The operating contract of DP World, the world's fourth largest ports operator, for PT Terminal Petikemas Surabaya (TPS) in Indonesia that will expire at the end of the agreement in 2019, will not be renewed, the company's chairman said.
“It is unfortunate that the significant positive contributions made by global terminal operators in Indonesia have not been fully recognised, despite our successful track record," Sultan Ahmed Bin Sulayem, DP World Group Chairman and CEO said in an e-mailed statement.
"We are therefore disappointed that the operating contract renewal terms offered by the Indonesian authorities did not meet our threshold for continued investment. Adhering to strict financial discipline has been crucial to the growth of DP World and on that basis we are not able to renew the agreement beyond 2019. The transfer of operations will be in accordance to the terms and conditions of the contract."
DP World is a 49 per cent shareholder in TPS, which represents a gross capacity of 2.1 million TEUs (twenty-foot containers) out of 85 million TEUs for the Group. The company acquired its interest in TPS when it acquired international ports operator P&O in 2006.
There will be no material financial impact on the Group as a consequence of the TPS contract lapsing, the company said.
“When investing in trade infrastructure and services, our goal is to serve our global customers while making a positive economic impact in the countries in which we work and delivering returns to our shareholders," said Mr Bin Sulayem. "We remain committed to investing in Asia and all geographies that have an appetite for foreign direct investment.”
Mr Bin Sulayem was not reachable by phone. In July DP World signed an agreement in Indonesia to advise on the development of two ports. The port operator signed a technical assistance contract with the Indonesian government to help develop the Kuala Tanjung greenfield port and logistics zone as well as the Belawan port, located in north Sumatra.
“DP World, alongside other global terminal operators, has built world class port infrastructure in Indonesia that serves the needs of shipping lines, manufacturers, traders and consumers in the region," said Mr Bin Sulayem.
"Over the last 20 years, Surabaya has benefited from DP World’s state-of-the-art, productivity-enhancing systems, training and development programmes, as well as the company’s security, safety and environmental best practices, and we are proud of our success there. We have invested significantly in the terminal infrastructure, which has created jobs and contributed to the growth of both the port and the region.
DP World's gross container volume advanced 10.7 per cent on a reported basis in the second quarter this year to 17,596 TEU on the back of a rise in global trade. The biggest growth in volumes came from the Americas and Australia regions, which together registered a 17.1 per cent jump followed by Europe, Middle East and Africa with 12.7 per cent, and a 7.3 per cent rise by Asia Pacific & India Subcontinent.