Modernising Manila North Harbour Port for local trade

The augmentation of port-related infrastructure in the Philippines is a high priority for the archipelago. Towards this end, the Philippines Ports Authority (PPA) has made concerted efforts to revamp several port terminals to bring them on par with international standards. As part of the drive to expand its ports, the authority awarded a 25-year (2010–35) concession contract to Manila North Harbour Port Incorporated (MNHPI) for the development, management, operation, and maintenance of Manila North Harbour Port (MNHP) in November 2009. The MNHP is the busiest commercial and transportation hub port in the country.

PPP-based modernisation programme

This contract is notably the first public–private partnership (PPP) agreement for domestic trade in the Philippines. The concession, extendable by another 25 years, authorises MNHPI to collect cargo handling and storage charges, cranage fees, terminal fees, and other port charges. However, a few other charges such as user fee, wharfage and vessel traffic management services fees will go to the PPA.

The contract agreement entitles the PPA to generate a regular stream of revenue from the concessionaire, regardless of economic conditions. The MNHPI has committed to investing PhP 14.5 billion (PhP 1 [Philippine peso = $0.023]) in the project that is being financed at a debt-equity ratio of 60:40. As per the contract, the MNHPI is supposed to spend about PhP 7 billion on the modernisation project by 2016. Reportedly, the company has secured the necessary long-term and short-term credit facilities to finance the development and operational requirements.

The project will be implemented in three phases; the first phase is currently being implemented. Phase I involves the construction of a modern passenger terminal complex and an operations centre, to be completed by end-2013. Piers 4 and 10 will also be rehabilitated to consolidate lift-on lift-off (lo-lo) and roll-on roll-off (ro-ro) operations for provision of adequate deep-water berths. Under this phase, the port capacity will rise by 2.8 million twenty-foot equivalent units (TEUs) from the current 1 million TEUs. Further, the passenger terminal capacity will also be augmented by 600 seats to provide seating capacity for 2,000 passengers. The scope of development under the successive phases will depend on the trade volume at the port.

Once completed, the vessel berth time and dwell time of cargo will decline. According to Richard Barclay, Chief Executive Officer, MNHPI, “Post-modernisation, the average berthing time at the port is expected to decline to 24 hours from 50 hours at present.” In addition, the cargo handling capacity at the port will be bolstered to cater to the increased demand for lo-lo and ro-ro handling facilities. Finally, the port’s operational area will increase from 52 hectares to 70 hectares.

Profile of MNHPI

Established in 2009, Philippines-based MNHPI is involved in the provision of cargo handling services and the management of the passenger terminal, berths, and storage areas at the MNHP. Over 90 vessels plying the Manila–Luzon–Manila, Manila–Visayas– Manila, and Manila–Mindanao–Manila routes utilise this port.

It functions as a joint subsidiary of Harbour Centre Port Terminal Incorporated (HCPI), the largest bulk and break bulk port operator in the Philippines, and Petron Corporation, an eminent player in the fuel and oil industry. HCPI holds a 65 per cent stake in the company. In 2011, Petron Corporation, a subsidiary of San Miguel Corporation, acquired the remaining 35 per cent in the MNHPI, which was previously owned by Metro Pacific Investments Corporation.

Progress on track

So far, the project has met all its scheduled targets. According to Barclay, “The modernisation programme is in full swing this 2013.” In May 2013, the MNHPI commenced soft operations at the passenger terminal complex located in Slip 5 of the MNHP as part of Phase I. The company spent PhP 200 million to develop the 2,000 passenger terminal that comprises the main building, ticketing area/ concessions, drop-off area and access, and the parking area. Barclay reports that “the passenger terminal complex is anticipated to be entirely operational in October 2013”.

The MNHPI has also invested a significant amount in purchasing the necessary equipment and technological systems for the modernisation programme. Barclay offers a detailed description: “The recent additions to the company’s cargo handling equipment include three units of quay container trains, eight rubber-tyred gantry cranes, and eight units of 45 tonne stackers. Meanwhile, the company has appointed Navis SPARCS to deploy a terminal operating system to enhance efficiency. This will be a one-of-its-kind initiative across domestic ports in the country. The system is currently in use in more than 100 terminals across the world.”

Besides, in order to service the needs of trade in perishable cargo, 144 reefer points are expected to be commissioned by December 2013. The port operator has also made significant headway in obtaining International Ship and Port Facility Security (ISPS) accreditation through its installation of modern facilities and systems.

However, sustainable operations will require a regular flow of revenue for the operator. In order to supplement its revenue stream, the MNHPI has proposed a tariff increase of 25.57 per cent to the PPA. The company claims that the effective change in tariff will actually amount to about 15 per cent, as charges had been reduced by 10 per cent after the port’s takeover by the MNHPI in 2010.

MNHP’s success depends on traffic flow and tariff revision

In the years ahead, the Philippines will have a modern port with amenities comparable to international benchmarks. As Barclay notes, “The modernisation programme will lead to efficient delivery of services and provide a stimulus to the country’s economic development.” The construction of the state-of-the-art passenger terminal and the acquisition of modern equipment testify to the MNHPI’s dedication towards the provision of superior passenger and cargo handling services. The project will facilitate the accurate exchange of data, optimise logistics, and improve customer experience, which is rather unique to domestic port operations in the country.

However, the project’s success ultimately will depend on the traffic flow at the port and a tariff revision that is commensurate with the investments. Once the modernisation programme is completed, the MNHPI’s revenue is expected to be PhP 6.8 billion by 2035.