DP World ready for return to Russia

September 13, 2015

Source:  Lucy Barnard lbarnard@thenational.ae


DP World may make a return to Russia after its chairman Sultan bin Sulayem met the president Vladimir Putin to discuss investing in the country’s remote far east region.

Speaking at the meeting in Vladivostok, Mr Putin mandated the deputy prime minister Yuri Trutnev and transport minister Maxim Sokolov to provide the Dubai-based port operator with investment facilities and remove any hurdles to its potential business operations in region.

In July the Russian parliament passed a legal framework giving 15 cities near Vladivostok’s capital Primorsky “free port” status.

The move, which offers tax and customs advantages, is aimed at encouraging overseas investment that will enable Vladivostok to compete more effectively with the likes of Hong Kong – a long-established free port – and Busan in South Korea.

Speaking three years after the Dubai-based port operator pulled out of its operations in the port of Vostochny, the largest container terminal in Russia’s far east, Mr bin Sulayem said that DP World was ready to contribute to the new venture.

“DP World has got the expertise and resources, which position us to be a key player in the execution of Russia’s development plans, particularly for its eastern region’s port and free zone industry,” he said.

In October 2012 DP World sold a quarter stake in the Vostochnaya Stevedoring Company to the Russian-based majority owner Global Ports Investment for US$230 million.

DP World’s planned move into Russia would be the latest in a series of global expansions.

The company currently operates 65 ports worldwide including the London Gateway in the UK and Jebel Ali in Dubai.

Last week the company, together with joint-venture partners, officially opened the Rotterdam World Gateway terminal.

It is also looking to expand in Senegal in Africa and in Latin America.

DP World has been in talks with the Iranian authorities regarding plans to expand across the region once sanctions are lifted. Iran’s ports on the Caspian Sea and Arabian Gulf make a natural link to DP World’s ports in the region.

“If they can tick all the right political boxes, it would make sense for DP World to move back into Russia,” said Sanyalak Manibhandu, research manager at NBAD Securities.

“Historically the company has shown it is good at finding new places in the world to invest, and taking profit from them when it makes sense so that they can move on and go elsewhere.”

In August DP World posted a 6.8 per cent increase in first-half net profit but cautioned that it did not expect to keep up that pace in the second half, because of weaker global economic growth and the economic slowdown in China.

At the time DP World said that it plans to boost global capacity from 76 million twenty foot equivalent units (TEU) to 85 million by the end of the year. It is targeting 100m TEU of capacity by 2020, depending on market conditions.

lbarnard@thenational.ae

Follow The National’s Business section on Twitter