Kingston Wharves to double capacity
Cargo handler will be able to take 1 million TEUs, larger post-Panamax vessels after expansion
THE planned US$70 million expansion at Kingston Wharves Limited (KWL) will double its throughput to one million 20-foot container units (TEUs), while preparing the cargo handler for Caribbean or Chinese competition.
Management outlined three phases of the project aimed to take the wharf into modernity.
The first phase was announced last month at US$20 million with the remainder to begin within 12 months.
"We are focusing on making the facility very efficient and modern to face any competition," said KWL chairman and CEO Grantley Stephenson in response to Observer queries immediately following the annual general meeting on regional and Chinese competition.
Phase one entails building a modern 24-hour logistics complex with modular warehouse space, the acquisition of gantry cranes, the closure of Third Street, the relocation of berth 7 warehouse to a newly refurbished facility, the relocation of transshipment and domestic car parks, and the demolition of on-dock warehouse and operational buildings.
The second phase is aimed at handling larger post-Panamax vessels including extending the berth by 50 feet, dredging along the berth to over 15 metres, along with the installation of new cranes.
Phase three includes expanding the port and motor vehicle transshipment operations to drive TEU throughput.
KWLs current capacity stands at some 500,000 TEUs, management told the Observer on Wednesday. It actually handled some 204,200 transshipment TEUs and 90,870 domestic TEUs in its latest financial year, according to its 2013 annual report.
"The first part of the expansion will cost US$20 million but ultimately it will cost US$70 million," Stephenson told the Observer.
Previous reports placed the total development at US$50 million.
Stephenson addressed roughly 50 shareholders at the AGM held at the Jamaica Conference Centre in Kingston on Wednesday.
"Regional competition is also preparing for the opportunities expected to arise from an expanded Panama Canal," said Stephenson in his presentation to shareholders. "Jamaica has a geographic advantage but will not grow on the basis of geography alone. KWL is an established transshipment hub for leading regional feeder lines allowing for direct shipment to regional ports across the Americas. KWL is a regional specialist in global automobile transshipment.
Regional interests are investing in wharf expansion to accommodate and profit from larger vessels traversing the Panama Canal currently in expansion.
That includes a US$39 million transshipment port development by China Harbour Engineering in The Bahamas, which is also making a multi-million dollar investment in a transshipment hub in Trinidad & Tobago.
Locally, the Government of Jamaica offered the Chinese Government the island's largest island reserve -- Goat Island, to develop into a hub.
Kingston Wharves' expansion will be financed through a mixture of debt and equity.
In 2012, KWL raised $1.8 billion by selling a 25 per cent stake in the cargo handler to Jamaica Producers Group (JP) at the beginning of the year to finance the expansion plans.
The development aims to ultimately raise the return on equity (ROE) which hit 6.58 per cent for its latest financial year ending 2013. ROE tends to hover at roughly five per cent at KWL which Stephenson explained reflected the capital-intensive nature of the business. He added that "no wharf" in the world makes double digit ROE.
Stephenson also indicated that Jamaica offers an advantage over other regional countries due to its strategic location and English-speaking population.
"Jamaica is positioned to take advantage of the Panama Canal expansion, based on its strategic location in the Caribbean," he said. ""KWL's strategic thrust is to grow its international business while simultaneously leveraging its assets and traditional capabilities. The continuing upgrading of KWL facilities and capabilities is key to achieving this strategic goal. The terminal and warehouse redevelopment is an ambitious suite of key strategic projects designed to transform KWL to achieve that goal."
For the first three months ending March 2014 KWL made $135.3 million in net profit on revenues of $852.5 million.
Stephenson said that the recent award of Free Trade Zone status for KWL augurs well for its upgrade.