Tuesday, June 29, 2010

Ports Operator Fails To Convert Promises Into Cash After Shipping Slide

DP World Shelve Plans for Dual Stock Exchange Listing
Shipping News Feature

DUBAI – UK – DP World the global ports business that vowed to go ahead with London Gateway just a few months ago has suspended plans to seek a dual listing on the London Stock Exchange which effectively means it will not attempt to raise money again via this route until its 2010 figures are published next March. Parent company Dubai World had already gone ahead with restructuring plans which specifically excluded the ports division.

After failing to raise the necessary capital on their home exchange, Nasdaq Dubai, DP World opted for overseas investor support via the London bourse which the company insisted was ‘not to raise capital but to provide liquidity’. Despite protestations that the withdrawal would not affect the share price the Dubai Exchange apparently registered a 6.8% fall before the close yesterday.

DP World owns P & O Maritime Services and CSX World Terminals and is 77% owned itself by Dubai World; it controls some of the world’s major ports including facilities in Jebel Ali, Hong Kong, Sydney, Vancouver and Southampton, a total of almost 50 terminals in over 30 countries with more under development. Analysts had predicted that the dual listing could lift the share prices in the Middle East opening the doors for a sell off by the parent company with the resultant funds being used to service the Dubai World debt, reportedly exceeding $23 billion.

The fact that DP World is now valued at under $8 billion, not the $20 plus billion it reached at the time of its initial public offering and the fact it has been unable to find a mechanism to trade its shares simultaneously in London and Dubai, will be of great concern to those who are looking for a sign that the London Gateway project will proceed according to the plan DP World so carefully market by way of ‘virtual reality’. After our report in January when DP World said “infrastructure foundation work” was due to commence we have heard little of progress on the development.

There have been no press updates to the London Gateway website since the change of Government and the reference to work commencing applies to the controversial dredging of the Thames Estuary that provoked a furious response from local fishing interests and was actually paid for with a £12.7 million grant from the EU's TEN-T Trans-European Transport Network.

Despite all the setbacks including the dramatic fall in Dubai’s credibility and the drop in TEU’s shipping through the company’s terminals last year, DP World apparently still managed a profit in its last financial year, probably due to the width of its global presence. Whether the extra 3.5 million TEU that London Gateway is promised to handle will be found in extra traffic or taken from other ports or indeed if it ever becomes fully functional is a matter of some conjecture.

Pic: London Gateway Masterplan.