Port Breaks New Ground in US Port Terminal Concession Agreements
March 4, 2009
A Market First as Port of Oakland Breaks New Ground in US Port Terminal Concession Agreements
Successful Bidder Named in $700 Million, 50-Year Agreement, Delivering Jobs, Investment, and Environmental Benefits
Oakland, Calif., March, 4, 2009 -- At the Tuesday board meeting, March 3, 2009, the Oakland Board of Port Commissioners approved a precedent-setting long-term agreement that is the first of its kind for US marine terminal concession agreements. Following a well-planned process that began last year in May 2008, Port Commissioners approved the selection of Ports America Outer Harbor Terminal, LLC (PAOH) as the new concessionaire for Port of Oakland’s Outer Harbor berths 20-24 for 50 years beginning in January 2010. Port Board President Victor Uno said, “This is an innovative and successful collaboration that will deliver long-term investment in the Port, job growth, additional cargo activity as well as environmental commitments.” The estimated value of the 50-year agreement is about $700 million.
PAOH envisions investing $2.5 billion over the life of the concession for capital improvements in the Outer Harbor. According to PAOH, economic consultants Martin Associates estimates this long-term agreement will realize over 6,000 jobs and more than $100 million in direct personal income.
Port Executive Director Omar Benjamin explained that this long-term concession affirms the Port of Oakland and the City of Oakland as a major international gateway. Benjamin remarked that it will boost the local and regional economies while at the same time provide environmental commitments, “You could call it a stimulus package at the Port of Oakland. This is the right thing to do to keep the Port as a major economic force for our region and competitive for the future. This agreement with the Ports America group creates an alignment between the public and private sectors and cements the public/private partnership. It allows the investment risk to be spread over a long period of time and sets the foundation for generating business revenue, jobs and environmental benefits consistent with port policies.” Benjamin added, “We know it will translate into local business and employment opportunities and environmental improvements to the maritime area.” PAOH intends to build a high density, low emission container terminal at the Port of Oakland. Part of their commitment is to incorporate early actions to address air quality from the beginning. For example, they will develop the terminal with ship-to-shore power and use electric stacking cranes instead of diesel-powered equipment.
Traditionally, the Port of Oakland has had 10-15 year lease agreements. This concession is for 50 years and requires the concessionaire to be responsible for operations, investment in capital improvements and development of the property. Ports America CEO Stephen Edwards stated, “On behalf of Ports America and our partner, Terminal Investments, we are extremely excited to work with the Port of Oakland to help implement their vision in taking this major American port to its fullest potential, now and for the long term future. We also very much appreciate the Port of Oakland’s confidence in us as the leading American port operator, including delivering the very best possible operational, environmental and financial commitment to our customers, partners, employees and the communities we serve.”
Port of Oakland Maritime Director James Kwon commented that Ports America has the technical and financial capability to make the terminal successful, “We are very pleased about partnering with the largest terminal operator in North America. Ports America has been doing business at the Oakland seaport since the 1960’s when containerization began. We now have a long-standing partner for growing new intermodal cargo business at the Port of Oakland.”
According to the Port’s Maritime Manager of Administration and Finance Services Jean Banker who also serves as the Project Manager for this agreement, “The way we went about this Request for Proposal process was new territory for us and a market first in the US port industry. We utilized the skills of our financial advisors RBC Capital markets assisted by Backstrom, McCarley, Berry & Co., LLC and Siebert Branford Shank & Co., LLC and legal counsel O’Melveny & Myers, LLP in the development of this forward-thinking concession agreement. Everyone worked together to achieve a successful outcome in only ten months.”
The concession agreement calls for a $60 million upfront fee to the Port of Oakland and annual rent of at least $19.5 million. The Port will use the cash to retire certain revenue bonds that financed prior improvements at the terminal. The retirement of the bonds is necessary to preserve the tax exemption on the Port’s bonds and will take place in January 2010. This will save the Port of Oakland approximately $3 million in annual debt service. Nixon Peabody LLP assisted the Port as expert tax counsel in this effort.
The concession of the property is expected to enhance maritime activity by attracting intermodal cargo with a state-of-the-art terminal and deliver long-term economic, environmental, and community benefits.
The long-term concession agreement includes the operation and improvement of berths 20 through 24. PAOH will take over management of the terminal in January of 2010. The area accounts for approximately 4,400 feet of berth with about 160 acres of storage space for a total of approximately 175 acres. Additionally, the concession agreement would allow for the opportunity for PAOH to acquire the adjacent berths 25 and 26 once the current use agreement for that area expires (as early as June 30, 2013). The combined areas (Berths 20-26) would bring the total berth length to more than 5,500 feet or the equivalent of berthing five to six container ships in a row depending on the size of the vessels. Ports America has been a major terminal operator at the Port of Oakland since the 1960’s.
PAOH projects that its direct operating expenses will be $50 million per year (spent in the community). According to PAOH, economic consultants Martin Associates estimates 3.9 million construction person-hours, $44.8 million in state and local taxes, 6,000 jobs, more than $100 million in direct personal income
PAOH estimates that when their build out is completed, emissions per TEU (Twenty-foot Equivalent Unit) could be reduced by as much as 90% due to –
- Electric stacking cranes rather than diesel
- No truck idling and fewer miles driven within the yard
- Ship to shore power
- Truck appointments
Port of Oakland
The Port of Oakland oversees the Oakland seaport, Oakland International Airport and 20 miles of waterfront. The Oakland seaport is the third busiest container port on the U.S. West Coast. Oakland International Airport offers 150 nonstop flights to 26 destinations; and the Port’s real estate includes commercial developments such as Jack London Square, as well as hundreds of acres of public parks and conservation areas. The Port of Oakland was established in 1927 and is an independent department of the City of Oakland.
Ports America Oakland (Ports America Outer Harbor Terminal, LLC)
Ports America Oakland is a partnership between Ports America and Terminal Investments Limited. Ports America, with 85 years experience, is the largest independent American terminal operator, stevedore and port-side vehicle processor, with operations in 50 ports and 97 terminals. Ports America is controlled by Highstar Capital, a leading value added infrastructure investor, with over $15 billion of infrastructure investments made to date, primarily in the United States.
Marilyn Sandifur, Port Spokesperson
Media & Public Relations Department