Will invest in port expansion as needed, says Gujarat Pipavav MD

Gujarat Pipavav Port Ltd (GPPL), the entity that runs India’s first public-private-partnership (PPP) greenfield port, said it has not closed the option of investing further for expanding the port located at Amreli district as it approaches the last 10 years of its 30-year concession, that ends in 2028.

“That would be wrong to assume,” said Keld Pedersen, Managing Director of GPPL, when asked whether the approaching 30-year contract timeline inhibited further investment in the port.

APM Terminals Management BV, the largest shareholder in GPPL with a 43.01 per cent stake, is the container operating unit of Danish conglomerate AP Moller-Maersk Group A/S.

“Something that we are open about to the investors is that in our concession agreement, we have something called ‘depreciated replacement value of assets’. This is a very good thing. It will never put any company in a position where it could stop investing because the timeline (to get returns) would be too short,” Pedersen told BusinessLine .

“We would invest as needed and at the same time we hope that we can extend our concession agreement with the Gujarat Maritime Board on reasonable terms and conditions,” Pedersen said.

Pedersen’s statement assumes significance as rumours are doing the rounds that APM Terminals is looking to exit Pipavav port but is handicapped by the short residual concession period for a new buyer to get returns on investment amidst uncertainty over its extension beyond 2028.

On expiry of the concession period, Gujarat Maritime Board will take over immovable contracted assets and essential moveable contracted assets at the depreciated replacement value worked out by an independent appraisal team.

GPPL, one of the two listed port companies in India, is in a peculiar situation.

“Today, we are a company that has got rid of all our carry-forward losses, we are debt-free and pay dividend to our share-holders – we have done so thrice in the last 18 months,” said Pedersen.

The port’s overall year-on-year growth has remained flat. But, LPG and roll-on-roll-off (Ro-Ro) have been continuously growing to compensate for the decline in bulk cargo. Ro-Ro and LPG are also areas that have scope for capacity expansion, says Pedersen.

Pipavav Port handles 100,000 cars — medium-sized Ford cars — on an annualised basis, a two-year old business that began in August 2015. The port has capacity to handle 250,000 vehicles and would be keen to expand it to 300,000 vehicles and beyond.

Pedersen acknowledges that the growth in Ro-Ro business came at a very opportune time for GPPL. “One of the areas where we face challenges is in the coal business which has been continuously going down,” he said. This is an investment that has turned unviable for APM Terminals.

“The steep drop in coal loadings led to under-utilisation of some assets which we will try to optimise through other means of business whether it is liquid, Ro-Ro or project cargo. But, there would be no expansion before we have optimised our utilisation on the existing assets,” Pedersen explained.

Containers is a balancing act now for GPPL. “The growth in containers has been flat in a very tough competitive market,” says Pedersen, surprising for a company that has Maersk Line, the world’s biggest container line, under its fold.

In April 2016, GPPL invested ₹360 crore to raise its container capacity to 1.35 million twenty-foot equivalent units (TEUs) from 850,000 TEUs. The port currently handles 685,000 TEUs a year, prompting Pedersen to say that GPPL has “become a fair player in the container business”.

A rate hike at the port was not on the cards. “We would like to see more utilisation of our assets. Pipavav last raised rates in January 2015. Another rate increase is not what the port is looking at right now. We would much rather like to see more utilisation of the concession. So, if we can go from 100,000 to 200,000 cars and grow our container business, it’s more important to grow the business than look at price (increases),” Pedersen added.

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