Massachusetts Port Authority Request for Information Conley Terminal Crane Acquisition Project

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Massachusetts Port Authority Request for Information Conley Terminal Crane Acquisition Project Massachusetts Port Authority RFI Conley Terminal Crane Acquisition May 14, 2018 MASSACHUSETTS PORT AUTHORITY REQUEST FOR INFORMATION CONLEY TERMINAL CRANE ACQUISITION PROJECT Interested firms must submit a response no later than 12:00 p.m., noon, EST, June 18th, 2018. Responses should be marked “Response to Request for Information Conley Terminal Crane Acquisition Project”. Eight (8) copies of written proposals responding to the questions outlined below should be submitted to: Anna M. Tenaglia Director of Treasury Massachusetts Port Authority One Harborside Drive Suite 200S East Boston, MA 02128 Massport intends to short-list 2-3 bidders from the respondents to the RFI. Subsequent to the shortlist, the Authority plans to issue an RFP to the shortlisted respondents and one-on-one meetings may be held to address questions related to the RFP and financing agreement. Selection of the winning bidder will be based Goals and Objectives outlined in Section 1.2. 1 4812-8004-0542.2 Massachusetts Port Authority RFI Conley Terminal Crane Acquisition May 14, 2018 1) INTRODUCTION The Massachusetts Port Authority (“Massport” or “the Authority”) is pleased to present this Request for Information (“RFI”), a solicitation to entities or groups (“Respondents”) interested in submitting Statements of Information (“SOIs”) to acquire, deliver, and finance the Conley Terminal Crane Acquisition Project (“Project”) through a volume dependent, revenue-based concession pursuant to a concession agreement (“Contract”) with Massport. Massport intends to invite Respondents that they consider most qualified to respond to a subsequent Request for Proposals (“RFP”) to be issued by Massport for the Project. If there is only one qualified Respondent, Massport may proceed directly to negotiations of the Contract with such Respondent. The Authority was created pursuant to Chapter 465 of the Commonwealth of Massachusetts Acts of 1956, as amended to date, and is a body politic and corporate and public instrumentality of the Commonwealth of Massachusetts. Massport owns, operates and manages the Airport properties, which consist of Boston Logan International Airport, Laurence G. Hanscom Field and Worcester Regional Airport; the Port properties, which consist of the Paul W. Conley Marine Terminal (“Conley Terminal”), Massport Marine Terminal, Flynn Cruiseport Boston at Black Falcon Terminal and Moran Terminal, Medford Street Terminal, Mystic Piers 1, 48, 49 and 50 (a/k/a the “Boston Autoport”), the Boston Fish Pier and the Commonwealth Pier (site of the World Trade Center Boston); and various other commercial real estate properties. This RFI does not represent a commitment to issue a Request for Qualifications or Request for Proposals in the future. 1.1 OVERVIEW OF THE OPPORTUNITY The Project consists of the acquisition of three (3) low profile neo-panamax ship-to-shore cranes (the “Cranes”) that will be used at Conley Terminal, the container port in the Port of Boston, which is owned and operated by Massport. Each Crane is estimated to cost approximately $13-$15 million for a total estimated cost in the range of $40-$45 million (excluding any applicable tariffs/taxes). With funding support from the Commonwealth of Massachusetts and the U.S. Federal Government, Massport is investing approximately $850 million in Conley Terminal related waterside and landside infrastructure improvements, to compete for a greater share of New England inbound and outbound container volume. These investments include the development of a new 50-foot deep berth, called Berth 10. The Ship to Shore (“STS”) Cranes will be used at Berth 10. The Authority anticipates that the manufacture and delivery of the Cranes will take approximately 24 months. Upon completion of the Berth 10 and Crane acquisition project, Conley Terminal will be able to service the 14,000+ twenty-foot equivalent unit (“TEU”) vessels that are now calling the U.S. East Coast following the opening of the expanded Panama Canal. In addition to the acquisition of the Cranes and the development of Berth 10, Massport is the local sponsor for the U.S. Army Corps of Engineers’ Boston Harbor Deep Draft Navigational Improvement Project which will dredge Boston Harbor to -47 ft. in the Main Ship Channel and Reserved Channel, and to -51 ft. in the outer harbor (the “Dredging Project”). Massport is interested in exploring an innovative arrangement with a strategic partner (the “Concessionaire”) to capture a greater share of New England inbound and outbound TEU volumes. The transaction would entail the Concessionaire making an investment to purchase the Cranes at Conley Terminal for use at the new Berth 10. In return for the acquisition, delivery, and financing of the Cranes, the Concessionaire will have the right to receive a portion of the revenues (“Massport Concession Payments”) from the increased TEU volumes that are generated at Conley as a result of the completion of Berth 10 and the delivery, acceptance and operation of the Cranes by Massport. The term of the Contract is expected to be up to 25 years. In parallel, Massport may conduct its own procurement to acquire the Cranes through a more traditional equipment procurement model in which Massport would finance the Cranes using its own capital sources. It is Massport’s intent to evaluate the results of the innovative procurement process versus its traditional delivery method to determine which approach is the most advantageous to the Authority. 2 4812-8004-0542.2 Massachusetts Port Authority RFI Conley Terminal Crane Acquisition May 14, 2018 Conley Terminal (including Berth 10, when operational) will continue to function as an operating port under this innovative arrangement. Transfer of Conley Terminal operations and maintenance is not included within the scope of this RFI and will not be considered by Massport. 1.2 GOALS AND OBJECTIVES OF THE AUTHORITY Massport’s principal objective is to partner with a strategic investor or consortium that can provide the Cranes that can help drive future TEU volume growth and that can provide a relatively low cost of capital. In general terms, the project goals and objectives include: Goal 1: Obtain Cranes capable of serving 14,000+ TEU vessels in a timely manner Given the change in fleet mix and the desire of current carriers to serve the Port of Boston with larger vessels, it is critically important for Conley Terminal to be equipped with three new Ship to Shore Cranes, which are capable of serving 14,000+ TEU vessels when Berth 10 is complete. Goal 2: Incentivize Concessionaire to drive TEU volume growth. Concession payments will be based upon ability to drive TEU volume growth in excess of what Massport can generate without a strategic partner. Goal 3: Transfer delivery risk. - Concessionaire is responsible for the acquisition of the Cranes, including financing such acquisition. - Concessionaire makes milestone payments to the Crane manufacturer. - Massport Concession Payments commence once the Cranes have been accepted and placed in service, post testing. Goal 4: Actionable marketing plan. Critical to the success of Conley Terminal in a highly competitive market is the ability to service larger neo- panamax vessels. The Concessionaire’s capabilities to increase container volumes will be part of the evaluation criteria. 1.3 CONLEY TERMINAL BACKGROUND Conley Terminal is a 101-acre container terminal in South Boston, Massachusetts located 10 nautical miles from the Boston Sea Buoy (transit time of 1 hour) with no bridge-related height restrictions in the federal shipping channel. It is positioned for growth due to its strategic location and strong regional demographics, and stands to capitalize on the larger neo-panamax vessels as a result of the Dredging Project, expansion of the Panama Canal and the continuing evolution of the global container shipping alliances. In 2008, Massport acquired an additional 30-acres of land to the west of the existing container terminal upon which Massport is developing Berth 10 and the waterside and landside infrastructure investments needed to service the larger neo-panamax vessels. This site also hosts the recently completed dedicated freight corridor which removed truck traffic from neighborhood streets and provides for more efficient connectivity to the interstate highway system. Conley Terminal is New England’s only significant container terminal, with strong local and regional cargo traffic. Conley Terminal provides global access for New England’s businesses and industries, and has the following attributes: 3 4812-8004-0542.2 Massachusetts Port Authority RFI Conley Terminal Crane Acquisition May 14, 2018 • Maintains an approximately 37% market share of port container volumes in the New England market (FY2016, excluding western Connecticut). • Conley Terminal container volumes have recovered from the 2008-2009 recession, with a Compounded Annual Growth Rate (“CAGR”) of 6.6% over the past five years (FY2012-FY2017). • Since 2011, TEU volume at Conley Terminal has been steadily increasing. Volume increased by 11.9% in FY2016 and 3.9% in FY 2017, ending fiscal year 2017 with 256,951 TEUs. A table of TEU volumes for the period from FY 2002- FY 2017 is set forth below: Fiscal Year TEUs % Change 2002 126,713 -- 2003 150,138 18.5% 2004 164,361 9.5% 2005 180,828 10.0% 2006 193,922 7.2% 2007 203,177 4.8% 2008 216,434 6.5% 2009 200,071 -7.6% 2010 173,735 -13.2% 2011 185,980 7.0% 2012 186,515 0.3% 2013 192,846 3.4% 2014 204,951 6.3% 2015 221,014 7.8% 2016 247,329 11.9% 2017 256,951 3.9% • Massport management estimates volume to grow at a CAGR of between 3% and 4% over the next 20 years. This projected growth is driven by the expected completion of landside improvements and expansion, the Boston Harbor Dredging Project, organic growth in the existing customer base and emerging container shipping alliance opportunities. • Boston is a densely populated mature market (tenth most populated metro area in 2016) with high per capita income and an unemployment rate below the national average.
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