Accord adds depth to port

Port of Tauranga CEO Mark Cairns says the volume commitment is worth $5 billion to $6 billion and adds certainty to the port's plan for dredging. Photo / John Borren

Logistics and shipping firms in 10-year deal to enable dredging of Tauranga’s channel

The port of Tauranga, shipping giant Maersk Line, and Fonterra-backed logistics company Kotahi have signed 10-year contracts aimed at supporting the port's plan to deepen its channel by 2016 for bigger container ships.

The deal, which insiders said would prove far-reaching for the port and logistics sectors, will involve Kotahi - a joint venture between Fonterra and Silver Fern Farms - taking a small stake in the port and Maersk putting more containers through its terminals over the next decade.

Shares in NZX-listed Port of Tauranga rallied by 63c, or 4.4 per cent, to $15 on the back of the announcement.

Part of the deal involves Port of Tauranga issuing two million shares to Kotahi - representing 1.5 per cent of the company. Kotahi's rights to the shares, including dividends, are subject to the company delivering on certain freight volume commitments over a 10-year period, the parties said.

Kotahi will commit export traffic to Port of Tauranga subsidiary TCTS, which has a 35-year lease over the 10ha of terminal operating area at PrimePort Timaru. In exchange for the commitment, Kotahi will get a 49.9 per cent shareholding in TCTS.

In addition, Kotahi has committed to provide up to 2.5 million TEU export cargo containers to Maersk Line for the next 10 years, starting from August 1.

The deal gives Maersk certainty to plan for introducing 6500 TEU (20 foot equivalent) container ships to New Zealand.

"New Zealand doesn't have a big ship-capable port and now is the right time for key players to work together to build a capability within New Zealand to receive these large vessels with all the efficiencies they will bring to New Zealand," said Kotahi chief executive Chris Greenough.

Kotahi is to provide up to 1.8 million TEU export cargo containers to Port of Tauranga in the next 10 years, and export cargo to TCTS from the same date.

New Zealand attracts about 20 ocean freight carriers and Greenough said if the country lost ship visits, it ran the risk of becoming a "spoke" to larger Australian hubs.

Port of Tauranga chief executive Mark Cairns said the 1.8 million TEU volume commitment was worth $5 billion to $6 billion to the port over the 10-year period "so it's very, very significant".

He said there was $50 million to $60 million worth of dredging to do at the port, so yesterday's arrangements had added certainty to support the project.

Maersk Line's New Zealand managing director, Gerard Morrison, said it was a first for the company - the world's biggest shipping line. Asked what the deal might mean for Ports of Auckland, he said the company's existing contracts would stand but they were under discussion. "It's difficult to say until we have those discussions with them," Morrison said.

Ports of Auckland said Kotahi and Fonterra shipped "minimal" volume through the port, so there would be little immediate impact.

"We're also a much more efficient business than we were three years ago, so we're well placed to adapt to this change and continue benefit from Auckland's growth," Ports of Auckland said.

On completion of its capital works, the Port of Tauranga will be the only New Zealand port capable of handling ships 5000 to 6000 TEU at low tide.