28 JUN 2011

DPPT Suggests New Legislation may be required to fulfill Government's Intentions in Dover

People's Bid for The Port of Dover suggests new Government legislation may be required

The Dover People's Port Trust ("DPPTL") yesterday submitted a detailed response to the Secretary of State for Transport's request in respect of the proposed revised criteria regarding the sale of Trust Ports in the UK.

DPPTL consulted widely with the communities of Dover, both with individuals and with a variety of private businesses and local government organisations, before drawing up this response.

DPPTL welcomes the Secretary of State for Transport's desire to make community participation and benefit a key criterion in approving the privatisation of major Trust Ports.

DPPTL considers that the existing legislation – The Ports Act 1991 (the "Act") is ill suited for this purpose, and that the proposed criteria are too imprecise to ensure that the intentions behind them are put fully into effect.

The Port of Dover (the "Port") is the leading ferry port in Europe and one of the busiest in the world and is the prime gateway into and from the UK for both roll-on/roll-off ferry traffic and for sea-born tourist traffic. In 2010, traffic was 13.5 million passengers, 2.3 million cars and 2.1 million freight vehicles. Consequently, the Port is an infrastructure asset of enormous strategic and commercial importance to the UK.

DPPTL believes that it is completely inappropriate that the entire sale process for a strategic national asset of this importance should be in the hands of the local board/management – in the case of Dover, the Dover Harbour Board ("DHB") – as is currently the case under the Act, particularly when the senior management of DHB are almost certain to have an economic interest in the outcome and thus be grossly conflicted.

The United Kingdom is highly unusual in permitting full private sector ownership of port authorities. Nearly all port authorities worldwide are in public ownership (either State or Municipal). Or, alternatively (in the case of the UK and some former colonies such as India), they are Trust Ports which embrace a wider stakeholder / community agenda.

DPPTL is confident that its proposals for the Port of Dover meet both the wording and the intention behind the revised criteria. However, given the structure of the Act it questions the ability of the Secretary of State to ensure that the aspirations set out in these criteria are fulfilled during the sales process.

DPPTL's particular concerns relate to the requirement for the board of the Trust Port – in the case of Dover, DHB, to:

(a) draw up the criteria and recommend the process of sale;

(b) act as the sole arbiter on the community interest and how it might be recognised, subject only to veto or direction by the Secretary of State;

(c) have control over the process of sale, when management is likely to have a financial interest in the outcome; and

(d) dispose of an essential service asset, which may have a tendency to monopoly pricing without any form of price control

Given DHB's hostile response to DPPTL's proposals, DPPTL is concerned that it will be difficult if not impossible for any privatisation committee of DHB to view DPPTL's proposals impartially and be able to demonstrate to the public at large that it has done so.

DPPTL has made a number of suggestions in its response to the Secretary of State on ways in which the drafting of the criteria can be made more specific, and the process of sale more accommodating, so as to satisfy the national and community interest.

However, DPPTL believes that the Government should urgently consider whether its aspiration to foster community involvement and benefit in Trust ports generally, and Dover in particular, can be addressed under existing legislation or whether new legislation is necessary.

DPPTL and the Port of Dover

DPPTL is an industrial and provident society established and registered in 2010 by a wide range of community interests to purchase the Port. DPPTL has been registered with charitable status by HMRC.

These community interests had become concerned by the proposal made by the DHB in January 2010 for the privatisation of the Port, through a sale to third party investors who did not necessarily have any direct commitment to either the local or national economy.

DPPTL and the broader community were unconvinced by the claims of the DHB, at the time of announcement of its proposals in January 2010, that the prime driver for seeking privatisation was the need to borrow in order to proceed with the T2 ferry terminal development at Dover's Western Docks (T2). In this respect DPPTL notes that:

(i) the sales process imposes no commitment on the buyer to proceed with the T2 development;

(ii) by DHB's own admission, significantly reduced traffic growth means that T2 will now not be required until at least 2020.

DPPTL was also concerned that the proposal represented poor value for money for the users and the local community, both of whom stood to gain little from the process either in terms of involvement in the key decisions relating to the ownership and development of the asset, or in terms of direct economic benefit.

Despite a number of attempts by DPPTL to engage with DHB to discuss its concerns, DHB has declined to engage in meaningful discussions with DPPTL, and indeed has been openly hostile, mainly through its Chief Executive, in denigrating DPPTL's proposals

DPPTL believes that DHB's belated recent attempt to demonstrate a community focus through a concerted PR campaign to promote its proposal to establish the Port of Dover Community Trust (PDCT) is substantially inferior in terms of community involvement and benefit to that inherent in DPPTL's proposals.

DPPTL's proposals involve the immediate injection of £50 million for the regeneration of Dover with a share of future profits. DHB proposes injecting into PDCT £10 million in cash, with an additional £1 million per annum over five years as a non-dividend cash endowment, and £20 million in shares in the Port. It is unclear whether these shares have any real value (being an illiquid minority holding with no certainty of any future dividend income), nor whether the "ongoing" community interest in them can be protected in the long term if the future majority owner of the business decided to sell it on.

DHB's frequent repetition of the claim that the "financial impact" of PDCT on Dover will be £95m in the first five years and £60m per annum thereafter (subsequently revised down to £7.8m p.a.!!) is hard to comprehend and harder to verify under the laws of simple arithmetic. It is apparently arrived at by adding in "likely match funding and multiplier effects" but has been interpreted by many casual observers (including the BBC) to mean that DHB would be investing £100million in the community. In reality, DHB would be investing some £15m over five years whereas DPPTL would be investing £50m immediately and a share in Port "profits" in perpetuity.

Finally, DPPTL believes that, as a Trust Port, the Port of Dover has a number of features that impose unique constraints on any change in ownership, namely it:

(i) occupies a major, strategic, long term role in the transportation infrastructure of the United Kingdom, accounting for trade between the UK and Europe amounting to £80 billion in value each year;

(ii) has considerable short and medium term pricing power because of its clear and pronounced competitive advantage on certain types of traffic, which arise from both its geographic location and the efficient domestic transport links that have been constructed to service it – using public money;

(iii) has a group of customers (the ferry companies) that have invested heavily in ships that are impractical to redeploy on other routes – so they are to a large degree "captive";

(iv) accounts for a substantial part of the land mass in Dover, so that it is a key player in any proposed programme of regeneration;

(v) is located in an area which has suffered from decades of serious deprivation, and

(v) will have an unusually pronounced impact on the well-being of the local community from any decision that it makes, because of the constraints imposed by the local geography.

Accordingly, and at its own expense, DPPTL has engaged a team of professional advisors to help it develop a structure which is designed to ensure that:

(i) the freehold of the Port remains inalienably within community ownership;

(ii) the three activities associated with the Port are split out and operated separately, through the following corporate entities:

DPPTL, as the vehicle for community interest, interacting with and contributing to the well being of the community;PortCo, as an efficient port operator; and RegenCo, as the agent for regeneration in the town of Dover and the surrounding area; the long term commitment of users to the Port;investment in the long term development and operation of the Port so that it can "contribute to reliable and efficient transport networks"; and "access to capital to meet" both the purchase price and "future investment needs" in a stable and predictable manner.

each activity is governed through an appropriate board and management structure which seeks to ensure that each can be managed alongside the others in a sensitive, accountable and intelligent fashion according to high standards of corporate governance;

in each case, DPPTL, PortCo and RegenCo are not capable of being "captured" by any interest group; and

in the case of PortCo, a regulatory framework is developed for the operation of the Port, including the appointment of an independent quasi-regulator, to ensure:

In a local referendum conducted on 23 March 2011 there was overwhelming support for a mutualisation proposal sponsored by the local community in Dover, as proposed by DPPTL. Additionally, a wide range of community organisations have backed DPPTL's proposals.

DPPTL is in the process of launching a recruitment campaign to sign up members of the local community as members of DPPTL in order to further demonstrate the broad and representative support it enjoys in the Dover community.

For further information, please contact:

Neil Wiggins

Dover People's Port Trust

M: 06330 103740

Simon Robinson

Farm Street Communications

M: 06543 340507

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