International ports operator DP World is cementing itself as a global trade player with major plans for future growth, according to its chairman. Rebecca Spong reports
Sultan Ahmed bin Sulayem, chairman of ports operator DP World, has been intricately involved in Dubais transformation into a major regional trade hub. His family has long-standing connections with the ruling Al-Maktoum family, with his father being a key adviser to the late Sheikh Rashid bin Saeed al-Maktoum.
Bin Sulayem began his own career in the 1970s, working as a customs officer at the new Jebel Ali port, built many miles away from Dubais traditional trade centre along the creek, where, historically, ships and dhows transported goods in and out of the emirate.
The new large port saw limited business in the early years, but more than 30 years later Jebel Alis terminals have seen numerous expansions, with the ports surrounding free zone and business parks continuing to spread further into the desert.
Through acquiring ports in Europe, the Americas, Africa and Asia, DP World has become a truly global company, one of the few Dubai names to be recognised at such an international scale.
Story of growth
It is a growth story Bin Sulayem has witnessed first hand, despite his career taking a slightly different trajectory for several years during his time as chairman of government entity Dubai World. In this role, he oversaw businesses in sectors such as real estate, hospitality and retail, heading the development of Palm Jumeirah through Dubai World-owned property developer Nakheel.
In 2010, following the financial crisis of 2008-09, Bin Sulayem left Dubai World. However, he maintained his position as chairman of DP World, a role he has held since May 2007. Driving forward the growth of DP World is now his key priority.
We invested [during] the crisis, when companies were shrinking That helped us a lot
We always want to have the capacity available to deal with the requirements of our customers and this I think is the key reason why our customers trust us so much, he says.
In the first half of this year, consolidated container throughput across the operators global port network hit 13.89 million 20-foot equivalent units (TEUs) in the first six months, a 10 per cent increase compared with the same period last year.
This traffic drove up profits by 26 per cent in the first half of the year compared with first six months of 2013. What made this possible is the investments we made in expansion, in acquiring new facilities, and the decision we made then is now paying off, he says.
Alongside many Dubai entities, DP World too struggled during the financial crisis of 2008-09. Its credit rating was downgraded and Jebel Ali port saw traffic stagnating as global trade volumes declined.
Yet Bin Sulayem says DP World defied the downturn by continuing to seek growth.
We invested [during] the crisis, when companies were shrinking, we did not stop. That helped us a lot. The result is we continue to invest, he says.
For the years 2012-14, the port operator had a $3.7bn capital expenditure plan in place, with investment poured into the expansion of Jebel Ali port as well as global operations in Turkey, the UK, the Netherlands and Brazil.
This original spending plan was slightly revised in recent months to account for some delays of equipment needed for the new Terminal 3 at Jebel Ali port.
Approximately $500m of the planned spending will now fall into 2015, reducing the 2012-14 expenditure to $3.2bn. The late deliveries have meant the opening of Terminal 3 has been partly delayed.
The facility was due to fully open by the end of this year, but just 2 million TEUs of capacity came online, with a further 2 million TEUs to be added in the second quarter of 2015, Bin Sulayem says.
Once Terminal 3 is fully open next year, Jebel Alis total port capacity will reach 19 million TEUs.
Bin Sulayem says he is now preparing to develop Terminal 4, which will be built on an island constructed from reclaimed land and will potentially add up to 10 million TEUs of capacity.
We are getting ready, he says. As soon as we see business that requires us to expand, we can easily expand.
To date, one contract has been awarded to construct a bridge to the island. The Netherlands Bam International won the AED370m ($100m) contract to design and build the causeway, bridge and quay wall earlier this year.
Bin Sulayem says that due to the costs of developing Terminal 3 coming in under budget, the operator used the spare cash to build the bridge.
DP World also continues to grow internationally. During 2013, $1.06bn was spent not only on expanding Terminal 2 in Jebel Ali, but also on the new London Gateway port and logistics park in the UK, and Embraport in Brazil, all of which opened last year.
The operator is planning to open several other ports in the coming year, with a new container port in Yarimca in Turkey and developments at the Rotterdam port due to come online in 2015.
In total, DP World is planning to increase its total port capacity by 100 million TEUs by 2020, to be built in line with market demand.
Currently, traffic in Asia-Pacific, the Indian sub-continent, Africa and the UAE is driving the operators throughput figures and revenues, therefore helping to shape DP Worlds expansion plans.
We dont need to borrow. Whenever we expand, it will be from our own resources
Asia-Pacific and Indian subcontinent traffic increased to 3.53 million TEUs in the first nine months of the year, marking a 3.2 per cent increase compared with the same period the year before. Traffic in Europe, the Middle East and Africa grew to 14.14 million TEUs, an increase of 11 per cent, with the opening of London Gateway helping to bolster volumes.
The UAE, including Jebel Ali and other ports, reported a volume of 11.4 million TEUs for the first nine months of year, marking a 12.6 per cent increase compared with the same period in 2013.
The operator has several operations in China, including in Qingdao and Yantai. In late November, DP World signed a strategic agreement with Qingdao Port Group to strengthen relations between Qingdao and the Dubai ports. The framework agreement will lead to discussions about setting up cruise services between Port Rashid and Qingdao, among other things.
Reaching into Africa
Africa is another increasingly attractive market for Bin Sulayem. We are in discussions with various governments regarding DP World. We are bullish about Africa: it is underdeveloped; it needs logistics, he says.
The ports operator is already present on the continent, with operations in Senegal, Djibouti, Mozambique and Algeria, among others.
Bin Sulayem says Nigeria and other West African countries are particularly interesting markets. We would love to find an opportunity in Nigeria, he told the Africa Global Business Forum, held in Dubai, on 1 October.
Nigeria has plans to develop a new port, but has not chosen a final location yet.
DP World has, however, run into some trouble with one of its African concessions.
Djibouti announced earlier this year it was withdrawing the Dubai operators contract at its Doraleh container terminal, accusing DP World of corruption. The case is currently in international arbitration, with the Djibouti government hoping to secure losses allegedly incurred from actions taken by the port operator.
At a conference held in Dubai in October, Bin Sulayem told delegates that DP World rejects the accusations and the dispute is the result of a misunderstanding.
Speaking to MEED, he says the experience has not put him off African investments but has made him more cautious about the continent.
DP World has previously faced disputes with local port authorities and governments.
In 2012, the company exited from management of its port operations in Yemen, following various allegations against it by the government surrounding claims DP World had not fulfilled its contractual obligations.
In Yemen, we withdrew due to instability. Actually, anybody looking at Yemen today will say we made the right decision. Had we not moved out, then wed be in a worst situation I am glad we got out then, Bin Sulayem says.
However, instability concerns are not putting the DP World chairman off considering opportunities in war-ravaged Somalia.
Poverty, conflict and lack of opportunities has driven many Somalians to piracy, attacking ships travelling from the UAE as they pass through the Gulf of Aden and close to East African shores. DP World has been working with Somalian authorities to combat the piracy threat, setting up an annual conference in Dubai to tackle the issue.
We are happy to report that piracy incidents have reduced and the Somalis themselves are interested in developing other sorts of revenue for the people, says Bin Sulayem. Opportunities for DP World to now invest in Somalias dilapidated port infrastructure could also prove attractive.
We are very interested in Somalia; thats why we launched the piracy conference, to raise awareness. Now, we are working with Somalia and discussing ports as well, he says.
A Turkish company Albayrak Group is currently working to rehabilitate Somalias Port of Mogadishu.
Funding DP Worlds expansion plans should not be a major problem, says Bin Sulayem, explaining that operator has enough cash and existing credit facilities to fund new acquisitions. We have a healthy balance sheet. We dont need to borrow. Whenever we expand, it will be from our own resources. We have enough cash, he adds.
DP World issued a $1bn senior unsecured 10-year convertible bond in June in an effort to diversify its funding sources and finance its continued expansion. Bin Sulayem says the bond was raised to capitalise on favourable market conditions.
However, since MEED met Bin Sulayem, DP World has taken on more debt through a $2.6bn acquisition of Jebel Ali Free Zone. The free zone was run by Economic Zones World (EZW), a company owned by the indebted Dubai World conglomerate.
The acquisition will include taking on $859m-worth of EZWs outstanding debt.
The deal is expected to ease the pressure on Dubai World, which is facing forthcoming multibillion-dollar debt repayment deadlines, including $4.5bn due in May 2015. For DP World, it will further strengthen its position as the driving force behind Dubais development as a global trade hub.
2007 Appointed chairman of DP World
2006 Appointed to board of directors at Jebel Ali Free Zone
2006 Founded Dubai World and became chairman of the conglomerate (until 2010). He also was chairman of the board at Dubai World Africa Services, Istithmar World Capital, Customs & Freezone Corporation, Dubai Waterfront Company, Tejari-FZ and Dubai Multi Commodities Centre
Graduated with degree in economics from Temple University, Philadelphia