Southern ports merger details awaited

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Details of the proposed merger between Port Otago and Lyttelton Port of Christchurch are likely to be unveiled by March next year - almost 18 months since the rival South Island ports first raised the possibility.

The proposal has dragged on more than a year longer than expected because of huge changes in the shipping industry during that period and, all the while, the merger has been shrouded in secrecy, because of LPC's sharemarket listing and requirements for disclosure.

A report commissioned from consultant Antipodes by the port companies is to be delivered to Port Otago and LPC this week.

It was likely to be formally considered by the respective boards in late January, Port Otago chairman John Gilks confirmed yesterday.

"There should be some activity by February or March, but not necessarily [an overall] decision," Gilks said.

Port Otago took a contentious $37 million blocking stake in LPC more than three and a half years ago.

LPC is 75 per cent-owned by the Christchurch City Council. Port Otago has 15 per cent and the balance is held by shareholders with stakes of 1 per cent or less. Port Otago is 100 per cent owned by the Otago Regional Council.

Calls in the past two years for port sector rationalisation have seen little activity, but in that time shipping lines have slashed port calls, amid massive financial losses, and major users such as Fonterra have changed transport routes, prompting huge cargo losses for the ports of Timaru and Taranaki, with a negative flow-on effect for Port Otago.

While the southern ports remain silent on the merger issue, a country-wide report by Ports of Auckland's 100 per cent shareholder Auckland Regional Holdings (ARH) sheds some light on the southern proposal, which it appears to back.

The 29-page report, "Long term optimism of the New Zealand port sector", dated October 2009, gives an overview of the sector, including changes, risks and operating environments, plus comment on the Port Otago and LPC merger proposal.

ARH chief executive Peter Casey called for a national action plan and co-ordination between all stakeholders because of overcapacity of ports, declining profitability and weak freight rates.

New Zealand's port structure was "relatively fragmented" as they were "piggy in the middle" between large consolidated exporters and international shipping lines.

"Improved co-ordination within the sector is needed to minimise bottlenecks and unnecessary duplication of investment, as well as increased bargaining power with international shipping lines."

The country needed at least one major South Island port to consolidate export volumes, either for coastal or international delivery, with Port Chalmers and Lyttelton the major candidates because of existing investment and proximity to export production bases, Casey said.

"An alliance between these two ports could enable optimisation of South Island container capacity and cargo flows."

- OTAGO DAILY TIMES

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