Recession Isn’t Preventing Private Sector Interest in Ports

The last few weeks have seen several private companies express interest in running major ports. The Port of Oakland struck a deal with Ports America. Maryland and Virginia are examining port privatization deals. My new column looks at the trend:

“In the past year, trade volumes through Long Beach, Los Angeles and Oakland, which together handle nearly half of America’s international trade, have fallen nearly 15 percent,” reports the Long Beach Press-Telegram.

Despite the current recession and drop-off in business, private investors are still looking for opportunities to invest in the nation’s ports, suggesting investors think that ports will improve before many other parts of the economy. And cash-strapped governments should be looking to take advantage of these public-private partnership opportunities.

“Ports are going to be one of the first lines of the economy to turn, when the environment improves,” Christopher Lee, managing partner of Highstar, the company set to invest $150 million in the Port of Oakland. “We want to be ahead of the competition.”

Ports America Outer Harbor LLC, owned by Highstar, recently won the right to to upgrade and operate five container berths in the Port of Oakland through a 50-year concession and lease agreement.

The company’s operational plan includes an initial payment of $60 million, paid to the government, as part of a total investment of up to $150 million to upgrade 160 acres and berths within the Port of Oakland. A second, larger phase of the port agreement could involve a $350 million investment that would link the port with more rail lines.

The Oakland deal isn’t the only one. The Virginia Department of Transportation (VDOT) received an unsolicited $3.5 billion proposal from an Illinois firm, CenterPoint Properties, to develop a public-private partnership with the Virginia Port Authority.

The company wants to take over the state’s port operations, including the Port of Virginia which ranks among the 10 busiest ports in the country. The proposed deal is for a 60-year partnership and could be worth $8.9 billion.

“Competition is good,” Gordon Hickey, a spokesman for Gov. Timothy M. Kaine told the Daily Press. “We welcome private proposals and we feel that this is something worth looking at.”

Virginia and other states should be looking to take full advantage of the private capital that is available for infrastructure projects.

Full Column