The second-phase of expansion at the Virginia International Gateway container terminal will soon commence now that the Virginia Port Authority has secured a long-term commitment to operate the facility.
The Virginia Port Authority (VPA) on Wednesday announced a 50-year extension of its lease for the Virginia International Gateway (VIG) container terminal, setting the table for work to begin on a $320 million expansion that will double its capacity.
The private facility is owned by Alinda Capital Partners, a Connecticut-based infrastructure investment firm and its U.K. pension fund partner, Universities Superannuation Scheme, which purchased it from global terminal operator APM Terminals (APMT) in late 2014.
APMT leased out the semi-automated terminal, which it developed with its own money, in 2010 after it had trouble competing for cargo with the nearby public terminals run by the VPA, following the 2008 recession. The APMT facility in Portsmouth was the first in the United States to have remote-controlled rail-mounted gantry (RMG) cranes grooming the container yard and transferring boxes to and from trucks. Having full control of all container terminals in the harbor gives the VPA operational advantages on where to berth vessels, depending on congestion and resource availability.
The VPA also operates two other container terminals in Norfolk harbor.
“This is a historic event for The Port of Virginia,” Gov. Terry McAuliffe said in a statement. “This new lease helps to put the port on the path to long-term sustainability which, in turn, will result in continued job creation, investment and revenue for the Commonwealth. Further, this sends a very clear message – world-wide — that the Port of Virginia is investing for the long-term and we will be able to service the vessels of any ocean carrier here at what will be one of the most modern and efficient container terminals in North America for decades to come.”
Under the deal, the Port of Virginia will operate and manage the terminal through 2065. It will begin construction this year on the facility’s second phase. VIG’s owners will finance an 800-foot berth extension, expand the rail operation by an additional 10,000 feet and add four ship-to-shore cranes and 13 more automated stacks in the container yard maintained by 26 new RMG on 60 acres of undeveloped land. The upgrades will double capacity to more than 1.2 million containers, or 2.1 million TEUs.
The VPA currently makes annual payments of $40 million to use the VIG facility, with volume guarantees that could lower or increase that amount. Gov. McAuliffe complained after taking office two years ago that the state got a bad deal.
Annual rent will begin at $62.8 million, with several annual escalators built in through year eleven. All rent is subject to annual inflation adjustments and the volume-based rent of the existing lease is eliminated. The VPA will have the option at the end of the lease to purchase the facility or its assets.
VIG currently processes 600,000 container lifts each year. The 10-year-old terminal is equipped with eight ship-to-shore cranes and has on-dock rail with service provided by both CSX and Norfolk Southern. The expansion will take an estimated three years to complete and result in a longer berth, an expanded rail operation, an expanded container yard and four new ship-to-shore cranes.
The VPA is in the midst of a large infrastructure investment campaign that includes adding a new bank of truck gates and semi-automated RMG cranes at the Norfolk International Terminal, largely made possible by the state’s commitment this spring to issue bonds supporting $350 million in funding. Officials said the capital expenditures are needed to keep up with cargo demand at one of the few ports on the East Coast with a 50-foot harbor capable of accommodating massive container ships being deployed today. The port authority has been able to make process improvements and minor physical upgrades in the past two years to relieve congestion, but needs more space and assets to handle growing volumes.
“Two years ago, when we began the work of re-elevating The Port of Virginia’s status, our goals were to create efficiency at our terminals, improve our delivery of service, put the port on a sustainable financial basis and expand our capacity to drive job and economic growth in Virginia. With today’s announcement we have set our growth path for the next 20 years and built a bridge to our long-term future, which is a terminal on Craney Island,” VPA Board Chairman John Milliken said.
Craney Island is planned as a man-made facility built on top of mud dredged from the harbor that could be built by the end of next decade.