UK: MHPA Profit Down on Lower LNG Demand

Milford Haven Port’s cargo throughput has been significantly lower during 2012 than it was last year.

Net operating profit before tax is expected to be around £4m for the year to 31 December 2012, down approximately 50% from the preceding year. The fall in profit is a direct consequence of significantly lower volumes of LNG entering the Port during the first three quarters of the year. In addition, it is anticipated that rising pension costs will lead to profits being lower again in 2013.

The drop in demand for LNG was influenced by number of factors. Gas prices increased due to high prices for LNG in Asia, partly as a result of a major increase in LNG demand brought about by the closure of nuclear power stations in Japan following the Fukushima incident in March 2011. Low prices for imported coal competed with gas for electricity generation, and last year’s mild winter lowered overall demand for energy in the UK.

While not possible to predict the weather, forecasts are that the international market conditions, which are the main cause of lower LNG imports into the UK, are not expected to change significantly in 2013 and 2014.

Costs have been controlled throughout the business; however, costs from pension provisions continue to rise.  In particular, the Pilots National Pension Fund (PNPF) – a national final salary pension scheme for marine pilots – carries a total funding shortfall of approximately £200m and rising. The PNPF has now indicated the amount it is currently seeking to recover from the Port – of the order of £800k per annum for the foreseeable future – and this would, if successfully imposed, constitute a substantial additional cost to the business in 2013 and beyond. The Port’s own pension scheme is also in deficit by £8m.

It is a core objective of the Port to maintain a strong balance sheet to be able to absorb these fluctuations and to remain cash generative and profitable in order to safeguard its investment programme. This includes the continuation of the Milford Dock Master Plan and dock lock development in 2013. The latter is part of Visit Wales’ Coastal Tourism Project, part funded by the EU’s Convergence European Regional Development Fund through the Welsh Government, to encourage tourism along the Welsh coastline.

Alec Don, chief executive of the Port, said: “The fluctuation of LNG volumes into the Port continues to emphasise the need to find alternative deep sea trades”.

“We look forward to working closely with the Haven Enterprise Zone, the Welsh Government, Pembrokeshire County Council and others on this key need over the forthcoming year.”

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LNG World News Staff, December 11, 2012; Image: MHPA