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Tuesday, October 16, 2012

Top Story

APM criticizes VIT to Virginia legislators, Carlyle Group pulls bid

APM, which submitted an unsolicited bid last May to take over the operations of the Virginia ports from Virginia International Terminals, tried to expose VIT's weaknesses at a presentation by an APM executive to the state Senate Finance Committee and industry stakeholders gathered in Portsmouth.

APM, VIT and RREEF America LLC, a unit of Deutsche Bank, are all still in contention for the job of running Virginia's ports. The Virginia Port Authority will take bids until Nov. 1, and state officials are considering extending the deadline to Dec. 3.

Carlyle Group, originally also competing to take over port operations, has withdrawn its bid. Carlyle's bid assumed it would be able to run APM Terminals' private container facility in Portsmouth. Currently VIT, the state's operating arm, runs that terminal under a 20-year lease, and contractually APM must approve any other operator stepping in for VIT.

"They basically have indicated to us that when they run the financials, they don't want to pursue this," Transportation Secretary Sean Connaughton confirmed.

VIT, currently running the state ports, is a private, tax-exempt company created in the early 1980s. VIT transfers tens of millions of dollars a year to the authority, after paying its expenses.

"The capital improvements being made at competing ports are serious challenges and cannot be masked over by reports that fail to tell the full story of today's operations at VIT and the Port of Virginia," said John Crowley, senior vice president for law and regulatory affairs at APM. "VIT is not returning any money to the commonwealth. Any claim to the contrary is false."

Crowley said VIT's $94 million annual operating revenue budget is already committed, including $35 million in operating costs, $38 million in rent to APM for Portsmouth terminal, and $50 million for debt service. "That leaves us an operating loss of $29 million for fiscal year 2012," he said.

Crowley also took issue with VIT's cash transfer projections.
VIT forecasts the transfer of $13 billion to the Port Authority over the next 48 years, after paying rent to APM. Crowley said its calculations didn't take into account the end of the authority's lease of APM's terminal 18 years from now, which would end $1.2 billion of VIT's projected revenues. VIT's figures assume the lease would be renewed, according to Robert Nestor, manager of strategic planning at VIT.

Crowley's analysis omitted the state's annual Commonwealth Port Fund payment, which puts VIT's ledger back in the black. The state payment is roughly $35 million a year.

A decision regarding terminal operations could be made in April or May of 2013, according to an update from Gov. Bob McDonnell's office.

For more of the Virginia-Pilot and Daily Press stories: hamptonroads.com and dailypress.com