Kingston's relationship with apm draws to a close

Smarting from the loss of Maersk Line to Hutchison Port Holdings’ Balboa operation, Jamaica Ports Authority has ended the Kingston Container Terminal (KCT) management contract with Maersk sister company APM Terminals.

While both sides officially deny any link between Maersk’s decision and the end of the seven-year relationship, insiders at APM Terminals admit that Maersk’s decision "did not help" the company in the re-negotiations of its management contract.

The contract finally ended at the end of January, leaving local interests, Kingston Container Services, an arm of the Port Authority of Jamaica (PAJ) managing the facility and looking for new clients to fill the 300,000teu-a-year hole left by the defection of its largest client.

With volumes down 16% to 1.5m teu, the company is now looking to appoint advisors to pursue the option of privatisation, according to PAJ VP, Pat Belinfanti.

"The terminal is likely to be privatised," he says. "There is not a specific type of privatisation approved as yet. That could take various options. It is too early in the process. We are in talks with various consultants to work on privatisation."

Options include floating the facility on the stock market – a route taken by rival facility, Kingston Wharves Limited (KWL) – or to sell it off through a concession agreement with a third party.

"It will be the work of the consultants to determine the right way to go," he says. Neighbouring KWL, already listed on the Jamaican stock exchange, has repeatedly been mentioned as a potential suitor for KCT – a move that would bring about a reverse-flotation of what was, until last year, the largest container terminal in the Caribbean.

Chris Stephenson, KWL president, denies that talks have been held to explore the possibility.

"KWL’s primary focus at this time is to ensure we survive the current recession, and can state categorically that KWL is not currently engaged in any negotiation with the PAJ-Kingston Container Terminal," he says. However, he pulls short of ruling the option out completely.

"The company will, however, explore all viable options that present themselves which will facilitate long-term growth," he says.

Belinfanti insists there is no pressure to force the privatisation through at a time when port asset values have fallen to a fraction of the lofty heights reached in 2007.

"Privatisation has been mooted by the government for some time. It’s not a matter that we are looking at now. We are not saying that it’s going to take place in three or six months, but serious work on it is going to start," he says.

As it watches volumes fall at the 3.2m teu capacity facility from almost 2m teu in 2006 to 1.5m teu last year, the administration faces other ominous clouds looming.

Its debts are set to rise to J$32bn (US$450m) this year, three times its annual revenues of J$11bn, as a result of the $231m expansion programme undertaken under APM Terminals’ tenure over the past two years. Money is also being spent to improve cruise facilities in Falmouth.

A $143m tranche of its debt will need to be refinanced this year, leaving the authority exposed to the whims of the global capital markets. Merrill Lynch has been appointed by PAJ to look at restructuring its debt at a critical time for the administration.