Port strategy | Smart port financing
Ports must improve in financing investments, according to a port property expert.
Speaking at the “Maximizing the Value of Port Land” session of the IAPH 2021 Global Ports Conference, Franc Pigna, Managing Director and Founder of Aegir Port Property Advisors, said ports often rely on governments when they need to invest, but global infrastructure now demands to exceed the value of global infrastructure finance.
“The need for intensive capital infrastructure exceeds the government’s ability to finance it,” he said. “The ports will have to be self-financing and self-sufficient. “
Regardless of their size, all ports face the question of how to finance expansion and modernization and they will need to be financially transparent as they need to access private sector capital, Pigna explained.
Ports were forced to examine their finances and subsequently examine their role as owners.
They need to measure returns better because they don’t make money in most cases. Because if the costs are not fully recovered, the ports subsidize shipping companies and other port users, he emphasizes.
Also present at the session was Patrick Verhoeven, Managing Director of IAPH, who asked how ports can become asset managers when land is held in trust.
Pigna suggested that the type of shareholder is irrelevant because the shareholder should always be looking to try to generate income.
With regard to North America in particular, he highlighted the potential repercussions of not using assets, highlighting the Canada Marine Act which allows the government to seize an asset if the port is not using it.
Different approaches from owners
He highlighted two US ports and their different approaches to land use. The Port of San Diego in California generates 75% of land lease revenue because it owns a large portion of the waterfront. This means that port operations generate only 25%.
Looking at the Port of San Francisco, also in California, he noted that it had become a real estate company with most of the port functions shifted to the Port of Oakland.
He left the participants with a simple but important message: “If you allow a port authority to operate like a business, it can be more profitable”.