Some companies are already nibbling at the caviar of Russia’s maritime sector in the wake of Moscow’s accession to membership in the World Trade Organization. Three weeks after Russia joined the WTO, APM Terminals on Sept. 10 announced it is buying a 37.5 percent stake in one of Russia’s two big private terminal operators, Global Ports. Both parties to the deal said WTO membership made it possible.
The new investment makes APMT, the terminal operating arm of Denmark’s A.P. Moller-Maersk Group, the biggest direct foreign investor in Russia’s transportation infrastructure. That infrastructure, however, will need a lot more investment to handle the booming trade volumes to come.
“Up until now, we haven’t seen any international operators getting a stake in the Russian port sector, which has been dominated by Russian-owned companies,” said Neil Davidson, senior adviser for ports at Drewry Shipping Consultants. “It’s significant that an international operator has entered the market in partnership with a Russian operator.”
The investment fits perfectly with APMT’s global strategy of investing in fast-growing emerging markets, especially those in the north-south trade. “It’s a dynamic market, one that needs investment in capacity and one that has great potential for growth with Russia’s joining the WTO,” Davidson said. “It’s also a very profitable one, because Russian terminal operators tend to be very profitable.”
Global Ports booked revenue of $501 million and adjusted earnings before interest, tax, depreciation and amortization of $282 million in 2011, which gave it a 56 percent return on income.
The investment will give Global Ports access to APMT’s terminal-operating technology, which will help its two container terminals in St. Petersburg grapple with some of the severe congestion plaguing the port. “It’s a market where operators are trying to catch up with demand most of the time,” Davidson said.
But the APMT investment won’t solve the port’s congestion problems immediately. “The additional liftings will not come overnight,” said Rick Shannon, president of Atlantic Ro-Ro Carriers, a roll-on, roll-off carrier specializing in the U.S.-Russia trade. “Port development is the top priority of the government as related to transportation productivity. St. Petersburg operates well but certainly can be improved, and we are anticipating better production during the coming year.”
Global Ports has two container terminals in St. Petersburg, one in the far eastern port of Vostochny, in which Dubai-based DP World has a 25 percent stake, and the other an inland container depot near St. Petersburg. It also has container terminals in the Finnish ports of Helsinki and Kotka and an oil export terminal in Estonia.
Global Ports handled 1.35 million 20-foot-equivalent container units in 2011, 30 percent of Russia’s total containerized ocean traffic, and shipped out 23 percent of the total fuel exports from the former Soviet republics.
Global Ports’ main competitor in Russia is National Container Co., which operates a new greenfield terminal in the Port of Ust-Luga, 50 miles from St. Petersburg, two terminals in St. Petersburg and terminals in Ukraine and Latvia.
Under terms of the deal, which requires regulatory approval by the European Union, APMT is buying 50 percent of Russian private transportation group N-Trans’ 75 percent stake in Global Ports. This will leave both companies with a 37.5 percent stake, with the remaining 25 percent publicly traded as global depository receipts in London, where Global Ports listed its shares in 2011.