Case Studies: Sines Container Terminal

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Project Overview

Photo from

Figure 1: Sines container terminal
Sines Container Terminal, Portugal
Project Type: Both
Contract duration: 30 years, with the option to extend for a further 30 years after changes in the payments made to the port authority and the lifting of exclusivity agreements
Budget: EUR 332.0 M (The actual budget for investments until 2009 was EUR137 M (public sector contribution EUR 62.3 M and private sector EUR 74.7 M). The expected budget of investment after December 2009 is EUR 195 M (public sector contribution EUR 40 M and private sector EUR 155 M).)
Project Time Line
Project conceived: 1997;
Concession agreement: 1999;
Start of operations: 2004;
Completion of phase 1B: 2011 (after being postponed three times from 2005)


The project is a greenfield container terminal BOT scheme at Sines, approximately 150km south of Lisbon, for which the concession agreement was signed in September 1999. Portuguese container traffic is fairly small, at just over 1.4m TEU in 2010, and is split between three ports of fairly equal size – Lisbon, Leixões (Porto), and Sines – and a much smaller port at Setubal. Sines’ main competitor for domestic traffic is Lisbon (see Table 1).

Table 1: Portuguese Container Throughput in 2010
Port ‘000 TEU %age
Lisbon 512 36%
Leixões 482 34%
Sines 382 27%
Setubal 30 3%
Total 1,406 100%

The objective of the PPP was to build in four stages a container terminal with an eventual quay length of 940m, a back-up area of 36.4ha, and a capacity of 1.5m TEU p.a. The terminal became operational in 2004, and so far 730m of quay and 20.8ha of back-up area have been built, and 4 out of the 10 quay cranes have been installed. The current capacity of the terminal is 0.4m TEU.

The Sines container terminal was originally intended to handle mainly transhipment traffic, in which case it would also have been competing with two much larger transhipment hubs at Algeciras (Southern Spain) and Tanger Med (Morocco). At the time of the concession agreement (1999) the Algeciras hub was already well established. The first BOT concession for Tanger Med was tendered in 1998. Because of competition from these two much larger hubs, the Sines container terminal has been able to attract very little transhipment traffic, and as a result serves mainly the Portuguese market and Western Spain.

The project is facing a number of challenges. Although the public sector delivered its part of the initial (committed) investment package ahead of schedule, the private investor - PSA Europe Pte, a subsidiary of the operating arm of the port of Singapore - has not invested as much or as quickly as expected (see Table 2 for actual vs scheduled investment programme). Phase 1B of the project was postponed three times, putting back its completion date from 2005 to 2011.

Table 2:Completion Dates for Investment Programme

Source: Tribunal de Contas Relatório n.º 26/2010 "Auditorio à Concessão do Terminal XX1 – Porto de Sines, October 2010
Phase 1A Phase 1B Phase 2A Phase 2B
Initial target March 2003 September 2005 September 2009 September 2014
Actual completion May 2004 June 2011 No start date agreed yet

Traffic volumes have been much lower than expected (see Table 3 below), and the operator’s tariffs have also been lower because of strong competition from other ports. As a result, the concession fees paid to the port authority have been lower than expected. The traffic forecasts were supplied by the bidder (PSA) prior to the concession agreement and were not validated.

Table 3: Forecast and Actual Traffic Volumes (‘000 TEU)

Source: Tribunal de Contas Relatório n.º 26/2010 "Auditorio à Concessão do Terminal XX1 – Porto de Sines, October
2003 2004 2005 2006 2007 2008 2009
Actual 19 51 122 150 233 253
Expected 200 231 250 500 550 595 805

In 2010 traffic volumes rose from 253,000 TEU to 282,000 TEU due to increased interest from MSC, but they have since fallen back to 203,000 TEU in 2011.

To protect Sines’ market position, restrictions were placed on further container terminal investment not only by Sines Port Authority, but also by the port authorities of Lisbon and Setubal, and any other organisation whose area of jurisdiction lay between the southern boundary of the port of Lisbon and the northern boundary of the port of Sines. These restrictions were to last for 30 years.

The restrictions, which were contained in a side letter to the concession agreement from the Secretary of State of the Ministry of Equipment, Planning and Territorial Administration (MEPAT), prevent other organisations from investing in new container terminal development within the designated area without the consent of PSA.

The Contracting Authority (Public Party)

Portugal has nine ports: five major ones, each of which has its own Port Administration operating as a landlord port authority, and four smaller ones which were run by the Institute for Ports and Maritime Transport (IPMT) until 2008, when two of them were absorbed into the Port Administrations of Aveiro and Leixões respectively.

The individual Port Administrations and IPMT all answer to the Ministry of Public Works, Transport and Communications (MOPTC). A Government port policy statement in 2007 confirmed the position of IPMT as the overall regulatory body for the sector, with the power to issue binding opinions on the award of concessions, and responsibility for monitoring their effectiveness.

In 2009 the Government also created an advisory body on ports – the National Council for Ports and Maritime Transport (CNPTM) – involving all of the main stakeholders. This issues its own, non-enforceable opinions on policy decisions, port services and tariffs. However the key public institution in the case of this project is Sines Port Administration (APS). Central Government and the EU were involved mainly as sources of finance, with central government funding 13.0% of the initial investment, and the EU Structural Funds 36.5%.

The Concessionaire (Private Party)

The main private agent is PSA Sines Container Terminal, S. A.. Initially, the SPV was wholly owned by PSA Europe Pte , a subsidiary of PSA Corp, the operating arm of the port of Singapore. The arrangement of private financing was left entirely to PSA, and was done through conventional corporate finance mechanisms secured by the cash flow and asset base of the parent company.

Between 2006-8 some shares in PSA Sines Container Terminal S.A were sold in tranches to Porthub Ltd SA, a Panama-registered company of unknown ownership. In 2008 this owned 49% of PSA Sines Container Terminal, a figure which fell to 38% in 2009.


Container shipping lines and importers/exporters and freight forwarders are the target users of the port services.

Because the project was a relatively uncontroversial one at a greenfield site, there has been very little involvement of other private agents – trade unions, media, and opposition groups.

Key Purpose for PPP Model Selection

The main reason for the project was set out in the White Paper “Política Marítimo-Portuária Rumo ao Século XXI” published in March 1997. This identified the need for Portugal to develop a deepwater port capable of accommodating larger container ships than its existing ports could handle.

Since Sines had no existing container traffic, and was located in an area that was not likely to generate much local container traffic (at least initially), transhipment traffic was seen as critical for building up the traffic needed to support shipping services and improve the region’s connectivity to the outside world. In this context, support of EUR 25.5m was provided from European Structural Funds.

Project Timing

Consultancy studies to verify whether a PPP arrangement would be viable were carried out for Sines Port Authority before it began to look for a partner. However, these studies were concerned with the technical aspects more than the financial aspects of the project. After a period of market testing, two radically different proposals were submitted by PSA Corp, in August 1998 and March 1999 respectively; the first was for a joint venture with Sines Port Administration, whilst the second was for a more conventional concession agreement.

Agreement on Principles was reached in June 1999, and the concession agreement signed in September 1999. However PSA did not invest as much or as quickly as expected. Phase 1A of the quay was delivered a month and a half late in 2003 and the Phase 1A equipment a year late. However the main problem arose with which 1B of the project, which was to have been delivered in 2005. Because of lower-than-expected traffic volumes, this was repeatedly postponed. It has now been built, but the last two phases of the project are still to be completed.

Project Locality and Market Geography

The project is located 150km south of Lisbon in a relatively rural area with limited amounts of local traffic. It has been able to attract some “gateway” traffic which might otherwise have used Lisbon, but is too far away to compete strongly for traffic destined for the Lisbon area and northern Portugal.

Procurement & Contractual Structure

The first port PPP in Portugal – the Alcântara container terminal concession in Lisbon - had its own specific legislation (Decree-Law 287/1984). More general PPP legislation for ports was introduced in 1993 with Decree Law no. 298/1993 which established the general legal framework for private sector port operations. This requires concessions to be publicly tendered and of a duration commensurate with the required private investment, up to a maximum of 30 years.

In practice Portuguese terminal concessions have generally been for either 20 or 25 years, apart from the Tersado multi-purpose terminal at Setubal (20 years with a 10 year renewal option) and the Alcântara concession, which in its re-negotiated form now lasts from 1985-2042 (57 years).

In 1994 Decree Law 324/1994 defined the legal framework in more detail. Key points include:

  • A requirement for the concessionaire to use the best available technology (in concessions outside of Portugal operators have sometimes transferred second hand equipment from their established terminals on a “filter down” basis);
  • A set of rules for the operation of the concession, to be defined by the port authority awarding the contract;
  • Maximum tariffs chargeable to terminal users, to be determined by the port authority in the general interests of the port;
  • Return of all investments (including equipment) to the port authority free of charge at the end of the concession, except for equipment purchases made in the last 10 years for which the concessionaire is entitled to compensation;
  • An option for early termination after the mid-point of the concession period, with the concessionaire entitled to compensation based on the net book value of its investments in the terminal;
  • The requirement for the concessionaire to pay fees for the use of any public assets assigned to the concession.

Although there is general legislation in place for port PPPs, large and controversial projects still generate their own legislation (e.g. Decree Law no. 188/2008 which authorised the extension of the Alcântara container terminal concession in Lisbon.)

Sines Port Authority’s non-competitive selection of a private partner was authorised by Decreto Lei 384A/1999 in September 1999, three days before the concession agreement was signed.


A “blueprint” of studies describing the proposed PPP arrangement was sent to 32 possible concessionaires and published in seven international journals, to test the market in 1998.

An initial response was obtained from nine companies, four of which – Liscont, ECT, HMM and Kashi International - dropped out soon after. The five potential partners remaining included: PSA Corp and P&O Ports (large international terminal operators), Mitsui (an industrial conglomerate with shipping and engineering interests), Chemical Bank (an institutional investor) and Portsines (a multi-purpose terminal operator already established at Sines).

However no formal request for Expressions of Interest was ever issued. In August 1998 PSA Corp submitted a formal proposal for a JV between itself (67%) and the Sines Port Administration (33%), and in March 1999, after further studies, it submitted a revised proposal which was radically different from its first one, based on public sector provision of the breakwater, channel dredging, and road and rail access, and private sector provision of the quay wall, superstructure and equipment. The proposed concession period was reduced from 60 to 30 years, the investment plan was rescheduled, and a new system of royalty payments was introduced (see table 4). The new proposal formed the basis for the Agreement on Principles signed in June 1999, and for the concession agreement itself, which was signed in September 1999. APS’s non-competitive approach to the selection of a partner was authorised by Decreto Lei 384A/1999 in September 1999, three days before the concession agreement was signed, although there is no evidence to suggest that the PSA’s offer was ever objectively evaluated.

The total cost of the project was estimated to be EUR 332M, of which 30.8% would be public sector expenditure and 69.2% private sector. However the public sector expenditure was heavily front-end loaded, whilst almost two thirds of the private sector investment is still to materialise.

Contract Structure

The contract was a fairly typical BOT scheme for ports in which the port authority was responsible for selection of the private operator, provision of certain investments (mainly basic infrastructure such as dredging), supervision of public and private construction work, and monitoring of operations. The private investor was given complete operational freedom, and also the freedom to set prices, paying the port authority royalties (US$ per TEU) which were directly linked to throughput.

Table 4: Royalty Payments

Source: Tribunal de Contas Relatório n.º 26/2010 "Auditorio à Concessão do Terminal XX1 – Porto de Sines, October 2010
Throughput band (‘000 TEU) Royalty (US$ per TEU)
Under 100
100-200 1.5
200-300 2.5
200-300 3.5
200-500 5.0
500-750 6.0
750-1,000 7.0
Over 1000 4.0

The investment programme was divided into four phases. Both parties made very specific, obligatory financial commitments to their Phase 1A investments (which were later modified by mutual agreement at the detailed design stage) and indicative commitments to the last three phases, which were to be triggered by unspecified amounts of traffic growth.

The initial public sector investment in the terminal was funded mainly by EU Structural Funds (36.5%), central government (13.0%) and bank loans (41.8%). PSA Corp contributed EUR 3.2M (4.6%) to the public sector costs, whilst APS contributed only EUR 2.85M of its own capital (4.1% of the total public sector cost).

No contractual guarantees were made to PSA by APS or the Government, apart from the normal guarantees included in most port concession agreements (fulfillment of public sector obligations etc) and those set out in three Addenda and four Supporting Agreements. These covered road and rail access, power supplies, and the exclusivity agreement.

PSA provided guarantees in respect of four issues, with penalties for non-compliance as shown in Table 5.

Most of these contractual requirements were unenforceable because they were insufficiently well specified. PSA also had to provide a performance bond of US$ 2.0m, renewable every other year, but this was never called as the APS inspections always produced satisfactory results.

Table 5: PSA Guarantees and Penalties for Non-Compliance
Guarantee Penalty for non-compliance
Completion of the agreed investment plan on schedule Fine of US$ 5,000 per day up to a maximum of US$ 2.0m, and loss of exclusivity rights within the port of Sines
Maintenance of the terminal’s assets to an acceptable standard Fine of US$ 5,000 per day, followed by eventual take-over of the terminal assets by APS
Provision of an acceptable quality of service Fine of US$ 5,000 per day
Provision of specified information on schedule Fine of US$ 3,000 per day late

Risk Allocation

The Tribunal de Contas report which reviewed the Sines concession judged the construction and maintenance risks to be low-average for a project of this type, given that a reasonable amount of site investigation work had been carried out in advance of the contract.

The operation and technology risks were also regarded as low, given PSA’s size and reputation, and its ability to transfer new technology between its different overseas operations. The terminal layout was standard. The traffic risk was regarded as fairly low by the Tribunal de Contas because the timing of the later phases of the investment was directly related to the traffic levels already being achieved. PSA’s position was further protected by restrictions on competing investments in Portugal and low royalty payments at low throughputs.

The finance risk to the Port Authority and Government was also regarded as low as the project was not reliant on project cash flows or the government guarantee mechanisms.

The lack of involvement of banks at the concession negotiation stage gave the two parties more freedom to define their working relationship. It also avoided the need for the contract to include a financial rebalancing mechanism to protect the lenders should things not turn out as expected. This substantially increased the financial risks to the private investor.

The environmental risks were small because the Environmental Impact Assessment had already been approved by Government before the signing of the contract. The remaining risks were therefore principally of accidents or changes to environmental legislation.


Figure 2 Risk Allocation

Other legislative risks borne by APS included new planning policies for the Sines area, changes to national ports policy, and the willingness of the Government to provide road and rail access to the port. In the short-term these were reduced by a strong level of Government support for the project, even though it was not formally a party to the contract and expressed its support in side letters which may have been legally unenforceable.

The attribution of delay risks to APS in the contract seems inappropriate, as the most likely cause of delay - failure of the market to develop as expected – could be more effectively managed by PSA.


The contract did not include any mandatory operational performance requirements, in particular throughput targets, even though the attraction of additional cargo and shipping services was one of the primary objectives of building the terminal.

The KPIs used by APS for performance monitoring purposes are:

  • User satisfaction with container terminal equipment (%age of users surveyed who declare themselves satisfied);
  • User satisfaction with operator performance (%age of users surveyed who declare themselves satisfied);
  • Average time ships stay in port (hours);
  • Average time ships spend handling cargo (hours);
  • Cargo handling productivity (containers per hour-worked per ship and TEUs per hour-worked per ship)

The terminal has also achieved ISO quality certification.


  • S. Farrell, 2013, Sines Container Terminal 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
  • Tribunal de Contas Relatório n.º 26/2009 "Concessão do Terminal de Contentores de Alcântara (Adenda 2008) – Porto de Lisboa"