Type Nature
Sale Terminal is transferred on a freehold basis but with the requirement that it will be used only to provide terminal services.
Concession Agreement Long-term lease of terminal land and facilities and the requirement that the concessionaire undertakes specified capital investments to build, expand, or maintain the cargo-handling facilities, equipment, and infrastructure. Greenfield (new facility to be built) or brownfield (existing facility) concessions.
Capital lease Similar to a concession except that the private sector is not explicitly required to invest in the facilities and equipment other than for normal maintenance and replacement over the life of the agreement.
Management contract Private sector assumes responsibility for the allocation of terminal labor and equipment and provides services to the terminal users in the name of the public owner. The public sector retains control over all the assets.
Service contract
The private sector performs specific terminal activities. The arrangement differs from a management contract in that the private sector provides the management, labor, and equipment required to accomplish these activities.
Equipment lease Various forms involving leaseback arrangements or supplier credits. Used to amortize the costs to the terminal for new equipment and to ensure a reliable supply of spare parts and, often, a guaranteed level of service/reliability from this equipment.
Forms of Port Terminal Privatization
There are several forms for port terminal privatization (not to be confused with port privatization), ranging form the outright sale of a terminal facility to a service contract where a private operator performs specific operational tasks while the port authority retains ownership of the facility and equipment. The emergence, the level of concentration and the growing importance of port holdings is mainly outcome of concession agreements, where a terminal lease a facility for a long period, commonly 20 to 40 years.
Concessions are not without controversy as it can be perceived that their hold on strategic port facilities implies a loss of sovereignty and may go against long term national interests. For instance, when in 1997 HPH concessioned container facilities on both sides of the Panama Canal (Balboa and Cristobal) the reaction in some circles was that China was now "controlling" the canal even if the canal itself is administered by a completely different entity, The Panama Canal Commission. This even prompted statements by the CEO of Hutchinson Whampoa, Li Ka-Shing, to reassure the United States that this purchase was strictly a commercial venture fitting the strategies of the holding and that it had nothing to do with the operations of the canal itself.
Another salient example took place in early 2006 when Dubai Ports World acquired P&O, and in the process the management of terminals in six major American ports (including New York, Baltimore, Miami, New Orleans and Philadelphia). In a post September 11 setting where security issues have become highly controversial, the deal stirred a public debate, particularly since DPW is controlled by Middle Eastern interests. The settlement involves DPW relegating the American terminal assets of P&O to an American entity (The American Insurance Group - AIG - holding purchased the assets that included 5 port terminals and 16 freight handling facilities) and were incorporated in the portfolio of Ports America.