Monday, December 22, 2008

Opinions by the container load over recent Globe and Mail Port story

Last weeks Globe and Mail report, first outlined early Friday morning locally here on the Podunk blog, has quickly become the talk of the town, as the Daily News featured some reaction to the Globe and Mail’s examination of future development for phase two of the container port.

Monday’s front page, headline story in the Daily News featured more feedback from Port President and CEO Don Krusel, who reiterated his view from the weekend that there really was nothing new in the Globe and Mail story.

The Daily also sought out some comment from the community, with a local realtor and the Mayor weighing in with their interpretation of where the port project stands as far as impact in the community.

Of particular interest to Rupertites is what is almost a throwaway disclosure regarding the Economic Development Office for the city, which apparently has not had anyone heading up the organization as manager. As things heave developed in Economic Development, former manager Chris Colussi apparently has followed his predecessor at PREDC, Jim Rushton onto the waterfront.

Mr. Rushton left economic development to move over to Maher Terminals, while the Daily News provides the word that Mr. Colussi has joined the workforce at Fairview Terminals.

Leaving the Economic Development managers office apparently left vacant for who knows how long, something that might have been of interest to the community, wondering if the City is working to any degree to attract new industry to the struggling economy.

With the port project pushed back on its timeline, the call has once again been made for diversification, of course, at the moment one wonders who would answer the inquiries for such diversification if there’s nobody running the shop at Economic Development.

The details on both angles of what started from the Globe and Mail story could be found in Monday’s Daily News.

Port boss Don Krusel says news reports of a slowdown on phase two are not accurate
The Daily News
Monday, December 22, 2008
Pages on and three

One day after the announced plans for the Rio Tinto Alcan Modernization project were slowed in Kitimat, a national newspaper was reporting that the Prince Rupert Port Authority's expansion plans were also slowing.

But President and CEO of the port authority Don Krusel is adamant that the slower progress is not new news.

Responding to a Globe and Mail story that appeared Friday, Krusel said the story implied that plans for Phase 2 for Fairview Terminal had changed recently because of the global recession and resulting financing woes.

"Nothing has changed," said Krusel from his office in the Atlin Terminal building Friday. "For the record, the port authority and all the partners remain committed to expanding Prince Rupert in an appropriate and timely fashion."

The Globe and Mail reported that, according to a confidential study commissioned by Transport Canada and the port authority by PricewaterhouseCoopers, the PRPA had hit a debt wall and was about to breach $22-million-worth of loans.

It also mentioned that the PRPA's limited cash flow and inability to borrow against its lands meant it could not support a $200 million increased debt burden purportedly needed to get Phase 2 going.

Krusel refuted that, stating that the $200 million in lending was not necessarily needed for Phase 2. He also said the PRPA has not even seen the report and said it was not clear where the information referenced came from.

"We still have not, with the commercial partners, we still have not confirmed or finalized the make-up of the financing of Phase 2 and so it may not be necessary for $200 million in financing for that project to move forward."

Things have changed since 2005 when the PRPA was eager to get going on Phase 2, and even since Oct. 1 because the global shipping market has fallen upon hard times along with the rest of the world's economy.

Just three years ago, the PRPA had hoped to get Phase 2 up and running by 2009, with the first shovel breaking ground by 2007.

"Right in time for the winter Olympics," Krusel told the Daily News at the time.

It's quite possible he could have meant the winter Olympics - Sochi, Russia in 2014 - because that is when Krusel is now expecting the first ship to dock at the Phase 2 facility.

An example of how things have soured for the shipping world would be major Fairview Terminal customer COSCO. On Saturday, it was revealed that the Chinese shipping titan, the largest shipper to Fairview, made losses of $585 million in the last quarter because of its commitments to Freight Forward Agreements (buying future freight contracts with the hopes they would be cheaper than the future rates), after betting that freight rates would remain higher than their future contracts.

Tightening shipping margins have greatly impacted port revenues on the West Coast creating a business scramble among ports from Long Beach/Los Angeles to the Port of Vancouver, with the IA port targeting business in Prince Rupert as a main opportunity to suck business back in.

Just over a month ago, the Californian port said it was contemplating a short-term incentive program to pay tenants $10 for every new TEU they bring to the port by either adding a new service or luring an existing service from another West Coast port.

But Krusel denies that has anything to do with the port's expansion plans.

"When Prince Rupert first opened up the main competitive advantage was we were bringing new capacity online into an industry that was capacity starved. Now, with the downturn in the economy, other factors are more important in the competitive territory.

"In reality, it is actually putting Prince Rupert on show and demonstrating that we actually have the superior competitive advantage compared to all of the other West Coast ports," said Krusel.

He said that the new competitive market share is allowing the port to become a winner because Prince Rupert's much-ballyhooed intermodal system is delivering containers faster, more economically and more reliably than any other trade corridor on the West Coast of North America.

According to a Canadian Manufacturers and Exporters survey released last Thursday, exporters are being knocked around worse than Rocky Balboa, with 67 per cent of British Columbian respondents claiming business was down, 52 per cent across the nation, with primary metal" taking the biggest punches.

Concerns have also been raised by local MLA Gary Coons that both the Conservative federal government and the B.C. Liberal provincial government have not been fully committed to investing in the port, suggesting per haps that the provincial government is spending too much time focusing 011 the controversial Deltaport rather than the much
embraced Port of Prince Rupert.

Krusel dismissed those concerns, suggesting that while funding is always important it is not critical to the success or failure of the expansion plans.

And for the future in container shipping, Krusel remains buoyant that we will see increased traffic coming through Fairview Terminals.

"The long-term prognosis for container volume on the West Coast of North America is quite bullish and the anticipated demand is expected to proceed in both Vancouver and Prince Rupert."

Leaders say time is right to diversify economy
The Daily News
Pages one and three

Local reaction to news that phase two of the Fairview Terminal expansion will not happen until 2014 did not include much shock among North Coast leaders.

And it seems that community leaders are saying now is the right time to diversify the economy, if nothing else.

"In the short-term it means that we need to continue on and in some cases redouble our efforts to ensure that there is support for port facilities in Prince Rupert and to let people know that we are solidly behind that and that port development is part of our future," said Prince Rupert Mayor Jack Mussallem.

Mussallem said enhancement expansion of port facilities would playa key role in our community and renewed development and beyond that the city would keep pursuing other opportunities for other port facilities.

"People are well aware of the possibilities of a potash terminal here and there are other thing that we would be looking to get done through our economic development, through investment opportunity programs," said Mussallem.

Currently, the Prince Rupert Economic Development Corporation has no one leading the charge. Former economic development manger Chris Collussi left to work for Fairview Terminals and has not been replaced.

Perhaps reinvigorating that might change local fortunes but Mussallem said he saw more opportunities opening up regionally.

"Regionalization of some services and some other programs putting the emphasis on the North Coast."

In Port Edward, District Manager Ron Bedard said that this news obviously meant, economically, it would affect the bedroom community's property sales.

"Property we have for sale for subdivision and housing is not going to happen and the number of people moving to the community is going to be impacted," said Bedard.

After a strong year for all communities in the Northwest region in 2007, the B.C. Northern Real Estate Board (BCNREB) had a very positive outlook for 2008, although it did expect the real estate market to settle down.

The median average price of the single-family homes sold in 2008 has increased to $172,500, up from $164,727 at the end of 2007.

However, the increase is much less dramatic than in the two years prior, given that the average home in Prince Rupert sold for $118,738 in 2005.

That was before there was any serious talk around the world of an economic recession.

Local real estate agent and B.C.Northern Real Estate Board member Victor Prystay said he received news from a friend in San Francisco through an email and said he couldn't say he was surprised.

"Given this current international financial morass that's going on ... you know the business plan is still good and it may be put off for a year or 18 months but I would think the port is being conservative and being a pollyanna because I think it will be sooner," said Prystay.

Ever the optimist, Prystay hopes the economic downturn will end sooner rather than later.

He said the promises of a Northwest gateway have been envisioned for some time as a logical geographical delivery point for Asian goods.

"Charles Hays had it right one hundred years ago and we are proving that it's right even if the container traffic diminishes I gotta believe that (shippers) want to get their product to where they want to get it in the most efficient, most economic fashion and we are it," said Prystay.

In recent months, house sales in the north have fallen by 22 per cent.

"I think our downturn this year was the consequence of the first eight months of the port in operation (workers) only got 20 hours per week.

"Since then we have had five months of 40 hours a week, so I think that by spring those people who are working down there are going to be a position where they are going to be able to buy," said Prystay.

Prince Rupert Port Authority President and CEO Don Krusel wants Prince Rupert take a breather at the news that Phase 2 will not be online until 2014 at the earliest.

"We remain focused and committed to expanding Fairview and to continue building this gateway and the success is there and we remain confident that we are going to be pushing forward with our vision," said Krusel.

"Our timeline is to start (construction) in 2010 and the first ship is to arrive in 2014”,

He said the evidence of who is providing the best service is in the numbers. .

"The numbers are the Port of Prince Rupert is the only port on the West Coast of North America that is showing good healthy volume of containers," said Krusel.

Mussallem had more direct words for locals.

"We are not going away.

"We're still here and we are going to continue on. With mega projects there are delays but it is not the end," said Mussallem.

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