2011 State of the Port Presentation

December 8, 2011

Good afternoon!

We gather each December at this event to recognize and celebrate the achievements of the past year at our great port -- and there have been many. Most importantly, however, this is an opportunity to focus on the future, to comment on our strategic plans, and to reaffirm my commitment to partner with our maritime community and with business and political leaders throughout our region to ensure the continued success of our port.

Visible and substantial progress has been and is being made at the Port of Tampa. This port remains the largest, most diverse and financially sound port in the State of Florida. In good times and bad, we have maintained our strategic long term focus. We continue to diversify our lines of business, protect and expand maritime land, invest heavily in essential port infrastructure critical to providing current and future maritime services in an uncertain and changing global trade environment, and we work hard to ensure the TPA’s financial performance remains strong even during periods of economic decline.

Simultaneously, we have greatly expanded our marketing and community outreach, taken steps to enhance internal and external communication and improve relations with the maritime community and key stakeholders throughout the west/central Florida region.

We understand well that our port’s success depends on partnerships and virtually every major project we undertake at the port authority involves public-private partnerships – often multiple partners. One superb example during this past year was the partnership with our maritime community, several key regional political leaders – in particular Senator Latvala and Representative Dana Young – and other ports and private sector associations around the state that resulted in a new state port security law that eliminated unnecessary, duplicative and costly requirements at Florida’s ports.

Our strategic approach – our focus on the future – has helped the port weather the economic storm better than most ports and has allowed us to continue sustaining and creating thousands of jobs for the Tampa Bay community during this difficult period. Most importantly, your port is well positioned to grow and to capture future opportunities that arise as the Florida economy recovers from the worst economic and financial downturn since the Great Depression.

I am not going to sugarcoat the port’s performance or the serious challenges and uncertainties we all still face. Our State and our region are only very slowing emerging from a recession that went deeper and lasted longer than in most parts of this country. I predicted last year that 2011 would at best be a year of very modest economic growth and 2012 will not be much better. As you are all painfully aware, unemployment remains stubbornly high, our real estate and construction industries continue depressed and consumer demand which is the primary driver of port activity remains subdued.

The difficult economy has been hard on our tenants and on port users. The Port of Tampa -- like every port in this state and most in this nation – has seen its cargo activity decline over the last 5 years.

The tonnage declines at Tampa have been particularly acute for the private terminals and the drop-off not as serious across the public docks.

This reflects that most of the cargo declines over time are due to continuing changes in the phosphate and fertilizer industry, and to TECO’s decision to sell its ocean transportation company and begin shipping coal by rail to its Big Bend facility. But these declines have been further exasperated by huge recession driven reductions in shipments of building materials and lower demand for energy products as a direct result of the weak economy. Similarly, container movements have been weak and global carriers are seeing rates plummet – most are again losing money after a period of recovery last year.

We are, however, seeing and hearing about some positive signs. Steel shipments are up and a number of vessel calls are scheduled over the next couple months; Peruvian Amazon Line just returned to Tampa after a lengthy absence to carry 26 yachts and boats to Manaus, Brazil and they expect more such business this coming year; Separation Technologies (Scott Zeigler) reported to us that fly ash opportunities in Latin America look good and confirmed a couple of shipments already from Tampa in 2012; David Hale, President of Tampa Tank anticipates a solid 2012 internationally with liftings from Tampa expected for their projects in Latin America, including Panama; and Chris Bush from Titan Metals confirmed his port business in steel coils is up and he sees a positive trend in 2012.

Even with recent declines, the Port of Tampa remains by far the largest port in Florida, handling nearly 40% of all maritime cargo entering this state and we rank number 17 in the nation.

And our very large tenant base, the diversity of our lines of business and solid growth in the port’s cruise business have insulated us to a great degree from the weakness in certain cargoes.

Notably during the year cruise passenger totals reached approximately 875 thousand, the 2^nd highest year on record – 2^nd only to the unusual year when we benefited from a cruise vessel shift to Tampa from New Orleans after Hurricane Katrina. This year with the recent addition of Norwegian Cruise Line, joining Carnival, RCCI and Holland America in Tampa an all time record year is expected in fiscal year 2012. And, by next year, we should approach 1,000,000 passengers, ranking us number 6 in the nation among cruise homeports.

Primarily as a result of cruise revenue growth, increased parking revenues, and increases in break-bulk cargo revenues, I am pleased to report that once again the Port Authority had an outstanding financial performance in FY 2011. Operating revenue for the year was over $42 million, the highest ever achieved and nearly 4 percent above the prior year. Operating income, before depreciation, increased almost 3% over FY2010, reflecting both the revenue gains and the port’s close vigilance and sound judgment with regard to spending and hiring which held expense to levels just slightly above the prior year.

Additionally, for the 11^th consecutive year the TPA’s Comprehensive Annual Financial Report received the National Certificate of Excellence in Financial Reporting award. During the year Fitch Rating Inc. affirmed the ports’ “A” credit rating with a stable outlook, consistence with previous ratings assigned by Standard and Poors and Moody’s at a time when the same rating agencies were assigning a negative outlook to the US Port industry as a whole.

The solid financial performance supports the TPA’s ability to continue to strategically invest to build the business platform necessary to support regional development and expansion for decades to come. In FY 2011 the port invested over $31 million in port infrastructure bringing the 5 year total to over $173 million. These investments not only prepare the port for the future but also support hundreds of badly needed construction jobs during a time when this industry is in the doldrums.

And we continue to look forward and prepare for the future. During the year we updated key aspects of our strategic plan. That update reaffirmed and reinforced the need to stay the course with much of what we have been doing. As a heads-up to those that are interested, at the next Board meeting I’ll be asking for approval to fund a series of strategic planning workshops intended to get many of our maritime community experts and regional planners involved in brainstorming just what they think the port needs to focus more on going forward.

Our current roadmap to the future includes a number of strategic initiatives that we are already implementing. These initiatives focus intently on: (1) Protecting and expanding the TPA’s considerable amount of maritime land – the physical size of this port gives us an unmatched competitive advantage among other ports in this nation that are limited in size and unlike us are unable to acquire or create more land; (2) Sustaining the TPA’s financial capacity to continuously invest – this is one area where we have excelled and, accordingly, we have the capability to fund future projects; (3) Preserving and enhancing terminal flexibility, landside access, and navigational channels – in other words, completing the I-4 connector, improving roads, expanding rail, building berths and dredging, all of which we have been actively doing; (3) Supporting the region’s long term energy needs – we are doing that with the $40 million modernization and expansion of the REK oil terminal, encouraging the expansion of fuel storage areas, building rail to more efficiently move energy products and working with private sector investors involved in many alternative energy projects; (4) Ensuring container terminal capability aligns with evolving demand – we have been expanding the terminal but only as additional capacity is needed; (5) Continuing our expanded marketing efforts such as the innovative Gulf Coast Advantage initiative; and (6) Sustaining capability to successfully pursue emerging niche cargo opportunities, with a special eye on Cuba and certain specialized trades such as the produce and reefer markets and RoPax services around the region.

We are making progress on many fronts and, in spite of my concerns over the short term challenges facing our economy and the maritime industry, there are many reasons why the Port of Tampa should grow and flourish longer term. Very quickly let me highlight just a few of the drivers that give us cause to be upbeat.

People equal cargo. As Florida returns to growth, we will soon be the 3^rd largest state in the nation and much of the growth will be in the Orlando-Tampa Bay super region.

The area on the map, depicted in red holds 51% of the state’s population, nearly 9 million people, and is the largest consumer area in the Southeast. The Port of Tampa should be the low cost gateway for most of the trade moving into this area.

Florida is the gateway to Latin America and cargo from this hemisphere dominates our state’s international trade. Tampa must look south for most of its business – Brazil, Mexico and Colombia are key future growth markets.

But post 2015, when the Panama Canal expansion project is completed, opportunities for more Asian trade to come into the Gulf and through our port will also be greatly enhanced. That $5.25 billion expansion is currently on track for completion around 2015. By allowing much larger ships to transit that waterway, cargo now coming eastward on trains through LA and Long Beach could shift to the all water route through Panama and sail directly into East Coast and Gulf Ports to take advantage of lower transportation costs.

Tampa can’t handle the very largest ships that will pass through Panama but we can handle over 80% of all vessels in the world. This port is as deep as any in the Gulf and is the deepest port in Florida. Most of the container ships passing through the Panama Canal post expansion are expected to be of a size our port can accommodate.

And if the very largest vessels are utilized, transshipment through deep draft ports in the Caribbean is an option with smaller vessels running into Tampa and other Gulf ports.

Cuba – need I say more? This island offers a number of future opportunities for us both as a direct market, as a transshipment hub, as an offshore production area and as a cruise destination. President Obama recently signed into law 3 free trade agreements – South Korea, Panama and Colombia -- that we supported and I look forward to an eventual change in US policy toward Cuba that will lift the trade embargo.

To capture the opportunities presented by these and other trade developments, we have significantly stepped up our marketing activities.

Our outreach to both shippers and carriers continues to be enhanced. One of our initiatives in this regard has been to develop an alliance with the other Gulf ports of Houston and Mobile to jointly market to the global container carriers what we are calling the “Gulf Coast Advantage”. Our priority is to attract a new all-water service from Asia via the Panama Canal. Overall the response has been favorable to our unique approach whereby the three ports jointly present a complete itinerary for three strong, complementary markets that are currently underserved, with a strong cargo profile of both exports and imports. Our combined marketing teams recently traveled to Asia again presenting the “Gulf Coast Advantage” face-to-face with the leadership of major Asian container carriers.

The uncertainties of the global market, especially Europe and the US, has had a major impact on the global shipping industry, forcing many carriers into survival mode as they grapple with overcapacity, low trade growth and declining rates, making many reluctant at this time to start new services. Nevertheless, we have been encouraged by some of the feedback and remain optimistic that another major carrier may expand services into Tampa and the Gulf this coming year. The support we receive from the Executive Shippers’ Council will continue to be an important part of these efforts, as it is the exporters and importers that ultimately drive the carriers’ deployment decisions.

In preparation for the expected growth in future business, we are investing heavily in infrastructure projects. Our current 5 year plan has programmed over $320 million in new investments. These include: the ongoing expansion of our container terminal. Together with terminal operator Ports America, TPA has plans to quadruple the capacity of the terminal over the next several years. This planned build-out will be on adjacent land owned by TPA and ready to be developed as business continues to grow and will provide more than enough capacity to meet all future west/central Florida demand.

And we are breaking ground now on a very exciting project called the Tampa Gateway Rail Project. Together with our partner CSX and with funding support from FDOT we are building Florida’s only on dock unit train capable rail facility. This multipurpose rail facility will be in operation by next summer giving us a capability no other Florida has to move containers, ethanol and other dry and liquid bulk materials on and off the terminal in trains up to 100 cars in length.

Any of you that have driven on the CrossTown can’t help but see the impressive work going forward on FDOT’s I-4 Connector Project. Construction is now well underway on this more than $500 million project that will provide the thousands of trucks daily entering and leaving the port direct access to the interstate system without traversing city and county roads, greatly eliminating delays and environmental and maintenance costs. Completion date is now set for summer 2013.

Construction will begin early this year on the single largest project planned at the port – the $40 million modernization and expansion of the port’s main oil terminal known as REK Pier, the primary entry point for gasoline for all of west/central Florida’s nearly 9.0 million residents and the jet fuel for Orlando Airport. REK will be demolished and replaced with a new, expanded facility providing new docks for larger tankers and capacity to meet future demand, while enhancing operational and environmental safety. This project will ensure the Port of Tampa remains the petroleum gateway for much of our state. This project is a prime example of the partnerships that allow this port to grow and modernize. Kinder Morgan, Transmontaigne, Murphy Oil and the TPA have partnered and worked together over the last two years to move this critical project forward with much of the funding for this critical project coming from the State.

New deep water berths are also being added – recently down in Port Redwing – and over the next few years in East Bay where we have filled and prepared the site for new berths 150-151. These berths give us added flexibility to handle potential new business.

And always an ongoing and essential part of our investments are road, rail and dredging improvements throughout the port, without which port efficiency would be diminished.

Finally, in the area of the environment, as many of you know, the Tampa Port Authority was one of the first port authorities in the nation to form an environmental department, back in the mid 1970’s.

Port Authority dredge disposal islands have become renowned bird sanctuaries, and we work closely with our partners in the environmental community to ensure the Tampa Port Authority remains fully compliant with environmental rules and regulations.

The preceding slides provided selected examples of the TPA’s investments in the port which will average some $60 million annually over the next 5 years. But even more is being invested by the private sector. We have entered into numerous new public-private partnerships over the last few years which will bring tens of millions of dollars in new investment by the private sector and create hundreds of jobs. One example, which we hope will begin early in 2012, is the NexLube project which involves an investment of $80 million to build an oil recycling and refinement plant on TPA owned property. NexLube, the TPA, the County, EDC and the City of Tampa are all involved in the effort to make this project a reality. Just another example of what partnerships can accomplish.

Let me close by making a final pitch for partnerships that are needed to grow the trade and logistic sector of our regional economy. This is not really a message for all of you – it is more a request for your help – most of you would not be in this room if you did not appreciate the importance of globalization and trade and logistics for our region’s economy. Many of you know that trade in the post World War II period has risen from 5% of global GDP to over one –third of the world economy; in the US it has risen from 5% to 25% in the same period. In the last several decades, trade has been growing 3X faster than world GDP. Doug Montgomery from Mosaic knows the importance of international trade, Scott Zeigler knows it, Chris Bush knows it, so does David Hale and Arthur Savage, Rooms to Go knows it, Amalie Oil knows it….. South Florida knows it and so does Jacksonville. Now it is about time west central Florida recognized trade and logistics as a pillar in the future growth of this region. More and more it is apparent that the traditional pillars of Florida economic growth -- tourism, housing, consumer driven services -- are not enough and that trade and the related logistics and distribution industry are increasingly important drivers of our economy and generators of high paying jobs. The TPA’s strategic, market driven approach, solid financial performance and prudent investment policy has us well prepared for the opportunities that lie ahead, but if we are going to see these opportunities materialize in our region we all need to step up and do more to encourage international business. We need to truly cultivate a global mindset and recognize the importance of trade, push the super region concept with Orlando more aggressively with a focus on trade and distribution throughout the I-4 corridor, we need to work with state and federal agencies to support export initiatives, provide incentives for small and medium size companies who are involved in international trade, and find ways to attract more manufacturing and logistics companies to our region. Spread the message. The TPA’s commitment to all of you – my commitment to you-- is to partner with our port community and key stakeholders to help make our region more global and by doing so ensure the success of the Port of Tampa, grow our economy and create jobs.

Thank you all for your support and friendship. All of us at the Tampa Port Authority wish you a very Happy Holiday season and a healthy, prosperous New Year!