Each year over the last five financial years the Port Authority of T&T (PATT) recorded multi-million dollar net deficits.
And when you combine those five net deficits, the overall loss made by PATT was over $337.5 million.
This total loss, however, still does not give a proper overall picture of the financial difficulties facing PATT, as it does not take into account the financial difficulties experienced by PATT’s three strategic business units (the Port of Port-of-Spain, the Port-of-Spain Infrastructure Company, and the T&T Inter-Island Transportation Company) as well as the operations at the Port of Scarborough that falls under its purview.
“PATT and its three (3) SBUs, inclusive of the POSCA (Port of Scarborough), have been in a deficit position for many years with government subventions completely funding the Inter-Island Ferry Service and capital expenditure being requested annually through the Public Sector Investment Programme (PSIP) for equipment and infrastructure upgrades, however, the latter is usually severely under-funded,” PATT stated.
“Furthermore, PATT’s expenditure has consistently exceeded its revenues because of outdated working practices thereby resulting in high labour costs, as well as aged equipment resulting in sub-standard productivity levels, and ultimately, higher operational costs. PATT is therefore unable to invest in major capital expenditure. Revenue generation is further stymied by the PPOS’s inability to set competitive tariffs due to its operational inefficiencies as well as its lack of infrastructure to attract vessels transiting the region,” it stated.
As such the PATT is now offering a Request for Expression of Interest for a potential public-private partnership project.
“The Government of the Republic of T&T (GoRTT), operating through the PATT, invites interest from willing investors with experience in port investments, development and operations, shipping, logistics and cruise operations to propose business ideas that will support participation in a PPP Landlord model project with the PATT, in any or all of the following areas:
a) The cargo operations at PPOS;
b) The cargo and cruise operations at the POSCA;
c) Regional cargo activities at Caricom wharves;
d) Cruise shipping operations at PATT
Apart from this PATT stated potential investors may also consider opportunities in marine services (towage, dredging etc).
“The PATT recognises that an effective public-private agreement has the potential to not only generate revenue but also positively enhance the experience of Port users, businesses and the national community. This Expression of Interest (EOI) is encouraging and creating the competitive environment for new agreement(s) to be created. This EOI is designed to give all who may be interested an opportunity to possibly engage in a potential public-private partnership arrangement in the future,” it stated.
PATT was incorporated by the Port Authority T&T Act 39 of 1961, currently the Port Authority Act, Chapter 51:01 and operates as a statutory authority under the Ministry of Works and Transport.
PATT maintains an employee complement of approximately 1,516 persons and is governed by a Board of Commissioners.
It owns 151.8 hectares of land extending from Beetham Highway in the east to Invaders Bay in the west.
The port utilises 48.41 hectares of its land for its operations. It leases 78.04 hectares, with the remaining 25 hectares located in east Sea Lots. The Port of Scarborough, Tobago operates on approximately 3.47 hectares.
It has been transitioning into strategic business units since 2005, when PATT took a decision to de-couple and break into specialised organisations based on functionality.
The objective was to allow each business unit to become autonomous and specialise in its core area of operation.
In addition to the three SBUs, the Port of Scarborough (POSCA), Tobago, falls within the joint purview of the Port Authority Governing Unit (PATTGU) and the Tobago House of Assembly (THA).
Operations at the POSCA, include cargo handling and cruise shipping, with potential for expansion in regional transshipment as well as in the cruise business.
“PATT facilitates the majority of trade within T&T and provides a gateway to regional and foreign markets, being the largest cargo handling and cruise shipping port in the country. Its market share is 60 per cent of containerised trade in T&T,” it stated.
“However, with the expansion of the Panama Canal, PPOS has lost transshipment cargo to regional ports which have invested heavily in infrastructural and equipment upgrades, to capitalise on the trade being transported by the larger vessels transiting the canal,” PATT stated.
The expansion of the Panama Canal in 2014 has resulted in a structural change in the size of vessels, with shipping lines amalgamating cargoes and containers onto larger 20-foot equivalent units (TEUs) vessels (new Panamax 8,000 to 10,000 TEUs vessels), which may increase to 11,000 and 13,000 TEUs.
“As a result, major ports in the region have and continue to make significant investments into infrastructure and equipment, to accommodate the new Panamax size vessels and to remain competitive,” it stated.
The largest vessel to call at the Port of Port-of-Spain (PPOS) is 295 meters, with a draft of 12 meters and a container capacity of 5000 TEUs. “Unfortunately, the infrastructure and channel at PPOS cannot accommodate the longer and deeper draft vessels. Similarly, the infrastructure and draft limitations also restrict the ability of PATT to accommodate large cruise ships transiting the region,” it stated.
“Furthermore, in terms of the existing infrastructure, the quay wall is already at maximum depth, except for berth 7, which can be deepened from 12 metres to 14 meters. However, berth 7 is only 197 meters long and PPOS will need to accommodate vessels with lengths over 300 meters. As a result, priority has been given to the construction of berths 9 & 10 to accommodate the larger vessels. In addition, upon completion, they will provide alternate berths as necessary to facilitate upgrade development at the other berths without significant interruption of vessel movement,” it stated.
According to PATT most of the equipment at the Port of Port-of-Spain is “beyond its economic life and negatively affects the ability to handle vessels transiting with high cargo (transhipment and domestic) volumes, at competitive productivity levels, thereby limiting its revenue generation potential.”
The PPOS contributes over 75 per cent of the total revenue of PATT and by extension is apportioned the highest share of the overhead cost being approximately 60 per cent of PATT’s overheads, which depletes its operating margin.
The highest revenue stream for PPOS is earned from the Cargo Handling business.
The gross profit margin of PPOS has been fairly consistent at 20 per cent over the period presented except for FY 2020 which experienced a sharp decline of 14 per cent in revenue earned during that financial year as a result of six per cent decrease in vessel calls and a 13 per cent decrease in cargo throughput.
POSINCO is responsible for the real estate, equipment, plant, buildings and other non-real property, rights and obligations of the PATT, as well as the Caricom Wharves regional cargo activities and cruise shipping business in Port-of-Spain.
“POSINCO plays a key role in facilitating PPOS’s business due to its responsibility in maintaining infrastructure, and upgrading/expansion of same. The limitations described above, faced by PPOS relative to infrastructure, are as a result of POSINCO not having required Capex which is requested annually via PSIP funding from the government. POSINCO is 100 per cent reliant on PSIP for capital projects,” it stated.
POSINCO contributes 23 per cent of the total revenue of PATT and is allocated its respective share of overheads, with the highest stream of revenue being earned from vessel charges.
The decrease in operating expenditure reflected in FY 2019 and FY 2020, was directly associated with the cost associated with towage charges being transferred to the account of the shipping lines with the exception of cruise ships which are treated as per tariff charges.
Operations at POSCA includes cruise shipping, cargo handling operations of bonded cargo and locally assigned cargo.
Presently the POSCA’s lands and real estate are vested in PATT. The THA is charged with the responsibility of constructing, maintaining and repairing storage and warehousing facilities.
“POSCA is a very small revenue earner, contributing around two per cent towards the total revenue of PATT. The main revenue stream for POSCA emanates from cruise ship operations, which accounts for over 65 per cent of the revenue of POSCA. The downward trend in revenue from FY 2019 is reflective of the losses experienced in the Cruise Shipping operations,” it stated.
According to PATT the expected outcome of the EOI would be to obtain information from the private sector in order to clarify the scope of the potential PPP Project for the Port, and identify opportunities for private participation/inclusion in the port sector of T&T.
“The goal of the GoRTT in increasing private participation is to establish a more competitive & financially sustainable port system. Specific benefits which can be derived by the GoRTT: Improved level of governance in the PPOS’ operations; Improved port activities and operational efficiency which can be positively leveraged to improve the ease of doing business in country; Positive revenues via dividends, concessions and/or lease payments and taxes; and stimulation of the local manufacturing sector,” it stated.