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BBI faces cut in PD Ports price tag

BABCOCK & Brown Infrastructure may have to cut its estimated £450m ($737.3m) price tag for PD Ports, the north east UK ports and logistics operator, as major customer Corus considers mothballing its Teesside Cast Products plant. PD Ports chief executive David Robinson said that the £450m figure outlined in press reports was “fairly accurate” but described estimates of a £300m revision as “too low”, adding: “It will be more than that.” Steelmaker Corus, a major customer at the Port of Tees and Hartlepool — the hub owned by PD Ports — announced last month that “any decision to mothball is likely to lead to a very significant number of redundancies”. At the time, Australian-based BBI said: “Corus is a significant customer of BBI’s wholly owned subsidiary PD Ports.” BBI added that the closure “would materially impact future years’ revenue and cash flow at PD Ports”.
A temporary closure of the TPC site would mean the loss of an estimated 2.4m tonnes of export steel slab per year, or around 20% of PD Port’s revenue from Teesport. PD Ports has indicated that some 20% of its 600 employees at Teesport may be laid off due to the possible decline in cargo volumes, including a lost contract with North Sea Ferries, which is taking its operations in house. A 90-day consultation process with unions over voluntary redundances has already started in response to the general downturn in volumes. Mr Robinson, who is not directly involved in BBI negotiations with potential bidders, added that the sale process was “moving along quite purposefully” up to the point when Corus put out its statement on TCP. “The bidders are considering their offers and will have to take a view on the implications of a Corus plant closure, which has still to be confirmed.” He added: “My personal opinion is that the sale will continue and that the various bidders will take a view on the Corus situation and future volumes.” Although BBI is continuing with the sale, it will have to settle for a considerable mark down on the PD Ports acqusition price of £600m, including debt, in 2005. Mr Robinson said that he expected a decision on TCP to be clearer by August, at which point PD Ports management will meeting with the rating agencies to discuss future volume predictions for the operator.

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