Port of Tauranga advocates "hub" ports 

Source: NZPA / Mike MilletPort of Tauranga, Mount Maunganui

Port of Tauranga believes some council-owned ports are performing badly and the government should give them a "nudge" and facilitate port rationalisation.

All New Zealand ports are majority council owned and 13 are wholly council owned, Port of Tauranga chairman John Parker told a National Party regional conference on Saturday.

"Most ports make truly abysmal financial returns on their assets and most rational investors would sell and put their money in lower risk, higher returning bank deposits or, give it back to ratepayers," he said.

"When I say abysmal returns many have had negative free cash flow for years," he said, although he did not name any companies.

Many companies are currently calling on shareholders for hundreds of millions of dollars of new capital to keep bankers happy but Parker did not go as far as saying councils would have to put money into ports or accept lower dividends from them.

Neither did he call for privatisation of ports. Port of Tauranga is partially privatised, being listed on the NZX with 55% council ownership, a model he praised.

Port of Tauranga has subsidised rates to the tune of $200 million since 1992, he said.

Instead he advocated that the government require councils to put port assets in holding companies with a majority of independent directors.

Independent directors would be competent and not "compliant mates".

There has been a lot of talk about the efficiency gains for New Zealand if larger container ships come here and only call at one or two ports.

Parker said Fonterra had identified gains for the country worth between $2 billion and $3 billion.

"The bigger ships are available now and pressing to come to New Zealand," he said.

"The huge savings estimated by Fonterra are tantalisingly within reach."

Hubs to increase efficiency

Ports of Auckland has said it can accommodate the next generation of large container ships, likely to carry 6,000 standard sized containers compared to the current so-called "4100" vessels.

But Parker said no port could accommodate them and few could afford to invest in facilities for them.

"What New Zealand needs, and this will get howls of parochial outrage from many ports, is just two major New Zealand hub ports.

"Two hub ports could service the majority of New Zealand's containerised imports and exports with feeder services coming from secondary ports," he said.

The secondary ports would still handle bulk cargo and load coastal vessels with containers for the hub ports, which would also be served by rail.

"Producers, consumers, exporters and importers would benefit substantially. The cost of national infrastructure that government bears would also decrease.

"Doing nothing is very likely to see our exporters transhipping through an Australian hub port in the future."

Without cargo aggregation in fewer ports, no port could ever assemble enough cargo or justify the huge expenditure in capital dredging of harbour channels or justify the cranes and equipment to load and discharge large vessels efficiently.

Parker said that, in fairness, the last government could see the problems and the current government was well informed on the high cost of the current port mix.

He believed the current government would move to do something.

Insisting that ports meet the requirement of the Port Companies Act to operate as successful businesses could provide a focus for the sector.

"Some observers want government intervention. That would hardly be politically sensible, but a nudge or two might help a process that, in fairness, has already started with tentative steps to amalgamate Otago and Lyttelton ports and Tauranga with Auckland."