Port officials are sounding out potential investors to help fund a $120 million project to deepen a berth at the Seagirt Marine Terminal - a project they say is needed to accommodate bigger ships passing through a to-be-widened Panama Canal.
If the initiative moves forward, it would be the first time the state has turned to private investors to finance improvements at the public terminals of the Helen Delich Bentley Port of Baltimore. The Maryland Port Administration said it needs to add a 50-foot-deep berth at Seagirt to stay competitive as the shipping industry moves to larger vessels. The three berths at Seagirt now are dredged to depths of 45 feet - too shallow for the bigger ships.
"There's a lot of interest by all the big financial companies," MPA Executive Director James J. White said. "When times are tight like they are right now, the port of Baltimore falls down the list in pleading to the state for additional funding."
Virginia has a 50-foot berth and New York is expected to have one next year, White said. Baltimore has a 50-foot channel but lacks a berth that deep. White expects the state to decide this spring whether to ask investors to finance the work. Such a move would require approval from the state's Board of Public Works.
Otherwise, the port would have to fight to tap into the state's transportation trust fund. But with the state facing a $40 billion backlog of infrastructure improvements, port officials are not optimistic about that option. While $35 million in the state's dredging program is allocated to creating the 50-foot depth, an additional $75 million to $85 million would be required to build on the grassy landside of the berth, which requires a new sea wall.
That cost would include at least two massive "post-Panamax" cranes to move containers on and off taller and wider ships, according to port administration spokesman Richard Scher. He said the project would take two to three years to build.
One possibility: The MPA could tie the investment in the 50-foot berth to a 20- or 30-year lease to run Seagirt, Baltimore's largest container terminal.
"A company with a long-term agreement to operate Seagirt would have a lot of incentive to market the need for a berth," Scher said.
Ports America, an arm of AIG Global Investment Group that bought P&O; Ports from the Dubai government in March, currently operates Seagirt under a nearly $50 million one-year contract extension approved shortly after the sale. The formerly British-owned P&O; Ports had operated Seagirt under a six-year contract.
The MPA collects all fees at Seagirt and pays a percentage to Ports America as its contract operator. A long-term lease would allow the operator to directly collect container and dockage fees, as Ports America does at Dundalk Marine Terminal.
With cargo from Asia on the upswing and bigger ships expected to pass through the Panama Canal about 2015, longer leases can offer investors more lucrative, direct control.
"It would certainly allow us better flexibility in recovering large investments," said John M. Stokes, a partner with the $3.5 billion AIG Highstar Capital fund that owns Ports America.
The Panama Canal now handles ships up to 106 feet wide and 965 feet long that can carry up to 4,500 containers. Widening the canal with new locks on its Pacific and Atlantic ends will allow for 160-foot-wide and 1,200-foot-long vessels carrying up to 12,600 containers, according to the Panama Canal Authority.
Mediterranean Shipping Co., the largest shipping line operating in Baltimore, could consider paying for improvements at Seagirt, said Capt. Lorenzo Di Casagrande, a company vice president who has overseen its Baltimore operations for more than 20 years.
The shipping line now handles 160,000 20-foot containers a year at Seagirt and hopes to increase that to at least 200,000 annually, Di Casagrande said.
The Geneva-based company requires a 50-foot berth to take full advantage of the capacity of its newer ships. For example, when the company's 997-foot MSC Michaela visited the port last month, the vessel could only carry less than half the 6,700-plus containers it can hold.
"We may be interested, but we don't know yet," Di Casagrande said.
But the independent shipping line, which is run by a tight-knit group of mariners, lacks the financial resources of Ports America's parent, the U.S. insurance giant.
"AIG has more money than God," Di Casagrande said recently.
AIG used its financial muscle to get into the port business with the purchase of Dubai Ports World, which was forced to sell its U.S. holdings after an uproar over security concerns. AIG Highstar Managing Partner Christopher Lee told The Sun that the fund paid $1.3 billion - the first time the price has been disclosed.
Through that deal, Ports America in February acquired a 30-year lease to own and operate the Port Newark Container Terminal, Lee and Stokes said. The company has $250 million committed to improving the site. Last month, Ports America also paid $90 million to Bayonne, N.J., for an old waterfront military terminal where the company plans to open an automobile-processing facility next year.
Stokes said the company could comfortably make investments on a similar scale in Baltimore.
At the same time, more shipping lines are angling to operate terminals themselves, to gain competitive advantage over rivals, said Aaron Ellis, spokesman for the American Association of Port Authorities. Docking spaces have become scarce at increasingly congested ports.
Maersk, the world's largest container shipping line, recently completed its own $450 million cargo terminal in Portsmouth, Va., through APM Terminals Inc., an arm of the Danish company.
South Korea-based Hanjin Shipping Co. has a preliminary agreement to build a container terminal at the port of Jacksonville, Fla., where Japanese-owned Mitsui O.S.K. Lines Ltd. is constructing a terminal scheduled to open in December 2008.
"They own the ships, and if they can control the terminal, they can control how the berths are open for their vessels, so they're not locked out," Ellis said.