Three private groups have submitted proposals to the Virginia Port Authority (VPA) to operate major state-owned marine terminals in Norfolk, Portsmouth, and Newport News, as well as the Inland Port in Front Royal and the proposed Craney Island Marine Terminal in Portsmouth’s Elizabeth River.
CenterPoint Properties Trust, Oak Brook, Ill., submitted an unsolicited proposal this past March under Virginia’s 14-year-old Public-Private Transportation Act (PTTA), which authorizes public-private partnerships to construct, improve, maintain, and operate transportation facilities across the Commonwealth. The Washington, DC-based Carlyle Group, and Carrix Inc./ Goldman Sachs Group Inc. of Seattle and New York City— met the July 27 deadline for interested groups to submit competing proposals.
The three groups offer differing approaches to operating the VPA's existing and proposed terminal facilities.
CenterPoint proposes a 60-year lease of all port properties, with an up-front payment of $500 million. Annual payments to the VPA would start at $7 million and increase by 2.6 percent each year.
Carlyle’s offer contains a similar initial payment, but calls for a profit-sharing arrangement, with VPA’s share indexed with Carlyle’s cumulative equity internal rate of return.
Carrix/Goldman proposes a 30-year operations agreement/consulting contract with VPA, a $250 million upfront payment, and an operating cashflow sharing program. VPA would receive 100 percent of the first $25 million, 50 percent of additional cash flow up to $40 million, and 25 percent of proceeds in excess of that threshold.
Privatization of the ports would also affect VPA’s planned 580-acre expansion of Craney Island, an estimated $2.2 billion multiphase terminal project that will create an ultimate capacity of at least 2.5 million twenty-foot equivalent units (TEUs). Virginia’s congressional delegation has secured $28.5 million for the project in President Obama’s proposed 2010 budget, with construction on the first 220-acre phase scheduled to begin in 2010.
All three proposals require continued state and federal government funding of site preparation for the expansion, and working with VPA to develop the site further as demand warrants. CenterPoint estimates it would invest $1.3 billion in new vertical construction on Craney Island.
All three groups are largely US-based, though Abu Dhabi-based Mubadala Development Co. has an approximately 7.5-percent stake in Carlyle. That makes the prospect of privatized ports potentially more palatable than Dubai Ports World’s aborted 2006 bid to assume management of six major East Coast ports, none of which were in Virginia. However, the Hampton Roads Daily Press reports that VPA’s interest in privatization has stirred concerns among some local officials about the apparent rapid pace of the PPTA process, and potential compensation to local governments.
Pierce Homer, the state’s Secretary of Transportation, will now appoint an independent review panel to evaluate the three proposals and determine which ones, if any, should move forward. No schedule for the review or subsequent steps in the process has been set, although VPA says the panel hopes to begin its work as soon as possible.