PD Ports may have lost out on a Spanish turbine factory, but it still has big plans for the future as Peter Jackson discovers in conversation with chief operating officer David Robinson.
DAVID Robinson was born and bred in Stoke – about as far from the sea as you can get in this country.
He remarks on the irony of this, as he is now chief operating officer of PD Ports in Teesport, the second largest container port in the North of England after Liverpool.
It handles about 420,000 TEU (20ft equivalent units) a year. Teesport has more than 750m of deep water quay and is home to two container terminals and PD Ports also includes Hartlepool Dock with more than 800m of quay.
He retains some of the Potteries accent and the phlegmatic nature which characterises that area. Which is just as well, given that we meet shortly after the news was announced that Spanish company Gamesa had chosen Leith in Edinburgh as the site for £125m wind turbine factory, rather than Hartlepool.
“We narrowly missed out on Gamesa. It’s unfortunate but these things happen, you can’t win ‘em all. It was a bold attempt to get a major turbine manufacturer into Hartlepool. We haven’t given up in that by any stretch of the imagination and there are a number of others to go after.”
Was the decision down to unfair advantages enjoyed by the devolved Scottish government?
“The short answer to that is that we will never know. Obviously there are several issues there. We understand that the land availability in Leith changed significantly over the last month or so. They were struggling for sites and they had a site become available, a big 80-acre site. We had significant support from the UK government to be fair, whether or not the Scottish government was even more supportive, I don’t know.”
He points out that the major shareholder in Gamesa is Iberdola which also owns Scottish Power.
There is, however, plenty of good news to set against the Gamesa disappointment, not least of which is the return of steel-making to Teesside. Thai company SSI, which bought the mothballed Teesside Cast Products plant from Tata Steel a year ago, is shortly due to recommence production.
“The return of steel-making to Teesside is a fantastic story and all credit to SSI who are spending circa US$1.5bn in buying, upgrading and restarting the plant. The restart is imminent and we expect steel to start to flow again in this next quarter.
“We have recruited another 40 plus people to support their operation and also, through subcontracting arrangements, will support another 40 to 50 new jobs. The economic benefit is significant for sure. You have something like US$1.5bn of exports a year coming out of the North East which will significantly affect our trade numbers.
“We will see something like another six million to seven million tonnes of inbound cargo on the river and we will hopefully see around three million tonnes of exports and this investment is expected to last at least 15 years, so it’s a major positive step change for us. If we go beyond 3 million tonnes of slab the likelihood is we will need to invest more money and we will need to employ more people.”
But, even before steel begins to move through the port again, things seem to be looking up with an encouraging 2011, even if described in Robinson’s characteristically deadpan way.
“It was a reasonable year, nothing spectacular. Across the business streams we saw a very slight decline in volumes on the river. Our container business continued to progress but not as quickly as we would have liked but it went forward by one or two per cent. We saw some difficulties in the logistics side, mainly through contract renewals but they have all been re-secured. Overall we did broadly in line with expectations.
“We spent a lot of time last year in building a pipeline of projects to deliver for the medium and long-term and hopefully this year we will see some of these come to fruition.”
He adds: “Over the past four years we have seen an average of 20% growth a year over that [the container] business and in a period of what is effectively two recessions that is a pretty impressive result in my opinion. Our expectations are that we will continue to grow, probably not as quickly as that but at a similar, decent, two-digit rate over the course of the next three to five years.”
Two years ago PD Ports had reached its capacity driven by growth in preceding years by its major customers. The port has undertaken a £29m expansion, which has involved increasing the capacity of its two container terminals from 235,000 TEU to about 450,000 TEU, marking a great vote of confidence by PD Ports owners, Canadian-based Brookfield. The first phase of the project, worth some £17.6m, which is the civil works and craneage, has now been completed.
“As a project it went very well, it was on time, on budget – which is always good to say – and we now have a container terminal facility which is equipped with some of the most modern equipment you can buy for that sector.”
There is also an IT upgrade planned for summer, which will complete that first phase.
Brookfield, which took over PD Ports in November 2009, is a global asset management business which focuses on property and infrastructure and has about US$150bn of assets under management, much of which is in the Americas but with an increasing presence in Europe.
“It’s not a fund manager, but is an operator of infrastructure platforms so it’s very much an operationally oriented business. They have been an excellent shareholder. They supported the investment strategy on the container terminal that the management team put to them and we have presented to them a series of potential projects over the course of the next three to five years which may require significant investment in the business.
“The growth going forward will be driven by the ability to have the capacity to expand our terminals, to upgrade the capability of the port over the next three to five years and attract volume and business to the river.”
He is in no doubt that much of the port’s growth has been down to its development of the portcentric logistics concept. This involves the location of the storage and distribution of imported goods close to the point of arrival at the port – ideally within a 10-mile radius. This has been embraced at Teesport by Asda, Tesco, Asda George and Taylors of Harrogate. It means the major national companies such as the supermarket chains no longer have to transport containers to national distribution centres for subsequent onward delivery to regional centres and have to return the empty container to the port.
“The reason for our growth is the significant investment that has been made in portcentric logistics. As well as creating a very good network of shipping lines that are now calling at Teesport. The two go hand-in-hand, it’s a similar analogy to an airport where if you get critical mass of airlines operating in an airport you will get the passengers, so, if you get a critical mass of shipping lines coming in, you’ll then get the shippers using the port.”
The model has been around globally for years but, claims Robinson, in the UK no other port has made the same investment nor enjoys the same relationships with major retailers as does PD Ports.
“That model is definitely quite unique to Teesport. The rest are catching up, I may add, so that’s why we need to keep moving forward and repositioning ourselves.”
He cites the relationship with Asda as being particularly important and proudly points to the port having won that retailer’s carrier of the year award last year, the first port ever to do so.
“Our portcentric activity continues to develop and we are starting to win other customers. We see the Tees Valley and the 10-mile radius around Teesport as presenting a tremendous opportunity to develop a logistics platform, not just for local industry, but for the whole north economy.”
For example, Clipper Logistics is building its national import centre at Wynyard off the A19 to consolidate all the work the port currently does for George Asda into that one facility, giving a total operational space of about 500,000sq ft, with another 400,000sq ft for third party business.
“We are working on positioning PD Logistics as the main portcentric player in the UK, that’s our ambition and we believe we have the operating platform to do that, both here on Teesside and also in Felixstowe where we operate 500,000sq ft. We offer a North/South package to importers and exporters and there’s no other company in the UK that can do that.”
He adds: “The strategy of land use versus port flow, in other words bringing customers in that want to use the port and develop facilities around the port on its land, is a very simple strategy, but it’s also a very effective one and that’s proved to be the case over the last two or three years.”
More investment is planned for the future. More than £100m of potential investment projects, which, Robinson estimates would generate more than £1bn of investment by third parties, have been presented to Brookfield. These projects are predominantly in the energy market, in the offshore wind and biomass sectors as well as in steel on the back of SSI’s investment and expansion of the container and portcentric operations in the shape of warehousing and rail terminals.
“The growth going forward will be driven by the ability to expand our terminals and by having the ability to upgrade our capability over the next three to five years. In the portcentric model we have now got probably 3.5 million sq ft of warehousing connected to what we do at Teesport and I can imagine in the next three to five years that will be nearer six million quite frankly, with the way in which our supply chain business is going, the portfolio is getting bigger and bigger. It’s driven by demand, not by some passion to build terminals for the sake of building them.”
There is one scheme which lies further into the future, but which is clearly near to his heart – the Northern Gateway Container Terminal project which would involve the creation of a major deep sea container terminal on the south side of the Tees. It is a £300m project which would have a capacity of 1.5 million TEU and – it is claimed – would deliver 5,500 jobs to Teesside if completed.
But £300m is not easily come by.
“The bottom line with this project is that we still have the planning approvals and we still have until about 2018 to enact the project. If we can continue the growth we have had over the last four years in that sector – and we have come from nowhere to a prominent position in the market – then, in about three to four years time, this will be back on the agenda. Whether it is in the form, size and scale that we originally envisaged remains to be seen.”
Something which could alter plans is the escalation of ship size with talk now of 22,000 TEU vessels up from larger sizes now of 18,000 TEU. The River Tees could never handle ships of those sizes but, as Robinson points out, there is huge scope to handle ships between 3,000 TEU and 18,000 TEU, particularly for markets in the Mediterranean, the Middle East, South America, Africa and some Far East services.
“Our customers want us to do this, there is no question of that, we just need to continue to develop our customer base.”
The original proposal was not dependent on government support, but it would be welcome all the same.
“In Liverpool they have been given government support of £35m for dredging and we would no doubt look to adopt a similar strategy, or something even more progressive. There is definitely scope for government support there, but we need to make sure the market place can support this. We are certainly not going to build a white elephant.” PD Ports is part of the infrastructure of the region and the UK and it is a key component in any economic strategy and, as such its relations with government and government machinery are critical.
So how did it view the formation of the LEP, on whose advisory board he sits?
“We as a business wanted more direct access to government and I think that has been delivered within the LEP structure. The Tees Valley LEP has done a very good job in progressing initiatives such as regional growth fund and enterprise zones and grasping the opportunities presented to them. But our business is not just Teesside-focused it is northern-focused and it is as important for our business to have connections into the Greater North East and also the Greater North.
“Our business is simple, we operate a river and a host of industries around it, so it’s extraordinarily local, we can’t go anywhere, we can’t move our river to Poland. But, 70% of all the investments on Teesside are by international companies and Teesside has to become internationally minded and I encourage our LEP to be more externally focused.”