“By acquiring three new stacker-reclaimers of the same model, Westshore will be able to significantly enhance its operational efficiencies in several respects, including by standardizing spare parts, repairs and maintenance, and by reducing overall maintenance downtime and costs involved in maintaining older equipment,” the company said.
The project will also include the replacement of its 42-year-old outdated and inefficient administration, operations and maintenance offices, shops and warehouses with one consolidated complex.
The facility, which will feature storage optimization, is expected to take 4-5 years to complete and will be built in stages.
Westshore said no additional equipment would be added to the site.
“Any additional throughput capacity would only result from the improved productivity of the new equipment, operating efficiencies and reduced maintenance downtime, and would only be realized if other participants in the coal chain can also improve efficiencies,” officials said.
It said it could potentially reach another 2-3 million tonnes annually, but not before 2017.
The capex program also includes about $7 million for dust suppression systems and related environmental control equipment. That facet of the improvement will be completed in 2013.
The facility has implemented significant operational changes over the past five years. During that time the company has reinvested $110 million back in to terminal operations to upgrade and replace equipment. It added a fourth stacker-reclaimer in 2008.
“The anticipated results of these efforts are that Westshore's capacity going forward has increased to an estimated 33 million tonnes per year,” the company said.
“With the customer agreements currently in place, and which were secured over the last two years, most of that capacity is committed through to 2021-2022.”
However, if those throughput levels are to be maintained long-term, Westshore said, the additional reinvestment was required, including that for the replacement of the older stacker-reclaimers.
“The alternative would be to spend significantly more money on annual maintenance capital to sustain these higher throughput levels (estimated to be $50-60 million over the next 5-10 years), but by doing so Westshore would continue to have old equipment that would inevitably need to be replaced,” it said.
“Westshore has been in business for over 42 years and believes that replacing the older equipment with new is in the best interest of operating the terminal for the decades to come. The new stacker-reclaimers will have an anticipated useful life of 30-40 years.”
Because of this move, the facility said it would initiate a capital projects fund beginning in the second quarter of the year. This would allow it to minimize the additional bank debt financing that would otherwise be required to pay for such efforts.
It plans to hold back, commencing with the second-quarter distribution, by setting a dividend rate of $0.33 per share per quarter – being the approximate levels of distributions paid in the second and third quarters of last year – on the basis of the terminal handling 30Mt or more under its existing customer contracts for the next several years.
Even with this capital project fund, the corporation still anticipated requiring debt financing of up to $80-100 million over the short-term, officials said.