VPA Nears Decision on Terminal Bids

VPA Nears Decision on Terminal Bids

The Virginia Port Authority is preparing to choose a preferred bidder from among three groups that want to take over operating rights of the terminals it owns in Hampton Roads and its inland port at Fort Royal.

The VPA set Nov. 1 as the date to announce the preferred bidder from among APM Terminals, Carlyle Group, and RREEF, the real estate investment arm of Deutsche Bank that also owns Maher terminals.

The bidding process touched off in May when APM Terminals made an unsolicited bid it estimated at $3 billion to $4 billion to take over operations of all the VPA terminals under a 48-year lease.

Under Virginia’s Public Private Transportation Act, Virginia Transportation Secretary Sean Connaughton was required to solicit other bids for the terminals. That attracted offers from Carlyle and RREEF. Carlyle’s proposal is estimated to be worth $1.78 billion to $2.1 billion over the life of the contract. RREEF’s proposal has an estimated value of $3.3 billion.

The three outside bids drew considerable opposition from local interests, which said the in an Oct. 4 public hearing that the terminals should remain in the hands of the state-owned VPA. APM Terminals and VIT were present at the hearing, but RREEF and Carlyle were absent.

“The VPA board is very focused on giving the bidding a fair hearing and creating as much transparency for this process as it can,” VPA spokesman Joe Harris said. Of the 43 people who spoke at the hearing, all but four were opposed to the outside bids, he said.

Joe Ruddy, VIT's chief operating officer, said 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.

Some of the objections to the outside bids came from shipping line representatives who worried that allowing a single private entity to operate the state's ports could put others at a competitive disadvantage.

Eric Sisco, president of the Americas for APM Terminals, dismissed concerns about a single company operating the port by noting sole operators control about 15 percent of the world’s roughly top 150 terminals.

Another concern raised at the hearing was Deutsche Bank’s recent listing of Maher Terminals as one of the assets it might sell off. At a Sept. 11 “Investor Day” presentation in Frankfurt, Germany, Deutsche Bank listed Maher among a number of “noncore operations” that could be sold off to boost its capitalization.

The VPA owns and operates four general cargo terminals through its Virginia International Terminals division: Norfolk International Terminals, Portsmouth Marine Terminal, Newport News Marine Terminal and the Virginia Inland Port.

As part of the bidding process, VIT has been asked to make a case as to why it should continue to operate the terminals on behalf of the VPA, based on its history and how it sees the future growth of the port’s terminals business.

The authority also leases the Port of Richmond from the city of Richmond. That port already has a third-party operator in place and is not one of the terminals being bid on, although it could become part of any deal.

While each of the bidding companies and VIT have submitted general proposals that are viewable online, they each have until Nov. 1 to submit more detailed plans.

Contact Peter T. Leach at pleach@joc.com. Follow him on Twitter @petertleach.