Port of Tauranga's move to take a 50%, almost $22 million, stake in Timaru's ailing PrimePort will increase competition for containers exported by Port Otago and Lyttelton Port of Christchurch.
The PrimePort purchase is part of a wider $70 million property spending spree by Tauranga to capture market share to cement and grow itself as New Zealand's major hub port for larger new-generation ships.
Without giving any forecast on container numbers, Tauranga said it expected annual earnings before interest, tax, depreciation and amortisation (ebitda) of about $1.5 million on the 20,000 containers it handled annually.
Forsyth Barr broker Suzanne Kinnaird said Tauranga's 50% stake and a lease of up to 35 years on container operations, plus land and assets, gave the northern company control on pricing and integration into its Tauranga-based services.
Ms Kinnaird said based on current trade volumes of around 20,000 containers, the ebitda of $1.5 million could be increased to $3.5 million, if container numbers were doubled to about 40,000.
''Port of Tauranga needs to win volumes back from these ports [Otago and Lyttelton] to make the deal work,'' she said.
Craigs Investment Partners broker Chris Timms said if Tauranga doubled containers during the next 12 to 24 months, the price paid by Tauranga would be justified, as it would be well-placed to benefit from increased regional dairy growth.
Tauranga had well established relationships with importers, exporters and shipping lines and could increase coastal shipping and international freight from PrimePort, with additional benefits to its Tauranga operations.
''We have confidence in Port of Tauranga's ability to take an essentially greenfields operation [PrimePort] and turnaround its performance,'' Mr Timms said.
Ms Kinnaird said Tauranga was intent on attracting the bigger, new-generation container vessels to its North Island base, which would increase its importance as New Zealand's major container hub port.
From a peak of handling 80,000 containers in 2008, PrimePort lost about 60,000 mainly Fonterra containers; about 50,000 to Lyttelton and 10,000 to Port Otago. Large job losses followed the container decline.
Ms Kinnaird said: ''We're expecting Port of Tauranga to attempt to persuade one of the major shipping lines to add Timaru to one of their current routes.''
Tauranga's other land deals include $47 million spent on four properties in Auckland and Tauranga, the largest being $37 million for 6.8ha neighbouring MetroPort in Auckland, and $10 million for 2.2ha in Tauranga.
