Va Port Authority will not privatize operations
NORFOLK, Va. (AP) — The Virginia Port Authority on Tuesday rejected two offers worth billions of dollars to privatize the operations of the state's coastal terminals, choosing to keep and restructure the port's current operator instead.
The authority's board of commissioners voted unanimously to discontinue negotiations with two companies that were seeking to lease and operate most of the state's terminals for the next several decades.
In a separate unanimous vote, the authority voted to move forward with changing the corporate structure of Virginia International Terminals to put it under more direct control by the authority. The intention is to eliminate duplications, increase efficiencies and reduce costs.
Additional details of the authority and VIT's proposed restructuring are expected to be released at the board's May meeting.
The proposal to privatize operations ran into widespread opposition by many with port-related jobs who worried that a company would look out for its own interests above that of the people of Virginia and that a private operator would unfairly discriminate against competitors.
The Norfolk board room where the vote was held was so packed with those in shipping-related industries that tickets had to be issued to gain admittance hours in advance, and board chairman William Fralin urged nobody to applaud and cheer after the board rendered its decision.
In explaining the board's decision, Fralin said the private offers were competitive, but not compelling, and didn't fully recognize the port's value.
The board's decision makes it the second time in five years the state has opted not to privatize its port operations, rejecting three offers in 2009.
The renewed possibility of privatizing operations started last spring when the authority received an unsolicited bid from APM Terminals. A group headed by JP Morgan Chase & Co. was also a contender in the process. The companies said they could provide better growth opportunities for the port than VIT, which was created by the state to operate its ports and has done so for 30 years.
"We felt, ultimately, that the upside of this port is such that we believe we can do that, and better, operating ourselves," Fralin told reporters following the vote. "We feel like we are positioned to really take off here and are very excited about it."
The Port of Virginia says 2012 was the second best year in its history in terms of cargo volume. The port said it handled more than 2.1 million cargo units in 2012, an increase of nearly 10 percent from the previous year.
Fralin said he was confident the port's performance would continue to improve based on its past track record, consultant reports and the region's natural advantages. Chief among the port's natural advantages is that it has a 50-foot channel that is deep enough to handle the world's largest cargo ships. That is expected to be a significant competitive advantage over other East Coast ports once expansion of the Panama Canal is completed.
The $5.25 billion project is expected to be completed in 2015 and will nearly triple the size of ships that can travel the canal.
Brock Vergakis can be reached at www.twitter.com/BrockVergakis