Steelworks peril may cut port value

Jun 23 2009 by Karen Dent, The Journal

THE problems at troubled steelworks Teesside Cast Products (TCP) may slash the asking price for the company which runs Teesport.

PD Ports, which says about 120 of its 600 workers will lose their jobs if Redcar-based TCP closes, belongs to Australian global investment and advisory firm Babcock & Brown Infrastructure (BBI).

BBI bought PD Ports for about £600m four years ago and is asking £450m for the business. However, it is understood the price may be cut to a reported £300m because of the repercussions expected if TCP closes and is no longer sending steel through the port.

About eight million tonnes of steel is imported via Teesport to serve the plant and two million tonnes is exported annually from it.

Credit rating agency Standard & Poor’s says the trade is responsible for more than 20% of PD Ports’ annual revenues. BBI said last month it was “currently assessing the impact of the Corus news on the ongoing sales process of PD Ports and any related refinancing”.

It said it would update the market in due course “should the impact be considered material”.

That announcement coincided with the deadline for the first round of bids for the business, which runs the port at Hartlepool as well as the huge and growing one at Middlesbrough.

Standard & Poor’s has now placed THPA Finance Ltd – the company responsible for the securitisation of the assets held and earnings generated by the PD Ports group – on CreditWatch negative. It said: “The CreditWatch negative placements reflect that the loss of a major customer, such as Corus, is likely to have adverse long-term consequences for the standard and business risk profile of THPA.

“Due to the present macroeconomic environment and current demand prospects for steel, and despite [Corus owner] Tata Steel’s efforts to enforce the contract and the possibility of finding alternative off-takers for the TCP’s slab steel, in our view it is unlikely that the TCP plant will continue to operate at Teesside.”

However, BBI is understood to be pressing ahead with the sale of the port. BBI said it was continuing with the process and would update the market once “material decisions” had been made.

TCP, which employs almost 2,000 people, is facing closure within months after a consortium of four companies pulled out of an agreement to buy most of its output for the next five years.

The plant is now working on internal Corus group orders which will keep staff in work until the end of August.

… loss of a major customer, such as Corus, is likely to have adverse long-term consequences