Home / Industry / Adani Ports places highest bid for container terminal at Ennore port

Bangalore: Adani Ports and Special Economic Zone Ltd (APSEZ), India’s biggest private port operator, is set to win the rights to run its first container loading facility on the country’s eastern coast. It has placed the highest revenue share price bid of 37% for building a 1,270 crore terminal at Union government-owned Ennore Port in Tamil Nadu.

Cargo handling contracts at Union government-controlled ports are decided on the basis of revenue share—the entity willing to share the most from its annual revenue with the government-owned port wins the contract, typically stretching 30 years.

The price bid of APSEZ—one of two received by Ennore Port Ltd on Monday when the deadline ended—shocked and surprised many in the port industry mainly because container loading capacity in the region is currently much more than the demand.

This forced nine of the 11 pre-qualified bidding groups, including PSA International Pte Ltd, APM Terminals Management BV, Sterlite Ports Ltd, Gammon Infrastructure Projects Ltd and L&T Infrastructure Development Projects Ltd, to stay away without putting price bids. Hindustan Ports Pvt. Ltd, the Indian holding company of Dubai’s DP World Pvt. Ltd and the only other bidder, quoted a revenue share of 27.09%.

A spokesman for Ennore Port confirmed the development, saying, “The port has convened a meeting of its board on 14 February to approve the price bid of APSEZ."

APSEZ declined to comment.

The container terminal will have a berth length of 730 metres with a capacity to load 1.4 million standard containers a year.

Ennore Port is being renamed as Kamarajar Port Ltd after the late Kumarasami Kamraj, a Congress party stalwart from Tamil Nadu and the state’s chief minister between 1954 and 1963.

Ennore Port, India’s only port among 13 owned by the Union government that is run as a company, has been planning to build a container terminal since 2007. It was originally slated to open by the end of December 2012 if an earlier contract went through. But, a consortium led by Grup Maritim TCB S.L., Spain’s biggest port terminal operator, that had won the rights in August 2010 to build the facility with an investment of 1,407 crore, walked out of the deal in September 2012 after it failed to arrange funds despite being given three deadline extensions.

The Grup Maritim-led consortium had quoted a revenue share price bid of 39.999% which APSEZ almost equalled in the re-tendering.

According to the tender terms, APSEZ will have the flexibility to build the 730m berth in stages, starting with a berth-length of 400m in 27 months that can handle 800,000 standard containers a year costing 750 crore and scaling it up to 730m to load 1.4 million standard containers over a period of 45 months, the spokesman for Ennore Port said.

“The price bid of APSEZ is a big win for Ennore Port given the current market situation where the container volumes in southern India have declined by 4% over the past two years and (there are) difficulties in getting bank funding," said a Mumbai-based port consultant. The combined container handling capacity on India’s eastern coast is currently more than 6 million standard containers a year while the actual volumes are about 2.3 million standard containers.

In February 2013, Larsen and Toubro Ltd (L&T) opened a 1.2 million standard container capacity terminal at Kattupalli Port adjacent to Ennore Port, which is lying virtually idle for lack of cargo.

Chennai Port failed to receive any bids for a container terminal last month.

The price bid of APSEZ is also a reflection of its comfort to set market rates for the services at the facility.

“Our tariffs are not regulated by any regulatory authority and this gives us operational flexibility. Being a corporate port, we are not covered within the regulatory purview of the Tariff Authority for Major Ports (TAMP). Our ability to determine our tariff helps us to take into account various market conditions and demand for port facilities, investments made, cost incurred, number of ships calling at the Port, tariff at competing ports, which enables us to compete effectively with other ports," the spokesman for Ennore Port said.

Hence, APSEZ will be free to set market-linked rates at the terminal. Rates at other Union government ports are regulated by TAMP.

APSEZ runs container terminals at Mundra—India’s biggest private port—and Hazira, both in Gujarat. The firm is India’s second biggest container port operator after Union government-owned Jawaharlal Nehru Port near Mumbai.

Ennore Port has filed a prospectus with the capital markets regulator to sell tax-free bonds worth 500 crore by March to help fund a channel deepening project, augment rail and road connectivity to the port, and build a third coal berth for the captive use of the Tamil Nadu Generation and Distribution Corporation Ltd.

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout