Filipino billionaire Enrique Razon Jr. is exiting the ports business in the United States as his flagship International Container Terminal Services Inc. (ICTSI) announced that it had mutually preterminated a 25-year lease deal with the Port of Portland.
The development followed a series of labor disputes between ICTSI and the International Longshore and Warehouse Union. This led to the idling of the Port’s Terminal 6 after big shipping companies pulled out. ICTSI sealed the lease deal with the Port of Portland in 2010.
In line with its exit, ICTSI said in a stock exchange filing Tuesday that unit ICTSI Oregon would be “relieved of its long-term lease obligations” effective March 31, 2017, pending approval by the Port Commission of the US.
ICTSI said the port would receive $11.45 million in compensation. This was to help it “rebuild business as well as additional container handling equipment, spare parts and tools at the terminal.”
“Terminating the contract to operate Terminal 6 at the Port of Portland will have no material impact as it represents only 0.1 percent of ICTSI’s consolidated revenue,” ICTSI senior vice president and chief financial and compliance officer Rafael Consing said in a text message.
“Strategically, the cost of terminating the contract is reasonable, but the value accretion arising from the savings in recurring cost is materially compelling,” he added.
ICTSI, which owns the Manila International Container Terminal, is involved in about 30 concession and port development projects across 20 countries. Most of these are in fast-developing regions like Asia, Latin America and Africa. In Europe and the Middle East, it has port projects in Croatia, Iraq, Poland and Georgia.
ICTSI reported higher earnings in its most recent financial filing. Its net income during the first nine months of 2016 hit $141.9 million, up 4 percent compared to the same period in 2015. It said revenues rose 5 percent to $835 million as throughput rose 12 percent to 6.4 million twenty-foot equivalent units or TEUs.
ICTSI noted that earnings growth during the nine-month period was cut by higher depreciation and amortization expenses as well as lower capitalized borrowing costs related to Tecplata S.A., its new terminal in Buenos Aires, Argentina, and higher interest expense from higher average loan balance.