French)

14 concessions

West and North Africa concentration

DP World (UAE)

Senegal clockwise to Mozambique

Signature concessions: Port du Futur, Sokhna, Maputo

APM Terminals (Danish)

9 concessions

West Africa concentration

Signature concessions: Apapa (Lagos), Abidjan and Monrovia

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6. CONSPECTUS OF AFRICAN PORT

PRIVATISATION EXPERIENCE

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MOZAMBIQUE

Port of Maputo

2003: 15 year concession awarded to MPDC (Mersey

Docks)

Full privatisation of role of PA

Competition with Durban / SA play

2010: concession extended and DP World led

consortium takes control

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KENYA

Port of Mombasa

Troubled history: intent vs execution

Tensions with DWU

Second container terminal project: JICA terms

Role of KPA and privatisation agenda

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NIGERIA

Ports of Lagos and Port Harcourt

2005: 25 year concession for Apapa Container

Terminal granted to APM Terminals

2006: Full roll out of 20 long term port concessions

completed

Inter-port competition

2014: New multipurpose terminal at Apapa

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SOUTH AFRICA

Ports of Durban, Richards Bay, etc. (8)

Contrarian view on port privatisation

Ports owned/operated by Transnet – public asset

conglomerate

Separate regulator (TNPA)

Primacy of social goals: full employment, universal service

obligation and public ownership of strategic assets

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7. FUTURE OF AFRICAN PORT

PRIVATISATION

Long game

Catalyst and evolution

Political risk and priorities

Development of domestic capital markets

Rise of private ports

But PSA as world benchmark!

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ACKNOWLEDGEMENTS

1. Sudi Amani Mwasinago “An analysis of the trend in concessions and

privatisation in ports: the case of Kenya and

Tanzania”

WMU Dissertation 2006

2. Auriel Edna Newman “Privatisation of Ports”

University of South Africa Dissertation 2013

3. Sheila Farrell “Attracting Private Finance into African Ports” in

Port Infrastructure Finance edited by Meersman,

Van de Voorde and Vanelslander 2014

4. Ashurst Lawyers “Africa: a new port of call for international

operators”

Client Alert 2014