Case Study: Ports Reforms & Concessions In Nigeria

Financing Transport for
Growth in Africa, Tunis,
2007
Ports Reform and
Concession in Nigeria
Arif Mohiuddin
Principal
December 3, 2007

Outline
♦ Key Reasons for Reform
♦ Involvement of CPCS
♦ Preparing for privatization
♦ Summary of transactions
♦ Progress in restructuring
♦ Achievements
♦ Direct benefits of reform
♦ Challenges faced
♦ What Remains to be Done

Key Reasons for Reform
♦ Long turnaround time for cargo and ships
♦ Insecurity of cargo
♦ Unproductive labour force in NPA
♦ Multiple government agencies in the ports
♦ Corrupt practices
♦ Excessive charges
To improve efficiency and productivity
in the Nigerian Ports Sector

Involvement of CPCS
♦ BPE, through an IDA credit, engaged CPCS
Transcom as Legal, Restructuring and
Concession Advisers in December 2003:
– To propose a legal and regulatory framework
– To formulate the restructuring process
– To prepare the concession plan
– To assist in the bidding process and negotiation with
the selected bidders
♦ In December 2004, BPE engaged CPCS
Transcom also
– To provide technical support to the Presidential Task
Force on the Ports Reform

Preparing for Privatization
April 04
All due diligence work and detailed plans,
including all bid documents were done
July 04
Legal and regulatory framework to convert NPA
into true landlord ports and to establish the
independent regulatory commission
September 04
Based on CPCS Legal and Regulatory Report, the
first draft of Ports and Regulatory Commission
Bills were ready

Summary of Transactions
♦ BPE issued bid documents for the
terminals in four rounds, in 2004 and 2005
♦ 13 terminals were concessioned through
competitive process
♦ 12 others are concessioned through direct
negotiation

Summary of Transactions
♦ Over 100 EOIs received from both
reputable international and local terminal
operators
♦ A total of 59 bids were received for 13
terminals, in a competitive bidding process
♦ All of these terminals have already been
handed over to private operators

Summary of Transactions (Con’t)
♦ 12 Terminals are being concessioned
through Direct negotiation
– 11 concessions have been handed over
– Negotiation for the remaining terminal is
complete

Progress in Restructuring
♦ The restructuring work was spearheaded
by the Presidential Task Force, with
technical Support from CPCS
♦ Negotiations with labour unions ended in a
successful agreement on social package in
2006
♦ Transport Commission Bill and Ports And
Harbour Authority bill are awaiting
approval from the National Assembly

Progress in Restructuring (Con’t)
♦ NPA is presently acting as both the
regulator and the landlord pending
enactment of the Bills
♦ CPCS also prepared business plans for the
proposed two port Authorities

Achievements
♦ 24 terminals have been assigned to 16
different local and international terminal
operators, notable among which are AP
Moller, Bollore, Bremenports, and
Eurogate
♦ Major investments have already started
taking place by private investors in various
terminals
♦ Significant improvement in efficiency and
productivity in the ports sector

Achievements (Con’t)
♦ Competition among various terminal operators
leading to improved service and reduction in
port costs
♦ Slowly attracting transshipment cargo for West
Africa
♦ AP Moller won the bid for Apapa container
terminal, bidding a record amount of more than
US$ 1 billion!
♦ In US Dollar value, the Nigerian Ports
privatisation is the biggest successful
privatization endevour in Nigeria’s history

Direct Benefit of reform
♦ Prior to reform – NPA was subsidized by the
government of Nigeria
♦ Port reform
– Private operators are to perform all terminal
operations (not cost to government)
– Improved efficiency and reduced cost through
competition
– Pvt. Operators to invest about US$ 1 billion in ports
development
– Pvt. Operators to pay about US$ 5 billion to
Government as fees

Challenges faced
♦ Reaching an agreement with Labour Unions on
Severance packages and secure funding for the
retrenchment and pensions
♦ Keeping Labour Unions from widespread strike
♦ Keeping NPA on board throughout the process
♦ Resolving the existing Lease issues and
converting some into directly negotiated
concessions
♦ Balancing the interests of both parties during
Negotiations with the preferred bidders

What remains to be done
♦ Concessioning of 1 remaining terminals
– Warri New Port A – Negotiation complete
♦ Enactment of the proposed bills

Glimpse on the Transactions
S/N Name of the Transaction
Terminal Operators/Preferred
Bidders
Local/Foreign Participation
Name of the Port Concession Rounds
Concession
Duration
(Years)
Bid Amount
(NPV @ 10%
Discount rate)
Value in US$
million
Status of Concession
1 Apapa Container Terminal A.P. Moller Apapa Terminal Ltd.
APM Terminals as Lead with local participation
Apapa Port Complex Round 1 25 1,061.14 Handed Over
2 Apapa Terminal 'A' Apapa Bulk Terminal Ltd.
Local lead with Atlantic Bulk Carriers Mgt. from Greece
Lagos Port Complex Directed Negotiation 25 18.10 Handed Over
3 Apapa Terminal 'B' Apapa Bulk Terminal Ltd. as Technical Partners
Lagos Port Complex Directed Negotiation 25 12.07 Handed Over
4 Apapa Terminal 'C' ENL Consortium Limited
Local lead with Dublin Port Company and ICIL from
Lagos Port Complex Round 1 10 13.58 Handed Over
5 Apapa Terminal 'D' ENL Consortium Limited Ireland and Civil & Coastal from South Africa
Lagos Port Complex Round 1 10 12.25 Handed Over
6 Apapa Terminal 'E' Greenview Dev. Nigeria Limited Local Dangote Group Lagos Port Complex Directed Negotiation 25 25.07 Handed Over
7 Port Harcourt 'A' Ports & Terminal Operators Nig Ltd Local Lead with P&O Nedlloyd Port Harcourt Port Round 2 15 90.81 Handed Over
8 Port Harcourt 'B' BUA International Limited Local Lead with Apec Antwerp Port consultants Port Harcourt Port Round 2 20 12.36 Handed Over
9 Tin Can Island Port 'A' Josepdam & Sons Ltd
Local Lead with Techserve and South African Sugar
Company from South Africa
Tin Can Islan Port Round 3 10 14.05 Handed Over
10 Tin Can Island Port 'B' Tin Can Island Container Terminal Ltd
Bollore Group as Lead with Zim Integrated Shipping
Services and Local participation
Tin Can Islan Port Round 3 15 83.31 Handed Over
11 Tin Island Port 'C' Sifax Nig Ltd local firms as lead with Bremenports Tin Can Islan Port Round 3 10 104.42 Handed Over
12 Tin Can Island Port RoRo Comet Consortium Local Lead with Eurogate Int. and MSC Tin Can Islan Port Round 3 15 86.63 Handed Over
13 Lilypond ICD A.P Moller APM Terminals as Lead with local participation Lagos Port Complex Round 3 10 9.65 Handed Over
14 Onne FLT A Brawals Nigeria Limited Local Group Onne Port Directed Negotiation 25 16.66 Handed Over
15 Onne FLT B Intels Nig Ltd Local Group with International partners Onne Port Directed Negotiation 25 29.06 Handed Over
16 Onne FOT A Intels Nig Ltd Local Group with International partners Onne Port Directed Negotiation 25 38.13 Handed Over
17 Calabar Old Port Addax Limited
International Company with local base
Calabar Old Port Directed Negotiation 25 2.01 Handed Over
18 Calabar New 'A' Intels Nig Ltd
Local Group with International partners
Calabar New Port Directed Negotiation 25 2.51 Handed Over
19 Calabar New 'B' Ecomarine Ltd.
WestAfrican Group
Calabar New Port Round 4 10 30.03 Handed Over
20 Warri Old 'A' Intels Nig Ltd
Local Group with International partners
Warri Old Port Directed Negotiation 25 2.55 Handed Over
21 Warri Old 'B' Associate Maritime Services
Local Group with International partners
Warri Old Port Round 4 10 1.90 Handed Over
22 Warri Old 'C' Julius Berger Nigeria Limited
Local Sub.of an Int. firm with Bremenports
Warri Old Port Directed Negotiation 25 5.50 Handed Over
23 Warri New 'A' Global Infrastructure Limited
An Indian Group based in UK
Warri New Port Directed Negotiation 25 2.00 Negotiating
24 Warri New 'B' Intels Nig Ltd
Local Group with International partners
Warri New Port Directed Negotiation 25 6.60 Handed Over
25 Koko Port Gulftainer Bel consortium
Local Group with International partners
Koko Port Round 4 10 2.90 Handed Over

Thank You
Email: amohiuddin@cpcstrans.com
http://www.cpcstrans.com