By Dan McCue
Staff Writer

Ironically, the political difficulties one of Jafza International’s sister companies, DP Ports, encountered after it bought and quickly disposed of the assets of the British Peninsular and Oriental Steam Navigation Co. two years ago may have enhanced the market position of the Port of Charleston and other facilities in the Southeast.

The properties originally purchased by DP Ports included portions of ports in New York/New Jersey, Philadelphia, Baltimore, Miami, Tampa and New Orleans.

After a political firestorm erupted over DP Ports’ securing of those U.S. assets—assets that were actually secondary to DP Ports’ desire to own P&O assets in India and the Far East—several of the port facilities in the Northeast were bought by investment and insurance companies.

AIG Global Investment Group, an arm of the insurance giant AIG, which has never run a port terminal, bought leases to the Port of Newark terminal, while the Ontario Teachers Pension Plan Board took over the lease to operate a terminal at Howland Hook on Staten Island, N.Y. Deutsche Bank, Germany’s largest bank, later agreed to buy Maher Terminals,

which runs the operations at the Port of Elizabeth in New Jersey.

The shift in ownership from traditional shipping companies to financial firms  was emblematic of investment firms’ broader interest in big public assets like airports and toll roads.

However, what companies like these are looking for are comparatively stable investments that offer steady income growth. Because they want to maximize the profits of their investors, like the contributors to the Ontario Teachers Pension Plan, longtime maritime industry officials fear they’re ill-prepared to spend money and make the kinds of investments ports need to make to keep up with the evolution of international shipping.

Although that contention is widespread, none of these officials wanted to be quoted, fearing they’d upset the Wall Street investors they rely on to buy their bonds.

An example of how much of an investment in new facilities and the like is needed to maintain market share is evident right here in Charleston, where the S.C. State Ports Authority has spent more than $688 million since 1985 on capital assets. At the same time, the SPA has contributed $25 million to date in relation to the construction and maintenance of the Arthur Ravenel Jr. Bridge, which was designed, in part, to allow the largest cargo ships to pass beneath it.

Unlike an investment firm, which must siphon off a percentage of earnings to pay back investors, the SPA reinvests 100% of its earnings into its facilities. On major projects, like the new terminal planned for the former Charleston Naval Base, the ports authority also issues revenue bonds.

Unlike general obligation bonds, a vehicle not used by the State Ports Authority and for which the state’s taxpayers would be responsible for servicing the debt, revenue bonds are institutionally rated vehicles that are tied directly to the authority’s future projected revenues.

While institutional investors do buy these revenue bonds, they don’t then become an owner of the authority and don’t play any role in port-related decisions.

Joe Gurskis, director of Intermodal Freight Planning for Wilbur Smith Associates of Columbia, said he’s heard these concerns and acknowledged their prevalence, but said he doesn’t necessarily hold with them.

“The thing you have to remember is that while these investment houses hold an interest in these terminals, they’re actually still operated by ports authorities,” he said. “While it may be true that an investment group wouldn’t want to pay to create new bridges or deepen a channel, I think states would, citing the common nature and common uses of these things.”

Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@setcommedia.com.

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