Kingston Wharves tacks US$30 million on expansion budget
Kingston Wharves Limited's (KWL) expansion cost could reach US$100 million ($11.6 billion).
The cargo handler's management appears more optimistic about the take-up of its logistics services in the future than it was just a year ago.
The third phase of the project is demand-driven, so it can drive up the cost of expansion. But last May, the cargo handler estimated that cost at US$70 million over the five years to 2019.
"Depending on when we implement different phases, that will determine the amount of capital that we put in," KWL CEO Grantley Stephenson told the Financial Gleaner after his presentation at the company's annual general meeting held at the Jamaica Conference Centre on Thursday.
"We are looking at US$70 to US$100 million," he said.
So far, KWL has spent US$7-8 million on the expansion. Its capital expenditure on property, plant and equipment jumped from $92 million during the first three months of 2014 to $175 million in local currency in the first quarter this year.
Stephenson said construction of the 160,000-square-foot total logistic complex should commence shortly - having broken ground on the project last October - while the acquisition of gantry cranes which can handle Post-Panamax vessels might take place in 2015. However, the cargo handler's focus this year is on operationalising the free zone status and expanding port boundaries.
Next year, the new logistics information system is expected to be deployed and the container yard will be reconfigured. Harbour dredging along the berth ways to enable docking of Post-Panamax ships should run into 2017. The modular warehouse, which will be sized at 10,000 square feet for each unit and which are targeted at manufacturers, distributors and logistics service providers, should begin by 2018. Then the demand-driven expansion will commence.
Importantly, Kingston Wharves wants to be able to handle a million twenty-foot container equivalent units (TEUs) by 2019. It currently is capable of handling 450,000 TEUs, but it will have to drum up more business to fully utilise the capacity it has now, given that it handled around 200,000 TEUs last year.
"How do we get there?" Stephenson rhetorically asked shareholders at the meeting. "The critical success factors identified are financing, customer value and infrastructure readiness," he said.
Some of that readiness will depend on the Port Authority of Jamaica completing the dredging of the channel and turning basin which gets ships to KWL's berths.
"Together with the new concessionaire, they (the Port Authority) are going to be undertaking this project sometime between this year and next," Stephenson projected. Port Authority is leasing Kingston Container Terminal to a consortium comprising CMA CGM and Terminal Link under a 30-year concession.
The KWL CEO told the Financial Gleaner that the company is now looking at securing debt financing for its state-of-the-art warehouse complex.
Still, Kingston Wharves has plenty of expansion cash. It was sitting on $2.7 billion in working capital up to the end of March. Its profit also climbed 39 per cent from year-earlier levels to $189 million in the first quarter of 2015.