APMT pulls out of Nhava Sheva bidding

APMT pulls out of Nhava Sheva bidding    Terminal operator APM Terminals has pulled out of the bidding to construct a container terminal in India's largest port, the company told AmericanShipper.com Thursday.
   APMT, a subsidiary of the A.P. Moller – Maersk Group, already operates one of three terminals in the Jawaharlal Nehru-Nhava Sheva port complex near Mumbai. It had been in the running, along with DP World and PSA International and a couple of domestic companies, to operate the fourth terminal, which would roughly double capacity at the port.
   The operator said in an interview with AmericanShipper.com that costs to build the two-phase terminal had increased past the point at which it made financial sense to bid for the concession. In May, APMT won the right to bid on the new terminal after regulators had prevented some existing operators at the port from bidding on future projects. But after receiving the tender document, APMT became worried that costs for the project had run too high.
   “We politely declined for the simple reason that any investment you make has to make financial sense,” Hans-Ole Madsen, APMT vice president business development, South Asia, Middle East and Africa, told American Shipper. “Essentially this project has been a long, dragged-out process. Some of the earlier assumptions are outdated. Three weeks ago, we received the tender document and noted that the construction estimates were based on three-year-old estimates. With the escalation in costs and pace you see in India, we saw an increase in project costs based on what you see in the tender. The revenue side didn't match the cost side.”
   The escalating costs were particularly concerning, Madsen said, given the structure of concessions at India’s state-owned ports, of which Nhava Sheva is one.
   “Tariff regulation rules at government ports are set in accordance to what the project cost is and calculated to provide the operator with a certain return,” he said. “If the project cost is significantly higher, the tariff rate won't be sufficient to cover the cost of the project.”
   Madsen said APMT outlined its concerns over the tender document to the government, but was told a review wasn’t possible.
   “Should the government revisit these major items in the tender document, we remain interested,” he said.
   The new terminal project has been hampered by controversy and delays, while Nhava Sheva is beset by port congestion as its terminals operate past their maximum design capacity. A project to deepen navigation channels to the port, enabling larger and more fully laden container vessels to call the key gateway, has also been delayed.
   Madsen said the dredging issue not only affects development of the fourth terminal, but also the three existing ones, including APMT’s Gateway Terminals India facility, a joint venture with the state-owned Container Corp. of India.
   “It's a concern for the whole port, even our existing terminal,” he said. “Everybody recognizes that for Nhava Sheva to stay competitive, dredging needs to happen.”
   The fourth terminal is to be constructed in two phases, with 1,000 meters of quay in each phase. If fully built, the terminal could handle 4 million to 4.5 million TEUs, doubling container-handling capacity at the port. More than half of all container volume in India moves through the Nhava Sheva complex. ' Eric Johnson