When the Virginia Port Authority board meets on March 26, it will decide whether to pursue two current private bids to operate its terminals or to proceed with the plan to restructure the VPA and its terminal operating subsidiary, Virginia International Terminals.
The VPA is still tweaking its reorganization plan but won’t implement it until a decision is made on whether to lease the port’s terminals to one of the private bidders. The terminals are now operated by VIT, which is in theory a subsidiary of VPA but is not overseen by it. The two bidders are APM Terminals and Virginia Port Partners, a consortium led by J. P. Morgan IIF Acquisitions that includes Maher Terminals and an affiliate partner, Noatum, a company that operates other ports throughout the world.
“If the public-private partnership process moves forward after March 26th, that’s a clear sign we’re leaning in that direction,” said Rodney Oliver, the VPA’s CFO, who is serving as the interim executive director. “It does not necessarily take the reorganization completely off the table, but until a deal is signed by the governor, it’s always out there.”
The idea for the reorganization arose in the context of the flattening out of the port’s container volumes following the Great Recession of 2008 and the need to improve the port’s operating efficiencies, reduce costs and keep or improve market share. “It looks toward the future to design the best structure moving forward,” Oliver said. “One of the major aspects of the plan is to exert some additional control over VIT, which is accomplished by having direct oversight over VIT and no longer have the VIT board make the month-to-month oversight.”
Up to now the VPA board appointed the VIT board and approved the VIT budget and the selection of a CEO for VIT, but did not oversee VIT operations, leaving that to the VIT board.
“The object is to centralize all the decision-making authority under the VPA board,” Oliver said. The VIT board would be relegated to an advisory status under the reorganization, and the VPA board would have direct control over its revenues and expenditures. “It would more closely resemble a parent/subsidiary relationship than it does now.”
The object of the reorganization is threefold: to centralize management under the VPA, eliminate the duplication of administration within the two organizations and unify communications. “If you’re a shipper and you want to contact the port, you first have to decide, ‘Who do I call? The VIT or the VPA?’” OIiver said. “We want to eliminate that and have centralized customer service and a unified communications and messaging strategy.”
Meanwhile the VPA is still in discussions with APM Terminals and VPP. It has asked for more specifics on certain aspects of the two bids. APM Terminals estimates that its bid is worth $3 to $4 billion over the 20-year term of the lease. The VPP bid is worth $3.12 billion over the 48-year period of one of the three lease terms it has proposed. The VPP proposal includes an upfront $400 million concession fee to Virginia, which would be paid in April. Joe Ruddy, VIT's chief operating officer, said last year the value to the state of sticking with VIT over a 48-year period is $13 billion, or $3.7 billion in today's dollars
“If the board decides on March 26th that the privatization proposals are not the direction where we’re headed, then immediately after the board meeting the restructuring would commence,” Oliver said.