Case Studies: Port of Antwerp Deurganckdock Lock

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Project Overview
Antwerp1.jpg
Figure 1: Graphical representation of the new Deurganckdock lock, Belgium
Deurganckdock Lock, Belgium
Project Type: Greenfield
Contract duration: 20 Years (including Design & Construction)
Budget: EUR 311.6 M (This budget includes only the construction costs of the Lock.)
Project Time Line
1Q 2010: Approval of construction and environmental permits
25 February 2011: Creation of NV Vlaamse Havens
4 July 2011: Creation of NV Deurganckdoksluis
24 November 2011: Start of construction
March 2016:

Scheduled end of works

(Van Nieuwenhuysen & Vanelslander, 2013)

Introduction

The development of the Left Bank of the port of Antwerp dates back to the 1970s and started from the Waasland channel with the construction of the north and south docks. In the original plans, the development of Waasland Port towards the Scheldt on the sea side was scheduled via the Baalhoek channel and the related Baalhoek lock. The Kallo Lock would thereby function only as a transit lock. The sea side access was never achieved, and the Kallo Lock, operational since 1983, provides the only access to the Waasland port. In 1998-1999, when the choice was made to develop the Deurganckdok, it was decided to erase the reservation area for the Baalhoek Channel from the regional development plan (Van Nieuwenhuysen, &Vanelslander, 2013).

The Kallo Lock is heavily occupied: 8,800 movements (123m tonnes) per year. Waiting times amount to 3.5 hours. The Kallo Lock is 50% busier than the Berendrecht Lock, one of the most important locks in the Port of Antwerp. This is due to increasing sea traffic and an increased use of the lock by inland navigation. Dimension-wise (360m x 50m x 12,58m), the lock was never meant to function as access lock from the sea side. Regular maintenance increases as the lock gets older, and structural maintenance is also needed. Moreover, there is always the chance of a collision at the lock blocking the entire Waasland port. In addition, the city centre of Kallo is near the lock, whereas an alternative access lock would be further away from residential areas (Van Nieuwenhuysen, &Vanelslander, 2013).

With the new Deurganckdock lock, the Flemish government and Antwerp Municipal Port Authority (AMPA) want to ensure better access to the docks. A lock allows ships to sail from the Scheldt with the tide into the port docks, where the water level is always high. The new lock is the second one in Waasland port. The new lock will be bigger than the current Kallo Lock and hence will allow the Waasland port’s potential to be used to the maximum. Also, the new lock will not only be longer than the Kallo Lock, but also deeper (Van Nieuwenhuysen, & Vanelslander, 2013).

Because of the growth of activities of Waasland port – including frequently used RoRo terminals as well as a new tank terminal – the Kallo Lock is hitting capacity constraints. Shipping companies and shipping agents have been warning for several years that current waiting times have reached the limits of what is acceptable. A second lock on the Scheldt Left Bank offers the port of Antwerp operational reliability when the Kallo Lock is not accessible for shipping. During maintenance or repair works, ships can sail in and out of the Waasland Port using the second lock (Van Nieuwenhuysen, & Vanelslander, 2013).

The Contracting Authority (Public Party)

The construction of the Deurganckdock lock is one of the key projects of the Flemish government and one of the goals of Pact 2020, the future development plan for Flanders. On the 5th of June 2009, the “Royal Decree of 8 May 2009” was published in the Belgian Law Gazette. This approved the creation of the new private law independent agency NV Vlaamse Havens and modified the decree of 2 March 1999 concerning seaports policy and management. NV Vlaamse Havens is responsible for co-ordinating and implementing the extension of maritime access routes to the port areas of Antwerp, Bruges-Zeebruges and Ghent. It has subsidiary companies in each port entrusted with the construction and financing of new sea locks, which are subsequently handed over to the port authorities (Van Nieuwenhuysen, & Vanelslander, 2013).

NV Vlaamse Havens has as one of its subsidiary companies NV Deurganckdoksluis. Antwerp Municipal Port Authority (AMPA) holds the majority stake in NV Deurganckdoksluis (74%), and NV Vlaamse Havens the remaining 26%(Van Nieuwenhuysen, & Vanelslander, 2013).

The Concessionaire (Private Party)

NV Deurganckdoksluis will build and finance the second lock in the Waasland Port and grant it via a concession agreement for 20 years to AMPA. The latter will be responsible for exploiting and maintaining the new sea lock. The contract for the construction of the lock was awarded to the temporary commercial entity Waasland Lock, consisting of Jan De Nul nv, CEI De Meyer NV, Betonac NV, Herbosch-Kiere NV, Antwerpse Bouwwerken NV. There were also several subcontractors, but the main one is the "ZPMC", a Chinese company that constructs container cranes, bridges, etc.

Sources of financing

On the 14th of September 2011, loans were agreed with EIB (EUR 160,5 M) and KBC (EUR 81,16 M). The remaining capital is to be provided by AMPA (EUR 61,5 M capital subsidy) and the Flemish Government (Van Nieuwenhuysen, & Vanelslander, 2013).


Users

The direct lock users are shipping companies and goods handlers in the docks behind the lock. In other words, the type of users of the lock is only cargo/freight. Other stakeholders/indirect users are consumers, employees, local residents, AMPA (supplementary port dues income), Port authorities of other Flemish seaports (competition), the Flemish government, and the Federal government (via the income taxes on employees) (Van Nieuwenhuysen, & Vanelslander, 2013).

Key Purpose for PPP Model Selection

Construction and financing by NV Vlaamse Havens and its subsidiary NV Deurganckdoksluis has brought the following advantages and opportunities as compared to traditional funding by the Flemish Government:

  • extended payments, untaxed on value added;
  • avoidance of need to consolidate investment costs in the Flemish Region accounts;
  • limitation of risks (demand risk, construction risk, availability risk, including supplementary expenses linked to lock construction).

Moreover, through the creation of NV Deurganckdoksluis, all expenses and revenues related to the lock construction are separated out. This legal entity is responsible in a transparent way for optimising the extension of maritime access to the port areas, which offers the best guarantees for the coordination of the project and its quick execution. At the request of AMPA, the scenario of lock construction and funding by the port authority itself was also investigated (Van Nieuwenhuysen, & Vanelslander, 2013).

The current model and the alternative of delegated construction management were compared, and trade-offs identified between their advantages and disadvantages. In both scenarios, AMPA bears all the risks. However, construction and financing via NV Vlaamse Havens and its subsidiary NVDeurganckdoksluis delivered the following advantages compared with execution by the port authority:

  • alignment with the philosophy of the Port Decree by placing important aspects of the port policy, such as building infrastructure at the level of the Flemish Region;
  • better guarantees of equal operational conditions for Flemish ports;
  • more transparency in terms of the financing of port infrastructure(Van Nieuwenhuysen, & Vanelslander, 2013).

Therefore, the Contracting Authority chose a PPP project delivery solution aiming mostly at financing (mostly finance-based approach)(Adam, 2015 &Van Garsse, 2015).

Another reason for the PPP choice is that the EU decided to allot Flanders more than 16 mln EURO of co-financing for five water-related projects in the framework of TEN-T. This project now received 5 mln EURO for the ground and concrete works (2012-2014).

Project Timing

Notwithstanding the negative impact of the economic crisis, the creation of the NV Vlaamse Havens was approved by Royal Decree on the 8th of May 2009.The construction and environmental permit was received in February/March 2010(Van Nieuwenhuysen, & Vanelslander, 2013).

The tender call started in September 2010 and was completed in March 2011. NV Vlaamse Havens was created on the 25th of February 2011. Approximately four months later, NV Deurganckdoksluis was created, on July the 4th, 2011.

The contract was approved/signed on 14 September 2011, and on 24th of October 2011, the building works of the lock started. The works are scheduled to be completed in March 2016.

The GDP per capita, the income per capita and the unemployment rate of the region of Antwerp during the time of data collection (March-April 2015) were higher than the expectations at project award (Eurostat, 2015b).

Project Locality and Market Geography

The lock is located in Waasland port on the Left Bank of the port of Antwerp, in the Municipality of Beveren. The closest housing is at Kieldrecht, at a distance of about 2,000m from the building site. The residential area of Verrebroek is located to the southwest, while to the southeast, the area of Kallo, at respective distances of 4,000 and 3,000m (outer-urban project locality)(Van Nieuwenhuysen, & Vanelslander, 2013). In this region, the population density at the time of data collection (2012) was higher than the density at project award time (2011).Also, the level of industrialization and economic activities during the time of data collection were higher than at the time of project award. No specific production activities, which were not foreseen when the project was planned, started in the region though (Eurostat, 2015a).

Procurement & Contractual Structure

Tendering

Various tender calls for construction work appeared in the Belgian Procurement Bulletin between 6 September 2010 and 13 March 2012. Six applications for the main works were submitted on the 2nd of February 2011, with the contract awarded to THV Waaslandsluis. Financing was negotiated separately with EIB and KBC (Van Nieuwenhuysen & Vanelslander, 2013).

An open call took place, which means that everybody could submit individual bids and since the only selection criterion was the price, the cheapest bid would “win”. There were no negotiations, meaning that there was only one stage and the number of bidders in that single stage was six. The time from the initial Call until the signing of the contract was approximately one year (Adam, 2015).

Contract Structure

The annual concession fee to be paid to NV Deurganckdoksluis by AMPA will only be determined after construction has been completed, and will be based on the effective building and financing cost. The construction cost risk is therefore borne by AMPA (Van Nieuwenhuysen & Vanelslander, 2013).

A subsidy agreement was drafted between AMPA and the Flemish Region, whereby the latter will allot an annual subsidy to AMPA during the 20 year concession period. Bank funding will be guaranteed for 51% by AMPA and 49% by the Flemish Region (Van Nieuwenhuysen & Vanelslander, 2013).

Investigation of AMPA’s annual accounts for recent years shows that at least half of the cost will be covered by revenues from sales (the so-called 50% criterion). As a consequence, AMPA is considered to be a market entity, and is classified in the sector of non-financial enterprises in the hands of the government (Van Nieuwenhuysen & Vanelslander, 2013).

On the one hand, the private partner finances (banks financing) and builds the lock (“Finance and construct” type of contract). On the other, the public partner designs, finances (partially) and will also operate/manage and maintain the lock (“Design, Finance, Operate/Manage & Maintain”type of contract). There were no renegotiation clauses in the contract (Adam, 2015).

Risk Allocation

Risks linked to the construction, maintenance and exploitation of the lock are allocated as depicted in Figure 2. Funders (EIB and KBC) get a guarantee for the outstanding amount of their loans. AMPA will take care of the exploitation and maintenance of the new sea lock and bears the risks (Van Nieuwenhuysen & Vanelslander, 2013).The construction cost risk is also borne by AMPA. The rest of the risks such as revenue, financial and force majeure risk are also totally or mostly public. The only risk that is divided almost equally among the private and public partner is the regulatory risk because it depends on the type of regulation that will be imposed (Adam, 2015 and Van Garsse, 2015).


Lock.png

Figure 2: Risk allocation

Performance

The Flemish Region gives the AMPA a subsidy of 18 mln EURO based on the use of the lock, linked to conditions related to the availability of the lock and the handling time (Van Nieuwenhuysen, & Vanelslander, 2013).

The subsidy is conditional on two performance indicators:

  • Availability of the lock for at least 95% of the time on an annual basis and 96.5% on a five-year basis (Van Nieuwenhuysen, & Vanelslander, 2013);
  • A handling time of no more than 8 minutes longer than the reference handling time.

Apart from the above two performance indicators (availability and handling time), which are explicitly stated in the contract, “quality and construction standards” were also mentioned. More specifically, the construction period is limited to 53 months. There was no delay in the beginning of the works following award. The project is expected to become operational in March 2016 (Adam, 2015).

Project Outcomes

Even if it is too early to discuss project outcomes, since the lock is not operational yet, based on the Social Cost Benefit Analysis (SCBA), the general level of the project’s perceived success is high. More specifically, according to the SCBA, the following effects are expected:

- Direct effects:

• Avoided waiting time cost – ships

• Avoided waiting time cost – goods

• Avoided indirect[1] waiting time cost

• Shorter sailing distance

• Benefits of new container traffic

• Avoided risk of lock closure (Kallo lock)

• Port dues

- Network effects of hinterland traffic

- Indirect effects

• Building and exploiting infrastructure

• Handling activities

- External costs of hinterland transport

• Air quality

• Climate

• Accidents

• Noise

Uncertainty and risks:

• Lower growth scenario

• No pure container traffic behind lock – shipping companies’ preference for terminals that are directly accessible

• Stronger growth of the average call size

• Lower avoided hinterland distance from an international point of view

• Shifting to Flemish seaports – the larger the share, the smaller the net benefits to Flanders and Belgium

• Maximum, operational capacity occupation of the Kallo lock and second lock


Source: Departement Mobiliteit en Openbare Werken (2008-2009)


The above-mentioned benefits are considered as the “Critical Success Factors” of the project that are expected to contribute in making the Deurganckdock Lock project a successful case. Apart from these, another important success factor is the strong project risk management. Moreover, it is important to note that the success of the project depends also on the economic growth of the activities in the area behind the lock (Adam, 2015).

A critical failure factor for this project could be the constructions works. This means that if a particular construction work goes wrong, then serious delays could happen. This is the reason why experts are needed. Last but not least, there were no acceptability issues raised during the design and construction of the lock. This is particularly important to the project’s success, in order to avoid political risk in the long-term (Adam, 2015).

Project’s outcomes and success are going to be also measured through the main project purpose for the Contracting Authority. This means that if the main project purpose is reducing the travel time and this goal is achieved, then positive project outcomes could be considered. There are many reasons for constructing the Deurganckdock Lock: 1) to improve accessibility to the port, 2) to achieve easy flow of traffic, 3) to enhance reliability, 4) to suitably respond to the increased dimensions of modern ships, 5) to relieve congestion and 6) to reduce travel time. But the main reason for implementing the project is helping to “unlock” the full economic potential of the area behind the lock.

Since the project is not yet operational, only the ex-ante forecasted economic, social and environmental impacts can be considered.

Economic Impact

Some of the economic impacts that the project is expected to bring are the following: 1) the increase of revenue from mooring rights, 2) traffic growth, 3) docks and terrains behind the Kallo Lock will be utilised to their full capacity, 4) employment and surplus value of port-specific activities generated by traffic that, in the zero alternative (the situation without a second maritime access), would have migrated to other ports (Departement Mobiliteit en Openbare Werken., 2008-2009).

Social Impact

The above last impact of “increased employment” could be considered also a social impact, because it affects the social fabric of the community and the well-being of individuals. Another social impact could be the environmental costs that will be avoided because the transportation distances towards the hinterland would decrease from the construction of the lock (less pollution and accidents). Nevertheless, other ones will be created because of the construction of the lock, but in general, based on the SCBA carried out in 2008, social profitability is forecasted (Departement Mobiliteit en Openbare Werken, 2008).

Environmental Impact

These social impacts could be also considered as environmental impacts. According to the SCBA completed in 2008, there will be certain changes with regard to environmental costs (climate, noise, air quality). Also, there will be some environmental effects of the second maritime access itself (the area required, the impact on the terrain, disturbance of natural habitats).

The Environmental Impact Assessment (EIA) for installing a second lock in Waasland Port was declared in May 2009 as satisfying the conditions laid down. The report shows that the project does have a few unwelcome implications, but is acceptable for human beings, nature and the environment if a number of mitigating and environmental compensatory measures are taken, as listed in the EIA. Any mitigating measures will be applied before the construction starts in 2011 (Departement Mobiliteit en Openbare Werken, 2008).

According to the EIA, one of the unwelcome implications of the lock construction and operation process is the disappearance of a gull breeding ground and a limited area of the natterjack toad's habitat. Both the colony of Mediterranean gulls living in the area covered by the project and the natterjack toads are protected in the tidal marshes and polders of the Lower Scheldt pursuant to the European Birds Directive. A new habitat with ponds and sand dunes is being created for the natterjack toad in the Steenland polder (Departement Mobiliteit en Openbare Werken, 2008).

Finally, the EIA covers a so-called water assessment. When the second lock is being built, the ground and surface water and the bottom sediments are carefully monitored so any adverse impact on the water system can be avoided, kept to an acceptable level, remedied or compensated for (Departement Mobiliteit en Openbare Werken, 2008).


[1]For more information regarding the indirect waiting time cost, please see the following source: The Flemish Administration, Department of Mobility and public Works (2008).

References

  • Adam, J. (2015) Port of Antwerp, interview: Deurganckdoksluis
  • Van GarsseS. (2015) Flemish Knowledge Centre PPP, Deurganckdocksluis
  • Van NieuwenhuysenC., VanelslanderT. (2013)Port of Antwerp Deurganckdock Lock In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ΙSBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu