Global Ports Forum

May 24 (Bloomberg) — Persian Gulf states risk creating a glut in container capacity as they spend $46 billion on port projects amid sputtering global economic growth.

More than 35 ports stretching from Kuwait at the head of the Gulf to Oman on the Indian Ocean plan to add space for as many as 60 million standard containers in little over a decade, more than doubling capacity from the current 50 million boxes.

The plans will extend an oil-funded infrastructure splurge that’s also set to endow the Gulf with some of the world’s biggest airports. Unlike those hubs, which will serve a global market, its ports rely on a local population of 40 million people and lack the urbanized hinterland that helps sustain major global harbors such as Rotterdam and Hong Kong.

“You have a fragmented group of nations each seeking to establish a large-scale port, and the danger is that there’s no overall coordination,” said Neil Davidson, senior adviser on ports at Drewry Shipping Consultants. “The key question is how robust demand will be over the next 10 years, and that really depends on oil revenue and the spending power it brings.”

Gulf ports are expanding even as shipping lines rein in supply after a glut of vessels led to a price war, causing losses of at least $6 billion. Capacity cuts prompted rates on Asia-Europe routes to more than double to $2,732 per 40-foot container in the week to March 1, according to Drewry estimates.

Close Competitor

Abu Dhabi is leading the charge with its new Khalifa port, scheduled to open in the fourth quarter with capacity for 2 million containers, increasing to 15 million by 2030.

Yet the complex, built on a man-made island and with an industrial zone two-thirds the size of Singapore, is situated just 25 miles south of Dubai’s Jebel Ali, the world’s ninth- biggest container port and the busiest outside East Asia.

Further west, Qatar, the top exporter of liquefied natural gas, is spending 19 billion riyals ($5.2 billion) on a port with a planned volume of 6 million containers, due to open in 2016. Little over 100 miles away in Bahrain, Khalifa Bin Salman Port, run by Denmark’s A.P. Moller-Maersk A/S, could double capacity to 4 million boxes in two or three years, said Hassan Almajed, director of the country’s General Organisation of Sea Ports.

Abu Dhabi, holder of 7 percent of known oil reserves, will spend $7.2 billion on the first phase of Khalifa, which it says will focus on terminating cargo, reducing any overlap with Jebel Ali, where goods are trans-shipped from one vessel to another.

‘Complementary’

Mohammed Sharaf, CEO of DP World Ltd., the world’s No. 3 container-terminal company and the operator of Jebel Ali, says there’s room for both ports, even as his company boosts capacity at the Dubai site 36 percent to 19 million boxes by 2014.

“If anything, we’d like to see infrastructure built more quickly,” Sharaf said in an e-mailed response to questions from Bloomberg News. “We see the development in Abu Dhabi as complementary to what we’re doing. Shipping lines are ordering bigger and bigger vessels to achieve economies of scale and ports need to meet those new needs and meet them efficiently.”

Abu Dhabi Ports Co. Chief Executive Officer Tony Douglas concurs, suggesting the Gulf’s economies and populations will grow quickly enough to sustain the expansion of its ports.

“At the moment there isn’t enough capacity in the region,” he said in an interview. “Unless economies in the region slow down, it’s unlikely there will be overcapacity.”

Colonial Inheritance

The expansion of ports is also being driven by the Asian boom, said Nasser Saidi, chief economist at Dubai International Financial Centre, with India accounting for 11 percent of Gulf trade in 2010, versus 2 percent in 2001, and China 10 percent, up from 4 percent, according Qatar National Bank figures.

“Much of our infrastructure is based on what the old colonial powers wanted when the idea was ‘we sell you goods, you sell us oil,”’ Saidi said. “Today’s world has changed and we need to think of where we stand in the global supply chain.”

Still, the International Monetary Fund says GDP growth in Gulf Co-Operation Council countries will slow from 5.3 percent this year to 3.7 percent in 2013, and that “even with high oil prices, fiscal sustainability is an immediate issue,” with “tighter and higher-quality government expenditure” warranted.

While population growth and higher living standards should spur imports of everything from foodstuffs to luxuries, Gulf nations will remain “pretty small,” and “even if they become more prosperous, that alone does not create a very compelling case for trade,” said Jarmo Kotilaine, chief economist at Jeddah, Saudi Arabia-based The National Commercial Bank.

Iran, Africa

Plans among GCC nations Saudi Arabia, the U.A.E., Qatar, Oman, Bahrain and Kuwait to end their reliance on petrochemicals may soak up extra container capacity. Abu Dhabi aims to derive only 40 percent of GDP from oil by 2030 compared with 60 percent today, and Khalifa will be surrounded in by enterprises including the Gulf’s largest smelter, spurring box traffic.

Arabian ports are also positioning to tap future demand from neighboring areas with underdeveloped infrastructure, such as Iran, Iraq, Pakistan, Afghanistan and East Africa.

While Oman has a short stretch of Gulf coast, it’s focusing expansion 650 miles to the south, where the port of Salalah will lift capacity by 50 percent to 9 million boxes as early as 2016 if demand continues at the current rate, according to CEO Peter Ford. The facility, part-owned by A.P. Moller-Maersk, expects to handle 4 million boxes this year, a 23 percent gain on 2011.

“We’re ideally positioned to connect East African, Indian, Red Sea and Gulf markets with Europe and Asia,” Ford said in an interview. “But I do see developments where it’ll be difficult to fill the capacity. That’s a great risk for those countries.”

At the other end of the Gulf, Kuwait aims to build a port able to handle 1.33 million containers a year which could later tap a hinterland spanning Syria to Iran, though the plan has led to tensions with Iraq, which wants to develop its own facility.

Overall, though, there’s too much capacity, said maritime consultant Juergen Sorgenfrei of IHS Global Insight, so much so that the Gulf risks repeating errors made in the Mediterranean 20 years ago, when ports such as Gioia Tauro in Italy mushroomed without ever becoming major centers for trans-shipment.

“Today it’s nothing, and we’re going to see the same thing in Arab states if they create overcapacity,” Sorgenfrei said. “There will be winners and losers.”

To contact the reporter on this story: Tamara Walid in Abu Dhabi at

twalid@bloomberg.net
To contact the editor responsible for this story: Chad Thomas at

cthomas16@bloomberg.net
Find out more about Bloomberg for iPhone: m.bloomberg.com/iphone/

Is Mexico & Brazil the next frontier for port deals & investments?

Big port increases for Brazil and Mexico

The Brazilian port of Paranaguá and the Mexican port of Veracruz have shown big increases in the handling of vehicles in the first quarter of 2012. Paranaguá has recorded vehicle imports up 77% on the same period last year and exports up 25%. Meanwhile, in neighbouring Mexico, Veracruz has topped port activity for vehicle handling in the same quarter, recording an increase of 28%. In addition, the port of Lazaro Cárdenas acheived an impressive increase, with the number of finished vehicles handled up more than 34% to almost 46,000. Despite the current economic spat between Mexico and Brazil, the latter still imported nearly 50,500 vehicles from Mexico in the Q1, up 153%.

Is Mexico & Brazil the next frontier for port deals & investments?

Deal Journal Australia
A one-stop shop for up-to-the-minute deals, M&A and private equity news in and about Australia.

December 14, 2011, 8:31 AM
Morgan Stanley Wins Port Botany Mandate
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By Gillian Tan

Morgan Stanley is currently sixth on Dealogic’s 2011 M&A league table but it will start 2012 on the front foot after defeating tested rivals in a competitive tender process.

Reuters
The Australian state of New South Wales has appointed the investment bank as its financial advisor for the long-term lease of Port Botany which has an expected price tag of more than 2 billion Australian dollars (US$2 billion). Funds will be allocated to infrastructure projects across the state, deemed critical.

“The long-term lease of Port Botany to the private sector also presents a huge opportunity to lift the overall productivity of our State,” NSW Treasurer Mike Baird said in a statement. “The combination of critical infrastructure upgrades and improved efficiencies under private management will enhance economic productivity. This will be particularly important to long-term trade growth and the future of our State’s economy, which is why the next scoping phase will be vital,” he added.

Mr. Baird said Morgan Stanley’s first task would be to undertake a scoping study and transaction strategy for Port Botany, which will examine market conditions and stakeholder needs.

The study will be provided to the Government for consideration during the first half of 2012, with a view to completing the transaction by the middle of 2013.

Mr. Baird has also called for Expressions of Interest from advisory firms wishing to provide independent advice on future transactions, asserting the Government would not be favoring particular firms.

“Looking beyond one-off transactions, these established groups of independent experts will work with Treasury to grow and support the long-term financial future of New South Wales,” Mr. Baird added.

Proposals are due on the morning of 24 Jan. 2012.

NSW CONTAINER STRATEGY: DON’T DISMISS NEWCASTLE

Photo courtesy of heraldsun.com.au.

Opinion – Greg Cameron

The NSW government is preparing a container terminal strategy for NSW as part of its ‘scoping study’ for the long-term lease of Port Botany terminal. It is due for release mid-year without public consultation. In December, the NSW government revealed its intention to approve a 350% increase in Port Botany container terminal operations, from 2 million containers a year to 7 million. The only container option the NSW government is studying is continued expansion of Port Botany.

An investigation of the Newcastle container option would include relocating all current and future Port Botany container operations to Newcastle. Sydney airport can be expanded, including a third parallel runway, using the Port Botany terminal site. Since new aircraft are 60% quieter than existing aircraft, sound pollution may no longer be a deciding factor in relation to growth of Sydney airport. The installed infrastructure at Port Botany can be moved by barge to Newcastle.

The decision to reject Newcastle for a container terminal is long-standing. After the NSW government assumed ownership of the former BHP steelworks site in 2000, it based all feasibility studies on the existing Newcastle urban rail system. However, it was known in 1998 that the existing system was unsuitable for rail freight. When BHP proposed a rail freight by-pass of Newcastle, from Fassifern to Hexham, it was rejected by the NSW government.

The NSW government’s decision to reject the Newcastle option is based on the assumption that the Fassifern to Hexham rail by-pass will never be built. Surely the assumption is false?

The Fassifern to Hexham by-pass is economically viable. Instead of spending $200 million to upgrade the rail freight line from Port Botany, the funds can be re-allocated towards the cost of the Fassifern to Hexham line. By reducing travel time between Sydney and Brisbane by up to 35 minutes, the line permanently contributes to lower freight costs. By allowing the Newcastle urban system to be re-developed using light rail, significant urban development opportunities are enabled. Empty containers – currently 50% of all containers are exported empty – can be railed into northern NSW for back loading through Newcastle with coal, agricultural products and, in time, value added products. An optimally designed Newcastle terminal will deliver containers into Sydney at a competitive cost compared with Port Botany. A container terminal at Newcastle provides most regional areas of NSW with cost-effective access to a container terminal, for the first time.

Any strategic economic examination of a Newcastle terminal would include an intermodal terminal. Newcastle’s advantage is that 100% of containers will be railed to an intermodal terminal north of Sydney. This compares with shipping the containers to Port Botany and moving them by truck and rail to Moorebank, 30km west of Port Botany. At present, 86% of containers from Port Botany are trucked. The NSW government’s plan is to reduce that to 72% within 10 years. The Newcastle option clearly benefits Sydney’s road system.

Is there evidence to support the NSW government’s assertion that the Newcastle container terminal option is unviable? If so, where is this evidence?

It would make good economic sense to rigorously investigate the costs and benefits to the NSW economy of a container terminal at Newcastle, before decisions are taken.

Greg Cameron is a former BHP manager and specialises in economic modelling.
Tags:
container-shippingcontainer-transportmoorebanknewcastleport-botany

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Nordic Shipping Banks Beat UniCredit Amid Container Overcapacity
By Niklas Magnusson and Adam Ewing
December 21, 2011 7:27 AM EST

DNB ASA and Nordea Bank AB (NDA), the largest providers of ship financing, may benefit as competitors face capital shortages from Europe’s sovereign debt crisis.
DNB and Nordea are better positioned to lend money because smaller shipping banks are more vulnerable to slumping freight rates and overcapacity. The two Nordic banks also need to raise less capital because of new banking rules than larger rivals do.
“All of them apart from DNB and Nordea will probably scale back their shipping businesses, because the first thing a bank does to improve its capital ratio is to exit loan agreements to cut their balance sheets,” said Matti Ahokas, an analyst at Svenska Handelsbanken AB in Helsinki, in a phone interview.
UniCredit SpA, whose German unit is one of the country’s biggest shipping lenders, and Commerzbank AG, which owns Deutsche Schiffsbank AG, each need to raise more than 5 billion euros ($6.5 billion) to meet tighter rules imposed by the European Banking Authority.
DNB needs to boost its cash buffer by 1.5 billion euros while Nordea, the Nordic region’s largest bank, doesn’t have to raise any new cash, according to stress-test results released Dec. 9.
Nordea, based in Stockholm, has lost 28 percent in trading this year and Oslo-based DNB has declined 30 percent. Milan- based UniCredit, which needs to raise 8 billion euros by mid- 2012, has dropped a steeper 52 percent. Commerzbank in Frankfurt has slumped 70 percent on concern its 5.3 billion-euro capital shortage will push it toward a second bailout.
‘Gaining Position’
“We are benefiting as we’re the No. 1 shipping bank in the world,” Nordea Chief Executive Officer Christian Clausen said in an interview on Dec. 9. “While the amount we have on our balance sheet is not going to increase, we are gaining position.”
Europe’s debt crunch is threatening growth in the container industry while the introduction of new ships means shipping lines may face half a decade of oversupply. That has sent freight rates plunging 70 percent since a 2010 peak, in turn putting pressure on the profitability of shipping companies.
In Germany, home to the world’s third-largest container fleet, small and mid-sized shipping companies along the North Sea coast face potential insolvency as banks demand more collateral for critical loans and they struggle to pay principal and interest on credit, Max Johns, spokesman for Germany’s VDR shipping association, said in an interview.
Bankruptcy, Insolvency
So far, Germany’s Beluga shipping line has filed for bankruptcy while Sietas KG, Germany’s oldest shipyard, has filed for insolvency because it can’t pay debt and salaries.
“This is the worst crisis since World War II,” Johns said. “A lot of the charter owners cannot pay interest rates to the banks because of unusually low charter rates.”
DNB focuses on the largest shipping companies, which shields it more from market fluctuations, according to Leif Teksum, group executive vice president and head of the Large Corporates and International unit, Harald Serck-Hanssen, head of shipping, offshore and logistics, and Trygve Young, chief risk officer. They spoke on a Dec. 16 conference call.
“It is remarkable to see how small the losses have been,” Young said. DNB, which has financed the shipping industry for about 150 years, may have some “challenging cases” in the next two years, Serck-Hanssen said.
Loan Agreements
Of 250 DNB clients, 50 were in breach of loan agreements over the last three years, Serck-Hanssen said. Of those 50, 15 were restructured and in three cases DNB had to take over assets. Loan losses are likely to rise from third-quarter levels because of the shipping crisis, he added.
“As one of the leading global lenders to shipping, DNB will invariably be affected by the cyclicality in the sector, although its long-standing relationship with most of its customers and experience in the sector is likely to mitigate this,” Fitch Ratings said on Dec. 16 when it affirmed DNB’s long-term issuer default rating at A+.
“DNB in Norway has its main exposure and revenue stream from a strong domestic economy that is doing far better than economies in other European countries,” Bengt Kirkoen, an analyst at First Securities ASA in Oslo, said in a phone interview.
Nordea, which navigated the 2008 financial crisis without a state bailout, hasn’t reported a quarterly loss since the fourth quarter of 1998. Its focus on retail banking in Sweden, Finland, Norway and Denmark made it less vulnerable to loan losses than most European peers, Ahokas said.
Low Funding Costs
“DNB and Nordea have some of the lowest funding costs in Europe, and their wholesale funding costs are a great competitive advantage,” he said. “A lot of banks would probably want to be more active in shipping finance, because of the high margins, but they cannot because of the funding situation.”
Price competition in the industry means that many companies with smaller fleets of 15 vessels or less can’t compete with their larger rivals and are operating at a loss.
“We’re not happy with the market at the moment, as it has turned negative since the summer,” said Oliver Faak, managing director for Norddeutsche Landesbank Girozentrale’s German shipping unit. The lending environment has also “become much tougher and much more demanding” as banks have to demand tougher terms for loans, he said.
Still, the Hanover, Germany-based bank, known as NordLB, expects its shipping portfolio to “moderately” grow in size in 2012. NordLB is about to hire another 15 people for its ship- finance business in coming months in part to help clients who are in financial trouble restructure their businesses, he said.
Banking Hires
Other banks also aim to gain from the turbulence in the industry. Hamburg-based HSH Nordbank AG is likely to benefit from lenders retreating from ship financing, Financial Times Deutschland reported Nov. 21, citing management board member Torsten Temp. The lender, one of the world’s biggest shipping financers, on Dec. 16 said it hired Ingmar Loges from UniCredit as the new head of its new Shipping Clients International unit.
UniCredit’s German shipping unit, which in January forecast its shipping portfolio would grow as much as 10 percent this year, expects it will be reduced in 2012, said Holger Janssen, head of global shipping at UniCredit Bank AG in Hamburg.
“Shipping companies are favoring their own tonnage, which is why tonnage providers and hence the time charter rates may become the victims of overcapacity,” he said. “It is not surprising that in the current shipping market climate bank lending will continue to tighten.”
To contact the reporters on this story: Niklas Magnusson in Hamburg at nmagnusson1@bloomberg.net Adam Ewing in Stockholm at aewing5@bloomberg.net;
To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net

The Euro Area Is Coming to an End: Peter Boone and Simon Johnson

Nov. 28 (Bloomberg) — Investors sent Europe’s politicians a painful message last week when Germany had a seriously disappointing government bond auction. It was unable to sell more than a third of the benchmark 10-year bonds it had sought to auction off on Nov. 23, and interest rates on 30-year German debt rose from 2.61 percent to 2.83 percent. The message? Germany is no longer a safe haven.
Since the global financial crisis of 2008, investors have focused on credit risk and rewarded Germany with low interest rates for its perceived frugality. But now markets will focus on currency risk. Inflation will accelerate and the euro may break up in a way that calls into question all euro-denominated obligations. This is the beginning of the end for the euro zone.
Here’s why. Until 2008, investors assumed that all euro- zone sovereign bonds, as well as bank debt, were risk-free and would never default. This made for a wonderfully profitable trade: European banks could buy government debt, finance it at less expensive rates through funding provided by the European Central Bank, and pocket the spread.
Then credit conditions tightened around the world and some flaws became evident. Greece had too much government borrowing; Ireland had experienced a debt fueled real-estate bubble; and even German banks had become highly leveraged. Investors naturally decided some credit-risk premium was needed, so yields started to rise.
Greece, Ireland, Portugal, Spain and now Italy have large amounts of short term debt that they can’t roll over at low cost. Leading European banks are in the same situation. None of these countries or banks can long bear the burden of their current debt levels at reasonable risk premiums.
Last Resort Technocrats
Many of Europe’s leading politicians, some International Monetary Fund officials, and the technocrats-of-last-resort — Mario Monti in Italy and Lucas Papademos in Greece — mistakenly believe that these risk premiums can be quickly reduced. They argue that if they cut budget deficits, carry out structural reforms and modestly recapitalize banks, their countries will soon grow and regain access to markets.
More realistically, none of these countries will be borrowing again soon in the capital markets. Ireland’s finance minister, Michael Noonan, is at odds with reality when he claims that Ireland should return to the markets in 2013. This is a country with 133 percent of gross national product in public debt and about 100 percent GNP in additional contingent liabilities to the banking system. (We use gross national product because gross domestic product is artificially raised by the offshore profits of non-Irish multinational corporations, most of which Ireland doesn’t tax.)
With such enormous debt burdens, even if the Irish or other troubled countries manage to convince the market that there is only a 5 percent to 10 percent annual risk of default, these countries will experience high real interest rates — plus ensuing low investment and fragile banks — for decades.
The French, along with U.S. and U.K. officials, are pleading with the European Central Bank to come to the rescue. Their hope is that the ECB can remove credit risk by promising to back all sovereign and bank credits in the euro zone. This is what politicians mean when they say “bring out the bazooka.”
When large amounts of any currency are printed in response to deep structural flaws, it’s hard to trust that money. A massive bond-purchase program by the ECB would reduce credit risk but increase the danger that the euro will decline in value against the dollar and other currencies. And if the ECB needs to continue buying more debt to finance deficits and prevent defaults — because peripheral countries could stop making painful fiscal adjustments once the ECB starts buying bonds — wages and prices would increase, as we saw in the U.S. in the 1970s. This is anathema to the Germans.
Inflation Risk
We would soon see German bonds sold off as investors protect themselves from long-term inflation, which erodes the value of such debt. People holding bonds with a high credit risk (such as Italy and Spain) would surely sell many of those to the ECB, or simply cash out when those bonds mature in case the central bank, at some point, stops buying.
An ECB “bazooka” wouldn’t restore competitiveness to Europe’s periphery, so even with this, Europe’s troubled nations would require many more years of tough austerity and budget reform to stabilize debt.
This would all just look like another unsustainable debt profile. Germany would be paying higher interest rates on its debt, while most banks and the periphery would be heavily financed by the ECB — and both credit and currency risk premiums would remain. Markets would eventually turn against Europe with a vengeance, and with no more plausible solutions, the whole system would come tumbling down amid both inflation and debt restructuring.
Germany’s credit is impeccable, but the country is issuing debt in a currency that is flawed and could soon be worth much less than it is today. If Germany does block the “bazooka” and instead takes on more of the fiscal burden in Europe — for example, through the obligations inherent in any kind of euro- bond issue — this would reduce currency risk but undermine the country’s credit rating.
The path of the euro zone is becoming clear. As conditions in Europe worsen, there will be fewer euro-denominated assets that investors can safely buy. Bank runs and large-scale capital flight out of Europe are likely.
Devaluation can help growth but the associated inflation hurts many people and the debt restructurings, if not handled properly, could be immensely disruptive. Some nations will need to leave the euro zone. There is no painless solution.
Ultimately, an integrated currency area may remain in Europe, albeit with fewer countries and more fiscal centralization. The Germans will force the weaker countries out of the euro area or, more likely, Germany and some others will leave the euro to form their own currency. The euro zone could be expanded again later, but only after much deeper political, economic and fiscal integration.
Tragedy awaits. European politicians are likely to stall until markets force a chaotic end upon them. Let’s hope they are planning quietly to keep disorder from turning into chaos.
(Peter Boone is a principal at Salute Capital Management, a non-resident senior fellow at the Peterson Institute for International Economics and a visiting senior fellow at the London School of Economics. Simon Johnson, who served as chief economist at the International Monetary Fund in 2007 and 2008, and is now a professor at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics, is a Bloomberg View columnist. The opinions expressed are their own.)
To contact the authors of this article: Peter Boone at pb@effint.org and Simon Johnson at sjohnson@mit.edu
To contact the editor responsible for this article: Paula Dwyer at pdwyer11@bloomberg.net

The company, a unit of private transportation and infrastructure holding group N-Trans, said that it would issue US$100 million of new shares and N-Trans would sell an unspecified number of existing shares to deliver a free float of 25 per cent.

A source close to the deal said that analysts had calculated a ‘fair value’ for the company of around US$3 billion, meaning a total of US$750 million could be raised from the IPO if investors agree on the sums.

‘There will be a significant secondary component to the offering, although the public market will determine the final valuation,’ the source told Reuters.

The company, which controls around 30 per cent of Russia’s container ports market, said that it will invest the net proceeds from the sale of the new and existing shares in its ports operation.

Russian companies have raised US$3.4 billion from IPOs in 2011 to date, compared to around US$5.5 billion for the whole of last year.

The standout deal was the blockbuster US$1.4 billion Nasdaq IPO of Russia’s most popular search engine Yandex last month, but there have been more cancellations than successes as investors remain wary of perceived risks surrounding Russian firms.

Global Ports could become a third successful IPO from the N-Trans company following the floats of freight operator Globaltrans Investment and road and bridge operator Mostotrest.

Mostotrest raised US$388 million in Moscow last November, although the shares have since lost ground. — Reuters

A good resource!

www.portfinanceinternational.com/news,2011,may

Investments at the port alone will be equal to the annual foreign investments realized a year between 1990 to 2010
LBR,

02 May 2011

Foreign direct investments will pick up with planned projects in ports and hotels valued at USD 500 million each, finance ministry secretary P B Jayasundera said.

He said a concession agreement has been signed in the Colombo port for a new terminal that will need USD 500 million to build. The terminal will be built by China Merchant Holdings, a Chinese state firm, and Aitken Spence.

Jayasundera said investments at the port alone will be equal to the annual foreign investments realized a year between 1990 to 2010. The BOI has still not published a foreign direct investment figure for 2010 but it is expected to be around $300 to $400 million, lower than the USD 600 million achieved a year earlier.

March 03, 2011, 5:39 AM EST

By Karthikeyan Sundaram
March 3 (Bloomberg) — India will form a state-owned company to help raise funds for ports as it works on a ten-year plan to triple capacity at its busiest harbors.

“We need a specialized arm,” Rakesh Srivastava, joint secretary in the Ministry of Shipping, said in an interview in New Delhi today. “The ministry is not equipped to do the fundraising job,” he said, without elaborating on when the company would begin operations.

The new Maritime Finance Corp. will issue 50 billion rupees ($1.1 billion) of tax-free bonds in the fiscal year starting April 1 to help pay for projects in 12 ports, Srivastava said. The country, Asia’s third-biggest economy, plans to spend as much as 2.87 trillion rupees on ports in the 10 years ending 2020 to support growth.

The port bonds were among the 300 billion rupees of tax- free infrastructure bonds announced by Finance Minister Pranab Mukherjee in his annual budget speech to parliament on Feb. 28.

India plans to boost the annual capacity at major ports to 1.6 billion tons from 616 million tons by 2020, according to the government’s Maritime Agenda. Major ports are defined as those with multiple berths.

–Editors: Neil Denslow, Vipin V. Nair

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net