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Puerto Rico Bullish Over Foray Into Transhipment …Gas Natural Puts Island In Intl Growth Plan

Puerto Rico Bullish Over Foray Into Transhipment

June 25, 2004
Copyright © 2004 Informa UK Ltd. All rights reserved.

Lloyd's List

CAN the US Commonwealth territory of Puerto Rico break into the Caribbean transhipment trade in a big way in the face of so much existing competition?

It seems to think it certainly can and is moving ahead with the long-mooted Port of the Americas on the south coast, which will consist of 7,500 ft of deepwater container berths linking the existing harbours of Ponce and Guayanilla.

The port’s long-term aim will be to attract as much as 2.3m teu of import-export/ transhipment cargo a year, almost double the amount the market leader, Panama, now does.

The project is likely to cost about $700m and the deadline for bids to design, build, operate and maintain the port was the beginning of this month.

Three groups had earlier qualified to bid: the Manila-based International Container Terminal Services International, Singapore’s PSA International and a Dutch-US consortium, Main Ports of Puerto Rico-Fluor.

Construction is due for completion by 2006.

The Puerto Rican authorities expect the port’s base business to be the burgeoning trade in light manufactured goods produced in the territory on the basis of special concessions made available by the US but will also be vigorously targeting the Caribbean transhipment business.

The Port of the Americas is foreseen as being one of the small number of mega ports providing transhipment services that is widely predicted to be the way cargo handling in the region will be structured in future.

Edgar Torres-Caballero of Puerto Rico’s Department of Economic Development and Commerce, puts it this way: "The port is designed to broaden Puerto Rico’s participation in the world economy by strengthening its distribution and logistics capabilities."

Industrial zone facilities will also be developed adjacent to the new port, along the lines of the Point Lisas port in Trinidad, which services the nearby gas-based industrial estate.

In Puerto Rico’s case, it will be light manufactured goods like pharmaceuticals, medical equipment and alarm devices, to name a few.

Gas Natural Puts Puerto Rico In Intl Growth Plan

By Enza Tedesco


July 26, 2004
Copyright © 2004 Dow Jones & Company, Inc. All rights reserved.

PENUELAS, Puerto Rico (Dow Jones)--In summer 2003, a U.S. Bankruptcy Court approved Gas Natural SDG SA's (GAS.MC) purchase of Enron Corp.'s (ENRNQ) assets in Puerto Rico. The timing could hardly have been better.

Coming off the failure to complete a EUR15-billion takeover of domestic rival Iberdrola SA (IBE.MC) in April, the Barcelona-based Gas Natural was glad to shift attention to something else. More importantly, Puerto Rico provided fertile ground for the company to stimulate its international growth.

At the crossroads between the U.S. and Latin America, this Caribbean island offered an opening into a still infant gas market, a chance to diversify into the electricity business and an expanded presence in the liquified natural gas market.

"Puerto Rico represents a great opportunity for us," said Gas Natural Chief Executive Enrique Locutura. "We are now the gatekeepers of the island's gas market."

The company snapped up Enron's 47.5% of the island's state-of-the-art Ecoelectrica power plant in October 2003 for $179 million. Co-owned by the California unit of Edison International (EIX) and by General Electric Capital Corp. (GEX.XX), the gas-fired Ecoelectrica plant provides 15% of power consumed by the 3.8 million residents of Puerto Rico.

The 18-hectare site also houses the island's sole liquefied natural gas terminal and a water desalination plant.

With a dollar-based economy growing at 3% a year, Puerto Rico could be a nice chunk of the growth in Gas Natural's earnings before interest, taxes, depreciation and amortization. The company gets 13% of EBITDA in the Americas, a figure it wants to lift to 20% by 2008.

In nominal terms, that means the region will contribute EUR500 million to Gas Natural's EBITDA target of EUR2.5 billion in 2008.

Capitalizing on linguistic and cultural affinities as well as low costs and potentially high profits, Gas Natural has been building its utility presence in Latin America since 1992, when it first invested in Argentina. It has since also become a leading gas supplier in Brazil, Colombia and Mexico.

Last year's effort to take over Iberdrola kept executives' focus on Spain, but the failure to complete the deal, which was blocked by regulators, and the realization that Spain would allow only limited growth confirmed the need to look internationally.

"If we want to grow, we have to go elsewhere," said Alberto Toca, Gas Natural's head of international operations, referring to the limited expansion opportunity at home, where it has 70% of the market.

Analysts mainly view the investment in Puerto Rico as an additional move by Gas Natural into the U.S. market, rather than into Latin America.

"The only Latin American feature Puerto Rico has is that people there speak Spanish," said Javier Suarez, a Milan-based analyst for ING. "For all other purposes the island is the U.S.'s state number 51. The island economy is entirely dollarized, it offers low levels of volatility and basically no risks."

Fernando Murillo, a Madrid-based analyst with Ahorro Corporacion, said the Puerto Rican assets should give Gas Natural a return on capital of about 10%.

"Overall, it's a good investment," he said. "The price was reasonable and Puerto Rico's gas market is relatively untapped."

The country's state power monopoly, Puerto Rico Electric Power Authority, is encouraging that to change. It wants a third of power to come from natural gas by 2012, up from less than 14% in 2002. Two years ago, about 81% of the island's power generation came from crude oil.

Gas Natural is forecasting Puerto Rico will add EUR250 million to EBITDA between 2004 and 2008, almost 13% of the Americas' contribution to EBITDA.

Gas Natural wants to become the primary gas supplier to Puerto Rico, which has no reserves of its own, but will increasingly rely on gas to fuel its power plants in coming years, said Gas Natural Chairman Antoni Brufau.

The company already has its eye on a project to build and supply a 500-megawatt combined-cycle plant in Mayaguez, in the west.

"We'll be involved in the Mayaguez project one way or another," said Secundino Munoz, Gas Natural's country manager in Puerto Rico. "We'll either enter as an investor or at least as a gas supplier."

By 2008, Gas Natural also expects to have gas-supply contracts with three other power plants in Puerto Rico, allowing for annual sales of almost 1.1 billion cubic meters of gas. Such volume would equal the company's sales in Colombia, with a population of some 40 million.

"We have the exclusive import rights of natural gas into the island and that gives us the possibility to supply gas to other plants," said Brufau.

He said the company's presence as an international LNG supplier and its 12 tankers ferrying gas from producers in Trinidad & Tobago, Nigeria, Algeria and Qatar will support the effort. Gas Natural is the second biggest LNG supplier - behind the U.K.'s BG Group PLC (BRG) - to the gas-hungry U.S.

Gas Natural's core shareholders include Spanish-Argentine oil company Repsol YPF SA (REP) with a 30.8% stake and Spain's largest savings bank Caja de Ahorros y Pensiones de Barcelona (CXA.YY), known as La Caixa, with a 34.5% stake.

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