27 Jun 2014

Port deal to net $5 billion-plus

6:50 am on 27 June 2014

Port of Tauranga's 10-year freight deal with Kotahi, a freight company owned by Fonterra and Silver Fern Farms, will be worth at least $5 billion to the port, it says.

Shipping containers at Port of Tauranga.

Shipping containers at Port of Tauranga. Photo: PHOTO NZ

The port's revenue in the six months ended December was just over $137 million.

In exchange for a 1.5 percent stake in the port, Kotahi is guaranteeing it will deliver 1.8 million export containers to Port of Tauranga in the 10 years from 1 August.

Port of Tauranga handled more than 848,000 containers in the year ended June 2013.

Kotahi will also take half ownership of Port of Tauranga's inland port near PrimePort Timaru in exchange for dramatically increasing export cargoes. Port of Tauranga owns half the Timaru port.

Kotahi also has an agreement with shipping line Maersk to provide up to 2.5 million containers over the same 10-year period.

The deal gives the Port of Tauranga the certainty it needs to complete its investment in infrastructure to allow access for ships which can carry 6500 containers, up from its current capacity of ships able to carry 4500 containers.

It plans to start dredging next year and expects the large ships to start calling from 2016.

Port of Tauranga chief executive Mark Cairns said the company would make $5 billion to $6 billion for the cargo alone.

"With the export cargo will come an amount of empty containers associated with that and also there will be import volumes that we will add to that as well, so it's a very significant deal for the Port of Tauranga," Mr Cairns said.

The company was halfway through a $250 million capital expansion programme. It had been working on its "building blocks" programme for the past four years, including further investment in MetroPort in Auckland, buying half of Timaru's PrimePort and buying land at Rolleston, south of Christchurch.

"But the last major (capital expenditure) to go is the dredging. We estimate the dredging and potentially additional cranes at somewhere between $50 and $70 million, so this deal gives our board some certainty around the timing of revenues that will be matched with that capital investment," he said.