Port Otago will spend $30 million to $45 million to expand its infrastructure over the next two years, allowing larger ships to call at Port Chalmers.
Yesterday's announcement includes 13km of channel deepening to a depth of 14m, a 10% boost to overall warehousing facilities, wharfside deepening and a 135m wharf extension, to 435m.
The expansion suggests market makers, giant shipping line Maersk and Fonterra, are expecting a surge of hinterland exports over the coming 24 months.
Although the arrival of bigger container ships may be a few years away, exporters should get cheaper container slots and speedier delivery times.
Most of the overall spending has been signalled, but yesterday's announcement gets several projects off the drawing board, especially the already consented dredging work programme and warehousing.
Port Otago chief executive Geoff Plunket said the Next Generation project was a ''forward-looking programme'' to upgrade the port's efficiency and productivity for its next generation of users.
''This is a milestone day for us. It highlights our resolve to remain at the forefront of shipping and port activity in New Zealand and as a major contributor to the region's economic growth,'' he told media at Port Chalmers yesterday.
In an interview later, Mr Plunket declined to comment specifically on any talks with either Fonterra or Maersk.
''[However] we have talked extensively with customers and that's given us the confidence to invest in the future,'' Mr Plunket said.
Maersk is Port Otago's largest shipping line customer by far, while all existing warehousing at the relatively new $5 million Sawyers Bay facility is used by Fonterra.
By July, Port Otago would know if channel widening could allow the 348m cruise ship Ovation of the Seas to visit Dunedin, Mr Plunket said.
Royal Caribbean's Ovation, still being built in Germany, will visit New Zealand next year. The longest ship to visit to date is 317m.
Container ships at present are about 267m, with the 6500 TEUs (20-foot equivalent units) about 320m. Ships of 6000 to 8000 TEU are expected after the development.
Future cargo demand could lead to a third new crane being purchased within five years, he said.
To finance the expansion, Mr Plunket said Port Otago had only to rely on a mix of existing banking facilities and cash, the latter having been boosted by its coup in buying $37 million of Lyttelton Port of Christchurch shares, sold
last September for $65.7 million.
''There's no new borrowing involved ... we're in a strong cash position,'' Mr Plunket said.
He noted Port Otago was already the deepest container port in the country at 13m, as at low tide, and was unique in that it could handle ships at all stages of the tide.
''The first milestone will be to deepen to 14m. This will be done in two stages, with deepening of the existing channel to 13.5m by the end of 2015 and to 14m by December 2016,'' Mr Plunket said.
Port Otago's warehousing capacity would be increased about 10%, with developments at Back Beach boosting on-wharf dairy storage 25%, and Sawyers Bay getting an additional 3800sq m.
Mr Plunket said a new small workboat/tug and a split-hopper barge, costing $7 million in total, meant the barge could be filled then towed by Port Otago's split hopper dredge New Era. The barge would service all Port Otago's maintenance dredging and marine structure tasks for the next 20 years.
Port Otago would save $8 million in not contracting out the dredging, albeit the dredging would take almost three times longer, with a dual crew dredging for 90 to 100 hours per week.
''Our service is linked to our capacity. It's something every generation of the port has been aware of since our inception more than 130 years ago and it's allowed us to stay in the vanguard of shipping activity,'' Mr Plunket said.
Port Chalmers was the first port to export frozen meat in 1882, and hosted the country's first container ship visit in 1971.
The latest expansion follows completion of a decade-long programme of about $100 million in capital investment, including new tugs costing $21 million, a new pilot launch, Chinese-made container cranes also costing $21 million, and several $1.2 million four-high straddle container carriers, plus increased warehousing.
