Exclusive: DP World to maintain about $1bn capex for next three years

Company is eyeing more opportunities in Saudi Arabia, plans to further invest in Jeddah port capacity expansion

A former DP World manager must see out her jail term and pay a fine of Dh4.85 million after being convicted of bribery charges. Bloomberg.

DP World expects to spend about US$1 billion every year for the next three years as the world’s fourth-biggest port operator looks to ramp up investments, add capacity and acquire new assets to strengthen its global footprint.

"We are looking at about close to US$1bn [in capital expenditure] from now to till 2020,"  DP World group chairman and chief executive Sultan Ahmed Bin Sulayem told The National in an interview in Dubai. "This is what is envisaged but of course our budget is flexible, depending on any businesses opportunities that we see."

The company, which is set to post 10 per cent growth in its gross container volumes in 2017 on the back of a stronger-than-expected recovery in the global trade last year, has spent about the same amount on capex in 2017.

Saudi Arabia is among the global trading hubs where the company plans to expand its presence. DP World is eyeing deals to operate more ports in the region’s biggest economy and is considering further investments into Jeddah Islamic Port to add further capacity. The company operates the South Container Terminal in the Red Sea port, which is the main hub, handling 59 per cent of the kingdom’s imports by sea and serves its main commercial centres.

“We have plans to expand Jeddah [port],” Mr Sulayem said without elaborating on the size of planned investments into exiting port facilities.

Saudi Arabia, which still relies heavily on sale of crude for revenues, is implementing economic reforms under its Vision 2030 programme after a slide in crude prices from Mid-2014 peak of $115 a barrel. In December the kingdom announced a record budget with an emphasis on infrastructure spending, which opens up new business opportunities for companies such as DP World.

Vision 2030 "gives visibility of what [growth] prospects are there …..and we are looking at expanding our investments in Saudi Arabia,” he said.

The kingdom’s expansionary budget is a sign of commitment from the government to turn its economy around, and it is “all good news”.

“If you look at Dubai and the UAE, what got us growing since 2010 was the government commitment to invest in infrastructure and what they need to do in Saudi Arabia in [terms of] infrastructure [spending] is big,” Mr Sulayem noted. “That’s going to be, in my opinion, one of the most important growth initiatives in the region. It is not just Saudi, that investment in growth is going to touch everybody [in the region].”

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The Nasdaq Dubai-listed port operator, is also eyeing acquisition opportunities in the UAE and beyond, Mr Sulayem said without identifying the assets.

“We go where the business goes,” he said. “We have an appetite for anything that will increase our EBITDA [earning before interest, tax depreciation and amortisation]. We look at opportunities around the world.”

In September the company took over two state-owned maritime entities in Dubai for $405 million, its second acquisition of assets in the UAE in three years after buying the Jebel Ali free zone owner for $2.6bn.

The acquisitions will help diversify the company’s business and are set to be concluded by the end of the first quarter of 2018.

DP World’s debt plans will depend on the size of future acquisitions, Mr Sulayem said when asked if the company plans to raise funds from debt capital markets this year.

Further investment into Virgin Hyperloop One, the futuristic transportation company, which appointed Virgin Group founder Richard Branson as its new chairman, however, will be evaluated on merit, he said.

“We invested with them. I’m not going to say we will invest in the future. It depends on the deal and each investment in the future has its own [merits],” Mr Sulayem said.

The company in December participated in the latest $50m funding round for the company. The firm joined Russia’s Caspian Venture Capital in the financing, which came ahead of the transportation company’s Series C round of funding.

Mr Sulayem said that the investments already poured into the technology firm are in line with the strategy to invest in core businesses.

“It is [our core business] actually, because Hyperloop is a technology that deals with cargo and we are a cargo company,” he said. “To me, Hyperloop is more of a R&D [research and development] investment. Just by investing in Hyperloop we have developed amazing technologies in the ports to deal with how fast you move containers.”

In terms of domestic operations, Mr Sulayem said that DP World has added 1.5 million twenty foot equivalent units (TEUs) capacity at Terminal 3 of home port Jebel Ali in the second half of last year. That brings the total to 4 million TEUs and makes it the world’s largest semi-automated facility. Terminal 4 is "equipped and ready", he added.

"We never want our customers to have to [experience] congestion," Mr Sulayem said. "Any time we go to 70 per cent capacity, we automatically invest to expand."