Transnet Update on Attracting New Terminal Operators into Island View Precinct

Ports & Terminals — By on October 12, 2018 at 10:51 AM

Island View Precinct

Transnet Updates Industry on Process of Attracting New Terminal Operators into Port of Durban’s Island View Precinct

[Durban, South Africa, 11 October 2018]  Transnet National Ports Authority (“TNPA”) today outlined progress in implementation of its Island View Precinct Strategy, which sets out to facilitate greater participation of historically disadvantaged persons in Terminal Operations and enhance the country’s supply of strategic liquid bulk commodities, while encouraging new entrants into the market.

The engagement session followed various one-on-one tenant meetings and industry forums where TNPA has engaged with affected tenants and stakeholders since April 2018.

TNPA held industry stakeholder engagement sessions in Durban on 11 October to provide an update on progress in implementing the Island View Precinct Strategy which seeks to facilitate greater participation of historically disadvantaged persons in Terminal Operations and enhance the country’s supply of strategic liquid bulk commodities, while encouraging new entrants into the market.

Addressing the latest gathering Chief Executive of TNPA, Shulami Qalinge, said: “To date we have made some progress in implementing the strategy. Industry has been requested to provide feedback on the proposed Operating Model and our lease extension approach, and comments have been taken into consideration in our revised planning. We expect to issue an RFQ by February 2019, followed within a few months by an RFP, with April 2020 earmarked as the period when the transition of new Terminal Operators into the Island View Precinct will commence.”

Qalinge said TNPA was aiming to address the slow transformation in the Island View Precinct where lessees have historically enjoyed tenancy in excess of 50 years. She thanked Industry stakeholders and Island View Precinct tenants for their cooperation and input during the process to date.

The majority of the precinct’s footprint is occupied by cargo owners who act as Terminal Operators. They are responsible for landing, shipping and/or storage of South Africa’s petroleum, diesel, chemicals, oils, lubricants and aviation fuel.

Addressing industry stakeholders in Durban on 11 October were TNPA’s (left to right): Nico Walters, TNPA GM: Strategic Projects; Gary Young, Acting Executive Manager: Real Estate and Shulami Qalinge, Chief Executive.

Operating Model

TNPA is in the process of appointing a Liquid Bulk expert to advise on this and Industry has also been requested to provide feedback on the proposed model.

Condition Assessments

TNPA has appointed an independent service provider that has been on site since August 2018 to conduct condition assessments on 17 lease sites that are reaching or have reached expiry dates. This will help to determine the present condition of assets, the remaining economic life of assets and the potential presence of environmental contamination. The service provider will also consider available environmental reports from existing Terminal Operators.

The service provider’s Final Assessment reports are expected by December 2018 and will serve as a key input into the RFP process to allow bidders to submit bids, taking into consideration the asset condition on each site.

Lease Extensions

As required by the Act – including TNPA’s Regulatory Mandate for Property as set out in Section 11 together with TNPA’s Lease Management Policy – TNPA must follow a public process for service providers to provide port services and facilities.

TNPA proposed that expired leases would be extended for 24 months to allow for a smooth transition with the implementation of the IVP strategy.

TNPA’s Acting Executive Manager for Real Estate, Gary Young, said: “We have engaged with all affected tenants and a draft lease extension agreement was circulated for comments. This was revised to take into consideration tenants’ feedback.  A shortened extension agreement was drafted and circulated to all tenants to give effect to the 24 months extension and market rentals. The lease extension commencement date remains 1 May 2018.”

Asset ownership as set out in lease agreements will be addressed during the 24-month lease extension period. Extensions will in general be on the same terms and conditions, but rentals will be market related, taking into account the asset valuation outcome. Immovable assets at existing sites will transfer to TNPA at the end of the 24-month extension period.

Transformation

All affected leases will be advertised through an open tender process. Existing operators can participate in the Section 56 process but would need to fulfil the stringent transformation requirements of Transnet SOC Ltd.

Participants in the RFQ/RFP process will be required to meet certain transformation criteria such as Level 4 BBBEE and preference will be given to participants with 51% Black ownership in the Terminal Operator company. There will be a separation of Cargo Owners and Terminal Operators, with cargo ownership limited to 49% of the Terminal Operator company. To encourage new port entrants, members of a bidding Joint Venture (JV) who currently hold a Terminal Operator Agreement with TNPA may not hold in excess of 49% of the bidding JV.

Future lease tenure will be aligned with the condition assessment of existing sites and with Terminal Operator investment plans, but will be capped at 25 years.

Section 56 Project Timeline

Section 56 of the National Ports Act mandates TNPA as landlord and ports master planner, to contract with private terminal operators to design, build, rehabilitate, develop, finance, maintain and operate port terminals or facilities.

TNPA expects to have appointed a Liquid Bulk Expert and Legal Transaction Advisor by the end of Oct 2018. Condition Assessments are expected to be completed by December 2018. An RFQ is expected to be issued by February 2019 and qualifying bidders to be determined by April 2019. Thereafter an RFP will be issued by July 2019 with a briefing session anticipated by August 2019. The RFP is expected to close by January 2019 and adjudication of bids and selection of preferred bidders will be completed by March 2020. April 2020 will then see the transition of new Terminal Operators into the Island View Precinct.

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