Panel weighs APM Terminal options: Investor or partner?

NORFOLK

Virginia needs to be cautious when considering handing over operation of its port facilities to private investors whose interests might not match the state's, industry experts said Monday.

William Ralph, a senior consultant and economist with R.K. Johns & Associates Inc., and Eric Sisco, president and chief executive officer of APM Terminals Americas, testified at Old Dominion University before the subcommittee tasked by the General Assembly with recommending if, when and how to privatize the state's port facilities. The speakers encouraged the group to carefully compare different public-private partnership structures and decide which could best further the state's goals for the port.

The Virginia Port Authority, a state agency, owns marine terminals in Norfolk, Portsmouth and Newport News. Its goal is to promote the port, increase its business and create jobs.

A private owner would have different motives, Ralph said.

"If I'm an investor, guess what my mission is: profits," Ralph said. "A private entity, strategic or financial, will be looking at profit maximization. Are you willing to let that be your new goal for the Port of Virginia?"

The subcommittee is weighing different options, including leasing port assets to a financial institution, such as Goldman Sachs, or a strategic partner, such as APM Terminals Inc.

APM Terminals' Sisco promoted the second option.

"We build these terminals. We design these terminals. We operate these terminals," Sisco said. "We bring something to the table that's much, much more than an interest in the cash flow."

Jerry Bridges, executive director of the Port Authority, said he would prefer a strategic partner over an investor.

"Those types of strategic partners would be most welcome," he said. "From the Port Authority's perspective, one that would partner with us in generating cargo as well as investing in the infrastructure would be more to our liking."

But he remained open to different ideas.

"For the most part, there's nothing that has been said that couldn't be supported by the Port Authority at this point," Bridges said. "We'll consider anything."

The sense of urgency surrounding the subcommittee's previous meetings was less pronounced at its fourth gathering Monday, with the economic downturn making action less pressing.

"There's no need to rush into this process," Ralph said. "You need to be patient."

As the port continues improving and expanding, such as by completing renovations at Norfolk International Terminals and constructing a new marine terminal at Craney Island, it will gain value for potential buyers, he said.

Del. Harry R. "Bob" Purkey, a Republican from Virginia Beach who chairs the subcommittee, called for the group's creation early this year to study options for privatizing the port. The idea has come and gone over the years, arising again during the past legislative session.

It's appealing as a way to raise money for costly port and road improvements needed to keep pace with growing business. At the same time, Virginia can't afford to make a hasty decision when it comes to one of its most valuable assets, Purkey said. A bad decision could mean losing customers for the port and losing control for the state.

"What we're dealing with here is one of the most, if not the most, valuable asset the state currently owns, as far as an economic engine," he said. "It's not an issue we want to screw up."

The state also has to weigh the impact privatization could have on the port's customers, Sisco said. Any changes that disrupt business or increase rates could push them away.

"The truth of the matter is that cargo will move to the lower-cost, easier place to do business," he said.

At the Norfolk City Council meeting Nov. 18, officials expressed concern with Norfolk's lack of representation on the subcommittee. Norfolk International Terminals is the Port Authority's largest marine terminal. As a result, Norfolk bears the extra traffic and other community impacts, argued Norfolk Mayor Paul Fraim.

"If they go ahead with selling the port, we won't be at the table," he said. "I'm not saying that any of this is going to happen, but we need to protect the interest of the city."

The Joint Subcommittee Studying Public-Private Partnerships Related to Seaports will meet four more times in 2009 before making its recommendations to the General Assembly, Purkey said. The committee has 17 members from the House, Senate and port community.

Pilot writer Harry Minium contributed to this report.

Kathy Adams, (757) 446-2583, kathy.adams@pilotonline.com