APM Terminals made an unsolicited bid it estimated at between $3 billion and $4 billion to take over the operations of all the terminals owned by the Virginia Port Authority under a 48-year lease.
The Virginia Port Authority operates the terminals in Norfolk, Portsmouth, Newport News and Richmond through its subsidiary, Norfolk International Terminals.
APMT offered to operate the Norfolk, Portsmouth and Newport News terminals and said it would be open to taking over the Richmond river-barge facility as well.
“It’s an excellent opportunity for us to do what we do in a place where we’ve already made a very significant investment,” said Eric Sisco, president of APM Terminals Americas Region.
Under the offer, APM, which still owns the $540 million APM Terminals Virginia in Portsmouth that it completed in 2007 and leased to the VPA, would transfer ownership of that terminal to the VPA. The existing 20-year lease is valued at about $1.3 billion.
Sisco said APMT had leased the new terminal to the VPA as a short-term solution to preserve cash flow for both APM Terminals and the VPA during the downturn in container volumes moving through the terminal in 2008-2009. “The response to that was to get value from the investment at the time,” Sisco said. “Even as we were negotiating that lease, we knew this was not a long-term strategy for expanding port capacity after the opening of the (Panama) canal.”
Sisco said he expects some immediate shifting of cargo from the West Coast to the East Coast after the new Panama Canal locks are completed in 2015, “but it will be evolutionary, not revolutionary. The ships will get bigger, and we expect to see bigger ships calling this port.”
Under its proposal, APMT will carry out the second stage of the Portsmouth terminal’s expansion, which would boost annual capacity to 1.2 million 20-foot equivalent units. “We would fund both the below-the-surface infrastructure and the superstructure, which are the cranes,” Sisco said.
If the Commonwealth of Virginia accepts the offer, it will provide immediate relief for the $8.9 million operating deficit incurred last year by the VPA and its operating subsidiary Virginia International Terminals.
Under the terms of the bid, APMT will make substantial capital investments in the port that it figures will reduce Virginia’s capital costs by $1.1 billion. APMT would also pay state and local taxes, which the VPA and VIT, which are both tax-exempt entities, do not pay.
VPA Executive Director Jerry Bridges said the terminals will continue to operate normally while officials at the state’s Office of Transportation Public-Private Partnerships begin to evaluate the proposal.
“Customers will continue to work with the same VPA and VIT representatives they have worked with in the past; nothing has changed, Bridges said. “Regardless of the outcome of the PPTA process, state ownership of its marine terminal assets is not in question.”
Under its public-private partnership rules, Virginia will have to consider other proposals from private entities before it accepts the APMT offer. There will be a period of 30 days for public comment on the proposal during which the Commonwealth will solicit bids from other investors.
This is not the first offer the Commonwealth of Virginia has received for its marine terminal. The VPA received a $2.2 billion offer from real estate developer CenterPoint Properties in 2009 to purchase the operating rights of the cargo terminals. The VPA subsequently received similar offers from the Carlisle Group and a partnership between Carrix and Goldman Sachs. The VPA board turned down all three offers in September 2010.