High Level Review of the State Commercial Ports Operating Under Harbours Acts 1996 and 2000

RAYMOND BURKE CONSULTING FARRELL GRANT SPARKS CORPORATE FINANCE POSFORD HASKONING HIGH LEVEL REVIEW OF THE STATE COMMERCIAL PORTS OPERATING UNDER THE HARBOURS ACTS 1996 AND 2000. TABLE OF CONTENTS 1. INTRODUCTION 1 1.1 TERMS OF REFERENCE 1 1.2 CONTEXT 1 1.3 THE TIMING IS APPROPRIATE 3 1.4 CHANGING NEEDS 4 1.5 THE FOCUS OF THE REVIEW 5 1.6 APPROACH 5 1.7 PRINCIPAL OBSERVATIONS AND FINDINGS 6 1.8 VISION 8 1.9 KEY RECOMMENDATIONS 9 1.10 ACKNOWLEDGEMENTS 12 1.11 CONFIDENTIALITY 12 2. REGULATORY GOVERNANCE 13 2.1 WHAT DO WE MEAN BY REGULATORY GOVERNANCE? 13 2.2 THE HARBOURS’ ACTS 1946 - 2000 15 2.3 CORPORATE GOVERNANCE REQUIREMENTS 17 2.4 OTHER REGULATORY LEGISLATION 17 2.5 DEVELOPMENT OF THE BROADER REGULATORY PROCESS IN IRELAND 17 2.6 OECD REVIEW OF REGULATORY REFORM 24 2.7 THE EU PORT SERVICES DIRECTIVE 26 3. PORT STRUCTURES 29 3.1 INTRODUCTION 29 3.2 ANALYSIS OF PORT GOVERNANCE MODELS 30 3.3 CRITIQUE OF PORT GOVERNANCE MODELS 33 3.4 PORTS OWNERSHIP MODELS – INTERNATIONAL PRACTICE 34 3.5 LESSONS FOR IRELAND 46 4. OVERVIEW OF IRISH PORTS 49 4.1 INTRODUCTION 49 4.2 PORT OF CORK COMPANY 50 4.3 DROGHEDA PORT COMPANY 55 4.4 DUBLIN PORT COMPANY 58 4.5 DUNDALK PORT COMPANY 61 4.6 DUN LAOGHAIRE HARBOUR COMPANY 64 TABLE OF CONTENTS HIGH LEVEL REVIEW OF THE STATE COMMERCIAL PORTS OPERATING UNDER THE HARBOURS ACTS 1996 AND 2000. 4.7 PORT OF GALWAY 65 4.8 PORT OF NEW ROSS 68 4.9 SHANNON FOYNES PORT COMPANY 71 4.10 PORT OF WATERFORD 74 4.11 PORT OF WICKLOW 78 5. FINANCIAL APPRAISAL 81 5.1 INTRODUCTION 81 5.2 SUMMARY FINANCIAL OVERVIEW 81 5.3 REVIEW OF THE INDIVIDUAL PORTS 90 6. OPTIONS ANALYSIS 109 6.1 INTRODUCTION 109 6.2 THE CURRENT SITUATION 111 6.3 ANALYSIS OF THE OPTIONS 113 6.4 MAINTAINING THE STATUS QUO 116 6.5 DO MINIMUM 117 6.6 OUTSOURCING 119 6.7 CONCESSION ARRANGEMENTS 121 6.8 LICENSING 130 6.9 PRIVATISATION 131 7. KEY ISSUES 141 7.1 SHAREHOLDER RESPONSIBILITY 141 7.2 THE IMPORTANCE OF PORTS 143 7.3 FUNDING 145 7.4 INFRASTRUCTURE REQUIREMENTS 146 7.5 ROSSLARE – EUROPORT 147 7.6 PORT CHARGES 150 7.7 PORT COMPANY CARGO SHARES 154 7.8 THE CASE FOR A REGULATOR AT PRESENT 159 7.9 COMPETITION WITHIN PORTS 161 7.10 DEVELOPMENT OF PORT ESTATES 163 7.11 OTHER MATTERS RAISED 166 8. RECOMMENDATIONS 169 8.1 THE FUTURE ENVIRONMENT 169 8.2 SHAREHOLDER AND PORT COMPANY RELATIONSHIP 174 8.3 STRUCTURAL DEVELOPMENT 175 TABLE OF CONTENTS HIGH LEVEL REVIEW OF THE STATE COMMERCIAL PORTS OPERATING UNDER THE HARBOURS ACTS 1996 AND 2000. 8.4 STRUCTURAL CHANGE 177 8.5 ACHIEVING COST REDUCTION 183 8.6 CUSTOMER CHARTER AND COMPLAINTS PROCEDURES 183 8.7 BOARD APPOINTMENTS 183 8.8 PORT USERS’ FORUM 183 8.9 LANDLORD AND TENANT ACT 183 8.10 TRANSPARENCY OF RATES 184 8.11 ROSSLARE HARBOUR 185 8.12 REGULATION 185 8.13 COMPETITION ISSUES 186 8.14 CORPORATE GOVERNANCE REPORTING REQUIREMENTS 187 8.15 BYE-LAWS 187 8.16 ESTUARY MANAGEMENT PLAN 187 8.17 FURTHER STUDIES 188 8.18 PUBLIC DEBATE AND DIALOGUE 188 8.19 IMPLEMENTATION 189 9. CONCLUSION 191 APPENDICES APPENDIX A. CALL FOR SUBMISSIONS APPENDIX B. INPUTS AND SUBMISSIONS APPENDIX C. MAIN RECOMMENDATIONS OF OECD REVIEW OF REGULATORY REFORM IN IRELAND APPENDIX D. THE APPOINTMENT OF NEW BOARD MEMBERS FOR THE VANCOUVER PORT AUTHORITY APPENDIX E. REPORTS CONSULTED APPENDIX F. SUMMARY HISTORICAL FINANCIAL ACCOUNTS TABLE OF CONTENTS HIGH LEVEL REVIEW OF THE STATE COMMERCIAL PORTS OPERATING UNDER THE HARBOURS ACTS 1996 AND 2000. 1. INTRODUCTION 1.1 Terms of Reference Raymond Burke Consulting, Posford Haskoning Consulting Engineers, and Farrell Grant Sparks Corporate Finance were jointly commissioned by the Department of Communications, Marine and Natural Resources to carry out a High Level Review of the State Commercial Ports operating under the Harbours’ Acts, 1996 – 2000 Specifically, the Consultants were required: 1. To conduct a detailed evaluation of the adequacy of the current model for the governance of the State port companies (including the advisability of appointing a regulator) having regard to the need to have in place structures and approaches which ensure: that the ports are incentivised to deliver high quality port products to stakeholders, particularly users; that the ports have access to appropriate funding to provide for capacity requirements in the medium to long term; that appropriate competitive conditions exist within and between ports, which exert downward pressure on costs and charges for port, shipping and other port related services; the avoidance of inefficient monopoly situations developing, with potential upward pressure on costs and charges; and that the shareholder/management relationship is conducive to the development of a port sector which is fully supportive of the needs of our rapidly developing open economy. 2. To advise on the future role of ports in contributing to the optimum development of the transport sector in Ireland and appraise / recommend management / ownership options including enhanced private sector involvement. 3. To consult, at a high level, all relevant stakeholders and report by Summer 2002. Although the scope of the Review was limited to the ten port companies operating under the relevant Acts, we believe that it would be inappropriate to exclude the Port of Rosslare from our considerations. 1.2 Context Other than the ports of Rosslare and Greenore , Irish commercial ports are regulated primarily through the Harbours Acts 1996 – 2000. The State, through the Department of Communications, Marine and Natural Resources, is the single and only shareholder. The Minister determines national policy in respect of the management, operation and regulation of commercial ports, appoints the Board and sets 1 HIGH LEVEL REVIEW OF THE STATE COMMERCIAL PORTS OPERATING UNDER THE HARBOURS ACTS 1996 AND 2000. corporate governance responsibilities. Otherwise, the ports are free to operate within generally accepted commercial principles. While all port companies provide the basic infrastructure, only some commercial ports take responsibility for operating the cargo terminals; others leave it to the private sector to operate them and provide the superstructure. Ports form a critical element of the supplier chain and particularly so in Ireland where the strength of the Irish economy is very much dependent on international trade, and its competitiveness is central to our overall economic performance. The efficiency and management of our ports is core to sustaining that competitiveness as 99% of overseas trade passes through our ports. The table below shows that international trade, represented by Imports and Exports, is of the order of 155% of GDP. The second table shows that the UK is still our largest trading partner. Table 1.1: International Trade – Ireland; 1998 - 2001 Port Total/GDP Year Imports €m Exports €m Total €m Surplus €m GDP €m Tonnage % (‘000) 1998 39,715 57,322 97,037 17,607 67,728 143 39,954 1999 44,327 66,956 111,283 22,629 75,811 147 42,930 2000 55,909 83,889 139,798 27,980 87,121 160 45,274 2001 57,177 92,523 149,700 35,346 96,662 155 45,795 Sources: CSO & Central Bank Table 1.2: Sources of Imports and Exports Main Trading Partners 2001 Country Imports Exports Total % €m Great Britain 19,026 20,345 39,371 26 Northern Ireland 1,240 1,816 3,056 2 Other EU Countries 13,539 35,042 48,581 33 USA 8,712 15,696 24,408 16 Rest of World 14,660 19,625 34,285 23 Total 57,178 92,523 149,701 100 Sources: CSO and Central Bank 2 HIGH LEVEL REVIEW OF THE STATE COMMERCIAL PORTS OPERATING UNDER THE HARBOURS ACTS 1996 AND 2000. The throughput of Irish ports is relatively small. When the scale of the total Irish port sector is compared with individual ports in mainland Europe, it can be seen that traffic through the total Irish commercial state port sector at almost 46 million tonnes, is less than that for some European ports. Table 1.3: Traffic through Selected Mainland European Ports (2001) 2001 ‘000 tonnes Rotterdam 315,455 Antwerp 130,050 Marseilles 92,370 Hamburg 92,361 Le Havre 69,001 Amsterdam 68,383 Genoa 49,507 Trieste 49,324 Bremen 46,134 Dunkirk 44,450 Zeebruges 32,080 Source: Port of Rotterdam and other Annual Reports In relative terms, the scale of the Irish ports in relation to those in the UK is also small. The Port of Grimsby and Immingham for example handles the highest amount of trade in the UK which, in 2001, was almost 55 million tonnes. The total turnover of the ten commercial ports is of the order of 95 million Euro with a combined profit of some 3,500,000 Euro. 1.3 The Timing is Appropriate The carrying out of this Review is timely. Over the last number of years, the Irish ports sector had experienced major growth and structural change. Now, as we enter a less buoyant economic climate, the profitability of ports is being challenged and they face into a future where they are required to make significant capital investment decisions without Exchequer or EU support. It is therefore a fundamental strategic imperative that our ports increase their levels of efficiency and competitiveness, while providing a seamless integration into the national supply chain infrastructure. 1.3.1 International Developments The world’s port industry is currently subject to a number of different processes. These include globalisation, private sector involvement and also modernisation.

Load more