Failed Port of Auckland automation project racks up another heavy financial hit

Port of Auckland CEO Roger Gray inherited the disastrous container terminal automation project when he came on board last year. Photo / Dean Purcell

A new bill of $16 million is set to be added to Port of Auckland’s highly costly failed container terminal automation project.

The Auckland Council-owned port company wrote off $65m of investment in the project last year after a new chief executive and largely new board decided to pull the plug following years of failure to successfully implement it.

The decision left the port with 27 new straddle carriers designed for an automated system. To be of any use, these would have to be converted for manual driving.

Chief executive Roger Gray, just 10 weeks into the job when the decision to abandon was announced, acknowledged then the conversion job would be costly.

Pressed for that cost by the Herald last week when the port announced its FY23 results, he said the bill would be “in the vicinity of $16m”.

The port has stuck with Konecranes, the Finland-headquartered company which was its partner in the failed automation project, to do the conversion.

“We’ve agreed on a design agreement with Kone and we’re in the process of converting one [straddle carrier] in Europe to ensure the design does deliver... I’m very confident that will happen and that will be finished in late September,” Gray said.

“Once that conversion is signed off, we will start converting here, and within 18 months have the fleet finished.”

Meanwhile, the port had also spent around $8m buying five new straddles that could stack containers four-high.

Dockside jobs were another casualty of the automation project.

Layoffs in anticipation of its implementation meant the port, New Zealand’s major gateway for imports, was under-prepared and under-resourced when the consumer-driven shipping surge hit with Covid-19.

While all ports experienced shipping congestion and delays, Auckland port users copped congestion charges from shipping companies, and many vessels skipped Auckland for Port of Tauranga or Northport. As well as running up extra costs and delays for importers and exporters, this added pressure to the North Island supply chain with ensuing freight logjams.

Announcing last week an improved FY23 net profit, revenue and dividend, the previously poorly performing port made several mentions its workforce now numbered 774.

Gray said in resuming a standard manual operation after automation was cancelled, the port had signed on 60 to 70 more people and was “pretty much at full contingent now”.

The 2023 annual report showed 13 people earning $100,000 and upwards had resigned in the year, seven of them in a salary band of $100,000-$110,000.

The report’s remuneration table said 415 port employees earned $100,000 and upwards.

Most were in the $100,000 to $150,000-$160,000 bracket, with 24 paid between $160,000 and $180,000.

One of the 13 who had resigned had been paid $490,000-$500,000. One person, presumably Gray, was in the top pay bracket of $950,000-$960,000. There were five redundancies/severances.

Gray said he “was not concerned” about the 13 resignations, which were the result of restructuring, natural churn and people switching occupations.

“Turnover is coming down, particularly among salaried staff. We’ve settled into a rhythm now.”

Debate over the future shape, ownership and location of the port’s operations, the subject of multiple reports over the years, fired into fresh life with the election of Wayne Brown as Auckland’s mayor last year. He campaigned on returning CBD port land to Aucklanders and getting better returns for ratepayers from their premium land asset.

The Aarhus Harbour Bath in Copenhagen, which inspired Auckland Mayor Wayne Brown in his bid to return CBD port land to the public.

Before he was mayor, Brown led a port study commissioned by then-Cabinet minister and fellow Northland resident Shane Jones, which recommended shifting the port’s commercial operations to Northport. That a study be done to determine an optimal port and supply chain network for the future was a requirement of NZ First’s coalition agreement with the then-Labour government. Jones was an NZ First MP.

Earlier this month, Brown and Auckland Council’s governing body unveiled the possible first stage of land release, redevelopment options and commercialisation opportunities.

Saying he wanted the council “to deliver to Auckland the most beautiful and loved publicly owned waterfront of any harbour city in the world”, Brown said stage one of the land release would focus on the redevelopment of central wharves - Queen’s, Captain Cook, Marsden and the Hobson extension - for a mix of uses and activities, with Bledisloe Wharf to follow in the “not too distant future”.

The council had canvassed port operators and investors on potential approaches to deliver on its ownership objectives for the port company, Brown said. He was “still open-minded about the best solution” and was “genuinely interested” in all views, he said.

Asked if he had known of the possible upheaval ahead when he took on the CEO job to turn the company around, Gray said he “came in with my eyes open”.

“I always knew that getting involved in Port of Auckland would mean a highly political and high-profile turnaround.

“Did I know the specifics of a lease-out versus a listing? No, I didn’t. But it doesn’t sway me from my commitment to leading this port forward for the future.”

Gray said it was the port owner’s right to challenge the port’s footprint and review its ownership options.

“Every business I have been involved with has done that time and time again, so we are not worried too much about it.

“In the end, the ownership model, if the port is leased out or listed [on the stock exchange] or whatever, is a decision for the owner to make - we just give them the facts to allow them to make that decision in an informed way.”

Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.