Calls for change from a big gun

The head of Wellington's port company Centreport believes New Zealand's freight transport system needs big changes. Nick Churchouse reports.

Warren Larsen is mildly frustrated. An accomplished company director, with nine years as the Dairy Board chief executive behind him and enough letters after his name to start his own alphabet, the chairman of Wellington port company CentrePort is not riled easily.

Astride corporate governance for numerous companies including Air New Zealand, Mr Larsen's role at CentrePort has stepped up a notch, his eight year tenure on the board putting him in the top seat.

Now he has the chance to turn the heat up on not only his own port, but on everything that goes along with it.

His muted dismay with the situation CentrePort finds itself in is motive enough, he explains.

Stuck at the end of a strangled transport corridor, Wellington's docklands are small, under pressure for infrastructure investment and have half-turned into an office park.

Growth in container traffic has slowed markedly in the past six months and vehicle imports have dropped by more than half. The company managed a $11.4 million June year pre-tax profit in line with 2008, but predicts more tough times.

Mr Larsen says the secret to survival is not just about CentrePort, but a realignment of the country's road, rail and sea transport system.

But he is happy to start in Wellington.

Since joining the port's board in 2001, he has seen little progress toward a national strategy for moving goods efficiently to the most appropriate places for export. "We have hardly moved."

The region only managed to widen its rail tunnels to fit 40ft containers three years ago.

"Nationally, that's embarrassing."

Wellington's traditional outbound cargoes of wool and light manufacturing are all but memories, the industries having rationalised into other areas. That has to be accepted, Mr Larsen says.

The port has developed into a hybrid company - half port and half property. Office buildings now make up more than half of its asset base.

With government departments and banks ready to step up and take on the leases for big new buildings, it seems CentrePort sees more potential in multi-storey people places than its traditional fare.

But as the capital's port looks outside the square to appease its shareholders and make a profit, the argument for streamlined shipping and an integrated national logistics blueprint is not going anywhere.

It needs to, Mr Larsen says. "Unless we get a real focus on this, we'll hear this debate continuing [forever]. I have not seen any robust economic analysis of this, that encompasses all the pieces of the jigsaw that need to be looked at."

Calls for amalgamation of ports, most recently from Port of Tauranga chairman John Parker, have been around for a long time.

Industry analysts have questioned whether it makes sense for Auckland and Tauranga ports both to be spending money on infrastructure and handling large ships.

Last month, Mr Parker said the need for port rationalisation in New Zealand had become more urgent.

Speaking at the port company's annual meeting, Mr Parker said the collapse of world trade meant there was a surplus of container ships with an estimated 20 per cent of container capacity likely to be idle by the end of this year.

Global trade was unlikely to experience a large turnaround in 2010, which meant the surplus of container ships could double, Mr Parker said.

Newer and larger container ships wanted to begin servicing New Zealand, but hundreds of millions needed to be spent on infrastructure to cater for them.

"That cost and the requirements of these vessels to make at most two New Zealand port calls and to discharge and load big tonnages quickly means that New Zealand cannot afford or service more than two such ports," Mr Parker said.

"A port hierarchy must develop where other ports feed in cargoes to the two primary ports by road, rail and sea.

"If port owners don't move, falling revenues and market forces will dictate change."

Recently, Port Taranaki posted an increased annual profit, but warned life would be much tougher this financial year as a result of the combined effects of weaker global economic conditions and the loss of a significant portion of its Fonterra trade.

Container handling was expected to be down 35 per cent following Fonterra's decision to ship Whareroa's south-east Asian product by rail to Auckland, Tauranga and Napier for export.

But Mr Larsen says amalgamation is just one piece of the puzzle.

"If we all started life with a clean sheet of paper and no infrastructure at all, that's probably what we would design."

The national infrastructure plan, only a concept at this stage, is being looked at by a team within Treasury since a draft discussion paper was released earlier this year.

The idea is to have a holistic plan finalised for early 2010.

The closest Mr Larsen gets to advocating the ultimate solution is to suggest New Zealand optimises main export ports to link with super freighters on Australia's eastern coast.

Improved coastal shipping would feed the big outbound ports and service the regions.

But the answer has to incorporate roading and rail as much as anything, and it will not be easy.

The debate still has a long way to go, five years before any sensible strategy can be nutted out, Mr Larsen estimates.

The regions will fight for their own patch. With the amount of investment tied up in regional port facilities and the associated jobs and transport traffic and expenditure, the willingness to adopt a different scheme will be small.

To push the issue, Mr Larsen says some central government muscle is required.

"That's the only way you'll get a logical outcome. It will not happen fast enough by attrition.

"The shareholders are not going to give up on their ports, so what is going to convince them to adopt a totally different position? You have to have a good story to tell them, and we do not have that story yet."

Unsurprisingly, Mr Larsen is very bullish about Wellington's place in the grand new order. "We are the bridge across Cook Strait. We are a great natural harbour, there are plenty of others that aren't. We have some natural advantages."

The Cook Strait link is a big one, with rail traffic still strong across the ditch. He ponders whether the rail provision on the ferries will be scrapped in time, but it still remains relevant for now.

What is irrelevant, however, is any talk of a fast-tracked, one- dimensional fix to a national problem being fought regionally.

Mr Larsen knows Wellington will never rival Tauranga for container traffic, and claims Auckland has as many worries on its plate as traffic woes stifle freight to and from the downtown docks.

Regional ports have their strengths and their logical cargoes, depending on the flavour of industry in their catchment.

But all that needs to be taken out of the parochial mix and fed back into a country-wide solution.

"All of these issues have started to make people think about this. The bits of the equation are that the shippers have a view, the exporters have a view, and the ports historically have had to accommodate the wishes of both those parties to find a solution.

"It needs to move to an amalgam of all that - what's the best outcome."

He envisages goods moving around the country - "a country that is only the size of a city" - in small coastal shipping lines, and loading up larger ships in one or two larger export ports to go further afield.

It might cost $1 billion to get the infrastructure to that point.

Wellington could take the big ships with a little dredging of the harbour, but it cannot bring in the cargo because of transport links and storage issues.

"There's a really good chance that the smaller hubbing strategy makes more overall sense than the larger vessel strategy.

"We have a little wee territory with a couple of islands in which it is difficult to shift things around efficiently. Road is not going to do it, rail is not going to do it."

WHILE the Government needs to get the ball rolling, in the same breath he turns and looks at the office of CentrePort's new chief executive, Blair O'Keeffe.

"They are the people that will drive the change with the ability to withstand robust economic analysis, and being able to talk past the parochial barriers.

"People like that are not going to hang around in these jobs unless they can see progress."

As a director on the Air New Zealand board, Mr Larsen is aware of the monumental change required to shift an industry into the future.

Equally, he has seen the dairy industry pull up its socks, and he makes no bones about the task facing New Zealand's port industry.

"That's what we have to do."

WARREN LARSEN, Chairman of CentrePort

* Lives in Wellington.

* A professional director, Warren Larsen is also on the board at Air New Zealand, Jenkin Timber and Landcorp Farming as well as the Foundation for Research, Science and Technology and Massey University Foundation.

* Known best for his nine-year tenure as head of the New Zealand Dairy Board, he is also a Companion of the New Zealand Order of Merit for services to business, and a trained accountant and animal scientist.

* Outside the boardroom Mr Larsen has seen accolades in rugby, cricket and judo, earning representative spots in both rugby and cricket.

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