This presentation presents the various steps to undertake to value a container terminal.

1. Workshop on Valuing a Container Terminal
BMT Maritime Consultants
TOC Asia 2005
Hong Kong
British Maritime Technology 1

2. Introduction
This workshop will provide and Business
insight into how a container Opportunities
terminal can be valued HOW TO MAKE 600 mins of Local Outgoing
Calls FREE. Ask me How? Call me Now!!
This provides a seller with an
50 LEADERS NEEDED FOR GLOBAL
idea of the price they should INTERNET BIZ. Call Now
receive and a buyer with a price ASIAN CONTAINER TERMINAL for sale.
Operating terminal, 125,000 TEU pa. Tenders
they pay for a terminal wanted. Call Richard Szuflak +61 7 3221 1066
NEED LITTLE CAPITAL. Start you own biz to
build your career. Call Henry HP for
arrangement
STOCK & OPTION Seminar $650 2 days.
Trade US Mkt Live. Free CD.
Computer Courses
$50 PC ASSEMBLY, Networking Web Design/
HTML, Red Hat Linux
British Maritime Technology 2

3. Should You Use a Black Box Model for a
Container Terminal Valuation?
We believe you shouldn’t!
– Different objectives of the vendors
• Encourage economic regional development
• Obtain operating expertise / Infrastructure investment
– Different objectives of the purchasers
• To generate return on investment
• Strategic geographical location
– Different environmental aspects
– Ownership structures of the concession
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4. Should You Use a Black Box Model for a
Container Terminal Valuation?
Different ownership structures that can occur:
Owner
Port
Marine Approach
Port Owner
Quay (Depth)
Port Owner
Full ownership
Concessionaire
Land
Concessionaire
Civil Infrastructure
CT Operations Concessionaire
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5. The Way We Assess a Concession’s Real Value
To do this BMT develops three coupled models:
– Throughput model – which forecasts container throughput
– Operational model – which simulates the operations and
development of the terminal against throughput
– Financial model – which constructs P&L and Balance Sheets
on an annual basis for the valuation period
A valuation period of between 20 and 30 years is most common to
match the concession period
From these models we can provide a financial value
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6. Valuation Process
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7. Throughput Model
Hinterland Assessment
Hinterland supply and demand forecast
– Short Term (0-5years)
• Current export/import demand in the region
• Local infrastructure (Road/Rail/Inland waterways)
• Direct competition
• Historical Growth Rates
– Medium Term
• Expected trends – specific to container industry
• Growth and development of industries conducive to container volumes
• Growth of logistics centres at the port
• Growth and development of infrastructure to container volumes
• Development of intermodal connectivity and logistics chain alliances
– Long Term
• Gross Domestic Product and long term expectations
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8. Throughput Model
Tariff Assessment
The tariff levels are also generated:
– For the ports:
• Terminal handling
• Port dues
• Storage
• Miscellaneous charges
– For distribution:
• Transport costs
• Distribution costs
– Customer Study
• Interview terminal customers to determine their
expectations on pricing
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9. Throughput Model
Example Figures
Typical handling charges vary
between USD60 and USD330
Approximate Average Container Handling
Charges
328
350
300 259 250
US$/TEU
228
250 202 201 200 199 190
173 163 156
200 140
120 118 117 110
150 93
75
100
50
0
Ne erm om
ap s
al n d
ilip iu m
Ta nds
a a
d na a
st in
Ja es
Fr ile
St il
n a
Ch re
Ph lg n
n
er y
a
Sp e
Ch y
ng n e
Th in
d az
ite Ca rali
th an
Ki d
Be wa
pa
c
si
l
Au a
Ita
o
M ila
at
an
G gd
ay
la
Si pi
ite Br
i
Un
Un
World Bank
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10. Throughput Model
Regulatory/Competition Assessment
To determine the appropriate tariff a detailed study of the
competition in the vicinity is undertaken
– Direct competition – Other container and break bulk terminals
– Indirect competition – other modes of transport such as road,
rail, barging operations
Regulatory study
– Taxes and trade legislation obtained
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11. Throughput Model
BMT Freight Model
BMT uses its proprietary Freight Flow simulation model (EFM) to forecast
future freight volumes through a port under various competitive scenarios
The Asian Freight Model (AFM) is under development
It is a logistics model that establishes trade flows at minimum costs
Allows an accurate forecast of future freight through a port
Simulate impact of tariff changes on trade flows
Trade
Capture
BMT Freight Flow Simulation Model
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12. Throughput Model
Added Value
Gives the concessionaire a better understanding of future
throughput
Gives a platform to produce throughput scenarios and establishes
income drivers
Value can be added through the development of road, rail and
inland shipping into the terminal hinterland. In the case of
transshipment terminals, feeder and barging operations can be
looked at
Identify where weak strong links lie in the logistics chain
This has an impact on the potential income which flows through to
the financial evaluation model
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13. Operational Model
Key Objectives and Capability
Model needs to be able to calculate/estimate
– Cost of the current operation
– Identify and integrate the main cost drivers such as
throughput and productivity
– Evaluate the cost impact for different equipment choices
or container handling systems
– Evaluate berth and yard capacities
– Establish capital expenditure requirements based on the
cost drivers
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14. Operational Model
Step 1
Model the current container
terminal operation
– Identify variable and fix cost
components
– Model current operational
processes and work
practices
– Establish current
productivities of the main
operational functions i.e.
Vessel operation, road/rail
exchange
– Calibrate with current
operational costs to establish
the accuracy of the model
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15. Operational Model
Step 2
Establish alternative equipment choices and model their
operational costs under different throughput and
productivity scenarios
– Top lift, reach stacker direct/indirect
– Straddle carrier
– RTG
– Automated RMG + AGV (Trailer or straddle carrier)
For all the options personnel and equipment requirements
need to be established
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16. Operational Model
Step 2 Example Vessel Operation
Costs are related to the time a container crane is deployed
and its personnel paid.
Gross crane productivity is the best measure although it
does not incorporate costs that are incurred when the
vessel starts or ends during shifts
What is the effect on costs per vessel move?
Simple comparison reach stacker versus straddle carrier
handling system
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17. Productivity & Cost for Different Resource Deployment
55.00
50.00
45.00 Reach stacker
EURO per move
40.00
Reach stacker
Straddle carriers
35.00
30.00
25.00
Straddle carrier
20.00
15 20 25 30 35
productivity
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18. Operational Model
Step 3 Capacity Evaluation
Berth capacity
– Quay length
– Number of cranes
– Working hours
– Productivity
– Utilisation factors
Yard capacity
– Available space
– Stacking system
– Dwell times
– Yard utilisation factors
These capacities are critical to determine at what stages additional
equipment or change to a different handling system is required
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19. Operational Model
Example CAPX
Step changes in infrastructure Infrastructure
requirements 35
30
25
Amount of Equipment
20
Growth in terminal
corresponds to a higher 15
requirement and use of
10
infrastructure
5
0
05
07
09
11
13
15
17
19
21
23
25
20
20
20
20
20
20
20
20
20
20
20
Trailers Tractors Rail Mounted Gantries
Rubber Tyred Gantries Reach Stackers/Forks Ship to Shore Cranes
Mobile Harbour Cranes
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20. Operational Model
Step 4 Risk Analysis
Example labour environment
Ideally a container terminal operator wants full control and
responsibility of its personnel
– Direct employment
– Enterprise agreements that cover personnel costs,
deployment and flexibility
Worst case scenario (hypothetical)
– Labour pool where the conditions are negotiated between the
union and a third party
– Many unions with specific work coverage
– No opportunity for enterprise specific deployment
This will reduce the enterprise/concession value
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21. Financial Model
The goal of the financial model is to determine a value for the
concession based on free cash flows (FCF) and provide
analysis tools
Defined as the cash in the business that is available to financiers
Created from the throughput and operational models
Defined as: Net Profit – Capital Expenditure – Change in Working
Capital
Free Cash Flows and other indicators are then analysed to
develop a value for the concession
– Multiple of EBITDA (Enterprise Multiples)
• High infrastructure intensive firms
• Good before financing comparison
– Internal Rate of Return
– Net Present Value
– Financial Ratio Analysis
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22. Financial Model
Case Study
Heavy Capital Expenditure in
Free Cash Flow
assets causes the free cash 14,000
flow in initial years to be 12,000
10,000
8,000
negative. This provides an 6,000
EUR '000
4,000
2,000
insight as to when 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
-2,000
expenditure is payable -4,000
-6,000
-8,000
Year
Expected Financing Requirements
Inflows of capital is required 14,000
13,000
12,000
to get the terminal into 11,000
10,000
9,000
EUR '000
operating condition 8,000
7,000
6,000
5,000
4,000
– In later years this can be 3,000
2,000
1,000
0
repaid 2006 2007 2008 2009
Year
2010 2011 2012 2013
Required Debt Required Share Capital
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23. Financial Model
Example of operating costs over the concession
Staffing costs are found to Operating Expenses Make Up
make up a high proportion of 100%
90%
expenses in a container 80%
70%
60%
terminal 50%
40%
30%
20%
10%
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Energy and Lubes Maintenance Costs per Annum
Operating Insurance Staff Costs per Annum
Operating revenue often lies Operating Income Make Up
between 50% and 75% in 100%
90%
80%
European container terminals 70%
60%
50%
40%
30%
20%
10%
0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Revenue Expenses
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24. Financial Model
Example of CAPX over life of Concession
Initial acquisition and Capital Expenditure Schedule
replacement of infrastructure 12,000
is high 10,000
8,000
EUR '000
6,000
– Varies as per operational 4,000
model 2,000
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
-2,000
Year
Infrastructure Container Handling Intangibles IT System IT Hardware
Growth in terminal Depreciation and Net Book Value
corresponds to a higher 3,500 45,000
Net Book Value (EUR '000)
Depreciation (EUR '000)
3,000 40,000
35,000
requirement and use of 2,500
2,000
30,000
25,000
infrastructure 1,500
1,000
20,000
15,000
10,000
500 5,000
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Total Depreciation Total NBV
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25. Financial Model
Processing of the Results
NPV For Operating Scenarios IRR For Financial Scenarios
15%
Minimal Compet it ion
Loan Interest
9%
Tariff Rate
Logical
Assum ption
7%
Aggressive Compet it ion 0% 50% 100%
Pesimist ic Basic Opt imist ic
Gearing
Throughput Volum e
IRR
NPV
0%-5% 5%-10% 10%-15%
EUR '000
0-50,000 50,000-100,000 100,000-150,000 15%-20% 20%-25%
Important phase is to investigate the results of the valuation
– Scenario Analysis
– Sensitivity Analysis
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26. Sensitivity terminal
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Size of site
Beta
Market Risk
Risk Free Rate
Debt To Equity
breaks down
Taxes
Term
Interest Rate
Mobile Harbour
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Ship to Shore
Financial Model
Rail Mounted
Rubber Tyred
Reach
Tractors
Trailers
Infrastructure
Allows for mitigation planning
Intangibles
Power
Fuel and Lubes
IT systems
O/H's
Mobile Harbour
Ship to Shore
Rail Mounted
NPV Low %
Rubber Tyred
Reach
Variable
Tractors
Trailers
Sensitivity of input Variables
Infrastructure
NPV High %
Terminal
NPV sensitivity to a 10% change in variable
Third party
Power fixed
Business Tax
Insurance
Management
Land Tax
Operations
Management
Middle
Other
Additional Staff
Storage
– Impact of the interest rate to the companies cash flow
Congestion
Net working
Max. crane
The impact of various variables on the model is investigated
# of days per
Max. Cranes /
Lifts per hour
Max. RTG
The degree of influence can correlate to the actual operations of the
– Impact of a number of cranes could show the impact on value if it
26

27. Financial Model
Example Enterprise Value Calculation (Based on EBITDA)
Enterprise Value of the firm (Takeover EV/EBITDA Multiples of Businesses in the Port
price) can be determined Industry
– Forecast cash flows 13.9
11.7 11.3 11.3
– Comparable enterprise multiple 9.9 9.7
9 8.8
8 7.8
6.9
Enterprise multiple of comparable firms 4.8 4.7
4.1
Select an firm similar to its state of
development/market
* T * OP a
I
ho r t
H
es er i Au ers
SA
No PH
t
/S M ts
rts reh H
TS ko
d
fry &O
TS
BP
or
g
Jo hpo
N n P la n
* E /HP
Po ha /H P
CB HM or
/P an
* I /N ik
rP
* H Am of o ld
H
IC
/P
rd r t/A
P
Enterprise multiple should increase as
se ca ck
III aur
T/
rt
ie
n
C
o
at
&
do f T
C
N
uf
value increases
e l rt o
lD
oo
* P Po
el
ow
in
*P
*
Enterprise value = Market Value + Debt – EV
*
Enterprise Value
Acquisitions
Cash
Estimate that after 5 years the firm is in
steady state Earnings before Interest, Taxes, Depreciation and
Amortization
Debt: 16 mill Cash: 28 mill 14,000
Estimate the this firm is comparable to 12,000
ECT/HPH (x6.9) 10,000
EUR '000
8,000
Enterprise Value approx 65.6 mill (9.5 mill 6,000
EBITDA x 6.9) 4,000
Market Value 77.6 mill (65.6-28+16) 2,000
-
Discount back at WACC over 5 years 48.9
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
million value
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28. Financial Model
Example of IRR and NPV
NPV For Operating Scenarios
Net present value of the cash
flows describes 40 million
Minimal Compet it ion
Internal rate of return 20% Logical
Tariff
Assum ption
Value under different Aggressive Compet it ion
operating and financial
Pesimist ic Basic Opt imist ic
Throughput Volum e
scenarios and sensitivity 0-50,000 50,000-100,000
NPV
100,000-150,000 EUR '000
If there have been recent
sales in the industry these IRR For Operating Scenarios
can also be valued forward to Mi ni mal Competi ti on
a comparative point in this
T ar if f
model Logi cal
A ssump t i o n
Aggr essi ve Competi ti on
Pesi mi sti c Basi c Opti mi sti c
T hr o ug hp ut V o lume
IR R
0.0%-10.0% 10.0%-20.0% 20.0%-30.0%
30.0%-40.0% 40.0%-50.0%
British Maritime Technology 28

29. Expected Rates of Return
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30. Conclusion
Upper bound for buyer is 40-50
Business
million euro.
Opportunities
Seller also knows this is the HOW TO MAKE 600 mins of Local Outgoing
Calls FREE. Ask me How? Call me Now!!
upper bound based on accepted 50 LEADERS NEEDED FOR GLOBAL
assumptions INTERNET BIZ. Call Now
ASIAN CONTAINER TERMINAL for sale.
Number of techniques can be Operating terminal, 125,000 TEU pa. EUR
50,000,000. Call Richard Szuflak +61 7 3221
employed to give a basis for 1066
NEED LITTLE CAPITAL. Start you own biz to
investment build your career. Call Henry HP for
arrangement
Mr Szuflak would be able to STOCK & OPTION Seminar $650 2 days.
update his ad with a 50 million Trade US Mkt Live. Free CD.
Euro price tag Computer Courses
$50 PC ASSEMBLY, Networking Web Design/
HTML, Red Hat Linux
British Maritime Technology 30