I have been looking for an online copy of a article that was in one of the sunday papers (see below), which curiously doesn’t appear to have made it online. However the important points as far as I am concerned are:
The Group directly invests in hubs that serve large hinterlands and that either already support international trade or which have the potential to become key transport centres. Furthermore, HPH develops and manages all aspects of port operation and trade-related logistics, transferring proven operational practices to ensure an optimum environment for the development of commerce.
And from what is reported of the report, that is what it compares against for the ‘headline’ 13% ROE. Big ports with massive hinterlands. Not exactly NZ with 4.4 million people with a lot of sheep and cows. Hutchinson do smaller investments as well, but that wasn’t what the report looked at.
Mr Pearson has extensive experience in port operations and investment around the world. He recently returned to New Zealand. His work overseas most recently included Hutchison Port Holdings Group managing director for Hong Kong International Terminals Ltd and managing director for the Europe division of President ECT Rotterdam.
But the timing of Richard Pearson’s chairmanship probably explains a lot about where this current obsession and the use of this report came from. Doing strange comparisons with ports that bear about as much relationship to our ports as my iPad has to other aluminium castings. The comparison is vague and not associated with function.
Waitakerenews has a post about the article that Fairfax don’t have online – “Ports of Auckland is performing better than Auckland Council thinks”
The most important piece of this weekend’s comment on the Ports dispute was a Sunday Star Times article by Greg Ninness in the business section. For some reason it is not online as I type this. It was also tucked away in the business section, somewhere where most good lefties would never dream of going to.
But the report is really important and raises questions about the advice that Auckland Councillors have been given.
It casts major doubts on the veracity of the analysis that suggested that Ports of Auckland could achieve a 12% return and that its performance was poor.
The SST asked for a copy of the report but states that there was an attempt to keep it secret. Eventually it was advised that the report was a broker’s research report on Hutchison Port Holdings Trust. I cannot find the report on the web and the contents suggest that it would not normally be available but the reported contents are fascinating.
The report compared nine different ports from around the world. These included Ports of Tauranga but also other ports that had little similarity to Auckland. These included Piraeus Port Authority (mainly passenger ferries, coastal shipping and cruise ships), Mundra Port in India (property development company with a port operation on the side), Oman’s Port Services Corp and International Container services that runs ports in countries such as the Philippines, Brasil, the Cayman Islands and Madagascar. See any similarity with Auckland’s Port?
But this is the really interesting comment. Swift’s statement apparently failed to state that the report also gave performance benchmarks for groups of ports which have a lower average return on equity than 13.6%.
Chinese ports despite their lower wages return on average 10.6% and Hong Kong listed port operators returned an average of 7.7%.
The results across the ditch are apparently even worse. Melbourne’s return on equity was 2.6%, Wellington’s was 2.9% and Sydney’s was 6.9%.
As Ninness states Auckland’s goal of a 12% return looks “particularly ambitious”.
Given these comments you have to question the advice that Auckland Council has been given suggesting that the return is poor. Because the return appears to me to be perfectly reasonable.
The sense that the Auckland City Council and me as a ratepayer are getting scammed is fairly screaming in my mind. Quite simply the whole debacle of the management of the ports focusing on illusory labour efficiencies while ignoring the actual capital and market issues has been absurd. And we have all seen this kind of hysterical use of spurious comparisons to try to push politics to offload public assets cheaply to the private sector before.