Auckland ports new promise on full container terminal automation delivery

Ports of Auckland has pledged to deliver the long-awaited full automation of its container terminal no later than June 30 next year.

The undertaking was made to port owner Auckland Council in a draft statement of corporate intent for 2021-2024, considered by this month’s meeting of the council controlled organisation oversight committee.

The automation project started in 2016. The port company and the council have refused to reveal its cost to date. Sector observers believe it is north of $400 million.

Mayor Phil Goff in a “letter of expectation” to the port, also filed at the meeting, noted the port’s “assurance that the completion of automation full terminal rollout will be an important factor in easing congestion” at the port.

Shipping delays and congestion at the country’s main import gateway has been a major contributor to supply chain issues for Auckland and New Zealand importers and exporters in the past year. The congestion, a flow-on from Covid’s impact on the global supply chain and soaring consumer demand for imported goods, has resulted in spiralling container costs, empty container and product shortages, and uncertain delivery schedules.

Goff’s letter said “recurrent delays” in completion of the rollout were exacerbating supply chain congestion for Auckland and New Zealand.

The port has also been under pressure over its poor health and safety record. Chief executive Tony Gibson left the job in July, citing “persistent and personal attacks” on him. Port board chair Bill Osborne, who took over in January with the departure of chair Liz Coutts, announced this week he was stepping down. A new chief executive has yet to be appointed.

The council has already asked the port to do a review of the straddle carrier automation project after it is fully implemented. Goff’s letter also requires the port to include the performance measure of carrier productivity – for example, container moves per hour – in its 2021-2024 statement of corporate intent.

The port’s draft statement notes it is required by the Port Companies Act 1988 to “operate as a successful business”. It says the Act does not define what it means by “successful – this is left to the shareholder and the port company to define”.

“Ports of Auckland recognises that the previous 12-month period has been an unusual and difficult period for the company with a fatality, congestion … and declining financial performance.

“Accordingly it needs to focus on lifting performance in safety and productivity.”

It defined “success” for the next 12 months as achieving improvement in health and safety; recovering container terminal productivity; delivering automation; recovering commercial position; and delivering in the rest of the business.

It said automation was key to the port’s future success.

“Automation has been delayed by a combination of a fatality, Covid-19 related events and system underperformance.”

It is the first time port management has acknowledged system underperformance in its troubled year.

It said there was now a revised plan, supported by all stakeholders, which could deliver automation successfully and safely.

The port reported to councillors that in 2021 key performance measures it had fallen 2.4 per cent short of its targeted increase in revenue.

Revenue increase targets for 2022, 2023 and 2024 were 13.2 per cent, 13.3 per cent and 16.4 per cent respectively.

On dividends, it reported the dividend for the June 2021 year had yet to be declared.

Target dividends for 2022, 2023 and 2024 were $2.1m, $5.3m and $19.8m respectively.

In financial years 2020 and 2021 the port agreed with the council to pay a dividend of just 20 per cent of after-tax profits, down from 80 per cent, in order to fund its investment programme. The dividend for FY2020 was $4.9m.

The port has asked the council to consider a change to the dividend policy.

Instead of paying a percentage of total profit it proposes basing the percentage on free cash flows to “more accurately and easily reflect our changing capital expenditure needs”.

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