Port of Tauranga is planning to spend $150 million over the next three years to position the port for the new generation of mega container ships.

The money will be spent on the first stage of deepening the port's shipping channels, buying two new tugs and two additional cranes.

A crane has also been ordered for PrimePort Timaru which is 50 per cent owned by Port of Tauranga.

A buoyant outlook for the port was detailed by Quayside Holdings chairman Michael Smith to the Bay of Plenty Regional Council yesterday.

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It includes Tauranga planning to become a hub port for the whole of New Zealand in which cargo was trans-shipped to ports that were not deep enough to take the new generation of ships.

Quayside is a wholly-owned council company that holds 54.1 per cent of shares in the Port of Tauranga.

The 18 per cent surge in the share price since the Kotahi deal was announced last year meant that dividends paid to the regional council for the first six months of the financial year reached nearly $11 million, $3.6 million up on the same period in 2013.

Kotahi, an unprecedented 10-year alliance with Fonterra's logistics company Kotahi and the Maersk shipping line, is underwriting the $150 million capital spend. Tenders have been called for the dredging which will deepen shipping channels to 17.4m through the harbour entrance and 16m inside the harbour - increasing depths by 3.1m to 3.3m.

New Zealand's only other port with a dredging consent anywhere near Tauranga's depth is Otago.

Tauranga's two new tugs were due to arrive in the next few weeks, while the cranes have been approved for purchase.

Tauranga Mayor Stuart Crosby said it was a significant investment in the Port business, which is recognised as one of the top ports in Australasia.

"It's not only great news for Tauranga city but the whole Bay of Plenty region and New Zealand."

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Mr Crosby said the investment itself had taken lots of hard work by officials both in Tauranga and Timaru.

"But more importantly this is a positive, smart move for the future growth and development of the Port," he said.

Mr Crosby said the Port of Tauranga was a critical piece of infrastructure not just for this region but for New Zealand as whole.

Priority One chief executive Andrew Coker said the byline for Port of Tauranga was being the "Port of the Future" and this significant investment was the essence of that goal. Tauranga was already the country's largest port now and he "absolutely applauded" the Port Authority for the scale of this capital investment, which was clearly about future-proofing themselves, he said.

"For us at Priority One it's our role to attract businesses to want to come here.

"I think this investment will mean even more larger businesses will want to locate themselves in proximity to the Port of Tauranga, to have closer access to their markets."

The Kotahi deal saw Fonterra's subsidiary issued with two million new shares in the port, reducing Quayside's holding by 0.8 per cent.

The Port of Tauranga benefited from a partial sale of the Timaru container terminal to Kotahi.

The expected completion of the Eastern Arterial in August or September will add impetus to one of Quayside's biggest property investments, the 150ha of developable land at the Rangiuru Business Park near Te Puke.

Mr Smith said they were starting to see interest from industry and developers.

A planning change was underway to allow it to be developed at 30 to 40ha at a time, making it more affordable for developers. Other work included the drilling of a water bore.

Quayside's property interests also included kiwifruit orchards and and a first half loss of $800,000 to December 31 would swing to a strong second performance in the second half of the year from orchard returns and likely revaluations.

Port of Tauranga half-year revenues of $136.3 million were slightly down on 2013 from a 17 per cent drop in log volumes and lower earnings from Quality Marshalling.

Port of Tauranga performance to December 31
*Operating income $136m
*One-off sales $4.7m
*Profits from associated companies $4.9m
*Net profit after tax $42.6m
*Interim dividend per share 22c

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