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South Carolina State Ports Authority (SCSPA)Strategic Plan

October 2009

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Contents

• Introduction

• Overview of the SCSPA

• SCSPA Strengths, Weaknesses, Opportunities, and Threats(SWOT) Assessment

• SCSPA Mission Statement and Objectives

• SCSPA Strategic Issues

• SCSPA Strategic Initiatives

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Introduction

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Introduction

• The South Carolina State Ports Authority (SCSPA) Board initiated astrategic planning effort in February of 2009:

– Objective: to establish a clear direction and strategic priorities for addressing theSCSPA’s market, competitive, demand, and financial challenges

– Key elements:

• Refine and enhance the SCSPA’s mission

• Establish clear priorities

• Develop a strategic context for setting policy and making decisions

• Management-driven: the plan was to be prepared under the guidance and participationof the SCSPA’s Senior Management Team

• The SCSPA’s Board retained Norbridge, Inc. (Norbridge), a maritimetransportation and supply chain consulting firm, to assist in preparing theplan. Norbridge responsibilities included:

– Providing the framework

– Conducting interviews

– Establishing the facts

– Facilitating planning sessions

– Preparing working papers and drafting the plan

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Introduction (continued)

• The planning process included;– Five months of research, analysis and interviews

– Five planning sessions

– Multiple Board presentations

– Significant outreach: customers, stakeholders, legislators, Governor’soffice, Mayor’s office, and others

• This document summarizes the SCSPA’s strategic plan.

• It sequentially presents:– An overview of the SCSPA

– The SCSPA’s strengths, weaknesses, opportunities and threats (SWOTassessment)

– The SCSPA’s mission statement and objectives

– The SCSPA’s strategic issues

– The SCSPA’s strategic initiatives

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Overview of the SCSPA

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The SCSPA is an enterprise agency of the State ofSouth Carolina.

Enabling Legislation 1942• Incorporated in Section 54-3 of the

unannotated South Carolina Code ofLaws.

• Its purposes and authorities include:– Through the Authority the State may

engage in promoting, developing,constructing, equipping, maintainingand operating the harbors or seaportswithin the State

– …including the acquisition orconstruction, maintenance andoperation at such seaports of harborwatercraft and terminal railroads, aswell as other kinds of terminal facilities,and belt line roads or highways

• As an enterprise agency, the SCSPAis required to be financially self-sufficient.

2009 Port Governance Law(Act 73)

• Amends/expands on the originalenabling legislation in severalareas

– Oversight: Port oversightcommittee has been established

– Governance:• Board members can only be

removed for cause

• Qualifications (expertise,experience) to be considered forappointment to the Board aredefined

– Development: directs the SCSPAto proceed with constructingmarine terminals on theCharleston Navy Base and inJasper County

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The SCSPA is governed by an eleven member Board ofCommissioners.

• Nine members are nominated for appointment by the Governor andqualified and approved by the Senate.

• The Secretaries of Transportation and Commerce serve in an exoficio capacity.

• They serve for terms of five years (as amended by the 2009 PortGovernance Law).

• Board officers include the Chairman, Vice-Chairman, Secretary andTreasurer.

• The Board’s responsibilities include:

– Hiring the Chief Executive Officer

– Setting policy and direction

– Providing oversight and guidance to the SCSPA’s Senior ManagementTeam

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The SCSPA operates multiple lines of business andasset bases.

Major Lines of Business

• Container

• Breakbulk

• Roll-on/Roll-off (RoRo)

• Bulk

• Cruise

Asset Bases

• Port of Charleston– Container facilities: Columbus Street,

North Charleston, and Wando Welch

– Currently developing the Navy BaseContainer Terminal

– Non-container facilities:

• Veterans’ Terminal

• Union Pier Terminal

• Port of Georgetown– Breakbulk and bulk facilities

• Other Assets– Daniel Island: 1,500 acres; a portion of

the site is in the process of being sold

– Port Royal: 51 high ground acre site inthe process of being sold

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The SCSPA competes in the South Atlantic-East Gulf portrange.

Major South Atlantic and East Gulf Ports

Miami

Palm Beach

Jacksonville

Charleston

Savannah

Tampa

Mobile

Wilmington, NC

Port Everglades

Hampton Roads

Source: AAPA; Port Websites; Norbridge Analysis

Morehead City

Georgetown

Brunswick

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The SCSPA makes a significant contribution toSouth Carolina’s economy and economicdevelopment.

• $45 billion in total economic output each year across the state

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• 260,800 jobs, representing 10.9% of all jobs in South Carolina

• $11.8 billion in labor income, which is 13.6% of the state’s totalincome

• $1.5 billion in state and local taxes

• $18.5 billion in value-added impact, representing 12.1% of thetotal gross state product

Source: SCSPA

SCSPA Port and Maritime Industry Economic Impact

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SCSPA Strengths, Weaknesses, Opportunities andThreats (SWOT) Assessment

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Completing a SWOT analysis for the SCSPA was amajor first step in preparing the strategic plan.

• It established a fact-based foundation upon which the strategic plan wasdeveloped:

– Identifying what the SCSPA does well

– Identifying the SCSPA’s weaknesses and challenges

– Defining the SCSPA’s strategic issues

– Developing action plans

• The SWOT analysis was based on a series of detailed assessments:

– Competitive

– Industry

– Market

– Economic

– Financial

– Customer and industry interviews

• This section summarizes the results of the SWOT analysis.

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The SCSPA’s Strengths and Weaknesses

Strengths

• Vessel access: channel depths andwidths, transit times, and lack ofcongestion

• Vessel size: the Port of Charlestontoday can handle a majority of thecontainer fleet anticipated to call theU.S. East Coast following theexpansion of the Panama Canal

• Terminals: efficiency, productivity,truck turn times

• Customer base: SCSPA customersinclude 18 of the world’s top 20 globalcontainer lines (top 20 carriers as ofAXS-Alphaliner September 2009survey)

• Financial resources: ability to financeterminal expansion and modernization

Weaknesses

• Asian trades: SCSPA’s participationin the higher growth Asian trades isless (fewer services, less geographiccoverage) than major competitors.

• Distribution center industry: SouthCarolina lacks a significant distributioncenter base.

• Dispersed container terminals:reduces economy of scaleopportunities

• High terminal development costs:limited expansion sites requiring majorcivil works increase terminaldevelopment costs.

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Charleston’s 45’ channel draft can accommodate 84% of all container vessels of9,000 TEUs or less (current and on-order). Charleston’s maximum draft (47’ at

high tide) can accommodate 90% of these vessels.

Source: June 2009 Lloyd’s Fairplay; Norbridge analysis

35

40

45

50

55

60

4,000 6,000 8,000 10,000 12,000 14,000 16,000

TEUs

Dra

ft(f

t)

Current Orderbook

Container Vessels by Draft and Size and Major South Atlantic PortMain Channel Depths (4,500+ TEU Vessels)

Hampton Roads

Charleston(Avg. High Tide Draft)

Savannah

Charleston(MLW)

16

4042

38 40

31 3326 30

0

10

20

30

40

50

Lif

tsp

er

Ho

ur

Charleston Savannah Hampton Roads PANYNJ

Reported Average and High Gross VesselProductivity

Average High

Container shipping lines report they consistently experience thehighest gross crane productivity in Charleston.

Source: SCSPA; Carrier interviews

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SCSPA’s container shipping line customers include 18of the top 20 global container lines (see note below).

SCSPA’s Container ShippingLine Customers

• Include the major consortia

• Include the four largest“independent (non-alliance)”carriers

• Cover the world’s major tradelanes:

– China/Asia

– North Europe

– Mediterranean

– Indian Subcontinent

– South America

Note: Top 20 carriers as of AXS-Alphaliner September 2009 survey

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SCSPA’s Opportunities and Threats

Opportunities• Market recovery: international trade

should begin to recover during thelatter stages of 2010 and in 2011

• Panama Canal expansion: expansionwill provide access to significant inlandmarkets

• Navy Base Container Terminal:provides a modern deep-draftcontainer terminal capability within thePort of Charleston

• Distribution center development:proposed developments, if they occur,should significantly increase SCSPA’scargo base

• Jasper County: provides significantregional capacity expansioncapabilities

Threats• Industry consolidation: global

recession and its affect on shippinglines could lead to majorconsolidations and bankruptcies

• Opposition to terminal expansion:The SCSPA’s ability to successfullyaddress expansion opposition is majorconcern of shipping line customers

• Competitors’ expansion programs:SCSPA competitors continue to investsignificant capital in expanding andenhancing port and relatedinfrastructure

• Sustaining competitive rail access:sustaining and enhancing competitiverail access to major inland markets is akey to successfully pursuing marketopportunities

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The Panama Canal Authority is undertaking an expansion plan which involvesconstructing two new sets of locks and new channels. This expansion, when

completed (2014-2015), will create opportunities for Atlantic Coast ports.

Source: ACP (Panama Canal Authority); Norbridge research and analysis

iPanama Canal Expansion Overview

Source: ACP (Panama Canal Authority); Norbridge research and analysis

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The expanded Panama Canal will be able to accommodate largercontainer ships (up to 12,600 TEUs) with a draft of up to 50’freshwater.

Key Current and Expanded Panama Canal Features

Source: ACP (Panama Canal Authority); Norbridge research and analysis

119,00052,000Estimated Maximum BulkCarrier DWT

117,00054,000Estimated Maximum TankerDWT

1,4001,050’Lock Length

180’110’Lock Width

16,00013,500-14,000Capacity (Estimated AnnualTransits)

12,600 TEUs5,000 TEUsEstimated Maximum TEUCapacity

1,200’965’Maximum Ship Length

50’39.5’Maximum Ship Draft

Expanded PanamaCanal

Current Panama Canal

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By 2015, a portion of the estimated three million containers of traffic projected tomove between Asia and selected U.S. markets via West Coast ports could beattracted to South Atlantic ports as a result of the Panama Canal Expansion

program.

Midwest

Asia-West Coast Container Markets Potentially Divertedto South Atlantic Ports: Post Panama Canal Expansion

North Carolina

South Carolina

Georgia

Alabama

Tennessee

Kentucky

Source: Norbridge analysis.

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SCSPA Mission Statement and Objectives

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SCSPA Mission Statement

The South Carolina State Ports Authority (SCSPA)promotes, develops and facilitates waterbornecommerce to meet the current and future needs ofits customers, and for the economic benefit of thecitizens and businesses of South Carolina. TheSCSPA fulfills this mission by delivering cost-competitive facilities and services, collaboratingwith customers and stakeholders, and sustaining itsfinancial self-sufficiency.

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The SCSPA mission statement answers a number ofbasic questions about the organization:

1. What does SCSPA do?• The SCSPA’s promotes, develops, and facilitates port and waterborne

commerce.

• The SCSPA supports, but does not lead or promote on its own, state-wide economic development by promoting, developing and facilitatingport and waterborne commerce.

2. Why does SCSPA focus on port and waterborne commerce?• To meet its customers’ evolving freight and service needs, which in

turn, generates economic benefits (e.g. waterborne and freighttransportation jobs)

3. Who does SCSPA carry out its mission for?• Customers (e.g. carriers), stakeholders (e.g. maritime community), and

South Carolina citizens and businesses

4. How does SCSPA support its activities?• By sustaining its financial self-sufficiency

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The SCSPA has established six broad objectives tomeasure its success in fulfilling its mission:

• Growth: aggressively pursue growth opportunities across all lines ofbusiness

• Productivity: deliver superior, cost-effective productivity to itscustomers

• Asset utilization: maximize the efficiency and use of its assets

• Financial self-sufficiency: sustain the SCSPA’s ability tocontinuously invest to meet customers’ ongoing requirements

• Economic contribution: contribute to the economic betterment ofSouth Carolina’s citizens and businesses by sustaining and growingwaterborne transportation employment opportunities and fosteringfull service ports

• Staff development: recruit, retain, develop and train customer-centric employees

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SCSPA Strategic Issues

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Strategic Issue Definition: An opportunity or a threat thatfundamentally affects the ability of an organization to fulfillits mission and achieve its objectives.

The hallmarks of a strategic issue include:

1. Involves major uncertainties or risks

2. Is complex, i.e. involves multiple parties or decision-makers,multiple factors or drivers that are interrelated, multipleoutcomes depending on the interaction of key drivers, etc.

3. Affects the ability of an organization to achieve sustainablecompetitive advantages

4. Commands significant resources

5. Requires the focus of senior management to address

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The SCSPA identified four strategic issues it needs toaddress in order to successfully fulfill its mission:

• Market Development: How does the SCSPA best position itselfto take advantage of current and emerging marketopportunities in its major lines of business?

• Infrastructure Development: What is the optimal infrastructuredevelopment plan for positioning the SCSPA to sustain growthin its major lines of business?

• Stakeholder Relations: How does the SCSPA build thesustainable, collaborative relationships with stakeholders tosuccessfully fulfill its mission?

• Financial Sustainability: How does the SCSPA sustain itsfinancial self-sufficiency, which is critical to successfullyfulfilling its mission?

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SCSPA Strategic Initiatives

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Market Development Strategy

The SCSPA will pursue a multi-tiered approach to growing anddiversifying its major lines of business, focusing on:

• Customer retention and expansion

• New customer development

• Line of business and product diversification

• Partnering with stakeholders to enhance and expand theSCSPA’s competitiveness and market opportunities

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Infrastructure Development Strategy

The SCSPA will pursue an integrated approach to utilizing,modernizing and expanding port and related freight and cruisetransportation infrastructure:

• Maximize the use and efficiency of the SCSPA’s existing assetbase

• Successfully complete Phase I of the Navy Base ContainerTerminal

• Implement a post-45’ deepening project for the Port ofCharleston

• Pursue development of a container terminal in Jasper County

• Work collaboratively with stakeholders to address regionalfreight rail infrastructure and competitiveness issues

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Stakeholder Relations Strategy

The SCSPA will prepare and implement an integrated strategyfor enhancing and expanding existing stakeholderrelationships for the purposes of pursuing collaborativeinitiatives to increase trade, foster new business opportunities,and expand employment.

• The SCSPA and Senior Management Team will activelyparticipate in the formulation and implementation of thisinitiative.

• Proactively working with the Port Oversight Committee, theCharleston Maritime Association and the statewide businesscommunity are key components of this strategy.

• Clear, concise and consistent communication between theSCSPA and all stakeholder groups is also a critical element ofthis strategy.

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Financial Sustainability Strategy

The SCSPA will formulate and implement a long-term strategythat insures the SCSPA fulfills its financial self-sufficiencymandate and thus has the requisite funds to continuouslyinvest in the modernization and expansion of its facilities,infrastructure and services.

• Short-term: continuously pursue opportunities to reduce costs,improve efficiencies, and increase productivity to support theSCSPA’s market development strategy

• Mid-to-long term: identify, evaluate, and integrate new andemerging financial management and financing techniques tosupport the SCSPA’s market and infrastructure developmentstrategies

• Proactively seek opportunities to pursue public-privatepartnerships

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SCSPA Strategic Plan Proposed Action Plan Schedule

2009 2018

4. Financial Sustainability

3. Stakeholder Relationships

2. Infrastructure Development

1. Market Development

20172016201520142013201220112010Strategy

Fiscal Year

Note: Continued Enhancement