SUPPLY CHAIN & OPERATIONS

STRATEGY & ORGANISATION

Danish ports: Broadening horizons from water to land

We can generate much more green growth and profits from our ports but this requires having a shared national vision. Achieving that also demands an increased focus on the leadership of ports, explains a CBS researcher. Something Frederikshavn and Copenhagen are certainly familiar with.

By CBS Executive Education

Facilities of a commercial port seen from the sea

Photo by Moritz Kindler on Unsplash

Danish ports possess excellent opportunities to create growth, innovation and green jobs but taking advantage of those opportunities requires expanding the focus from water to land.

CBS Associate Professor and Director of CBS Maritime Henrik Sornn-Friese clarifies that:

“We need to stop thinking about ports as simply places where goods are transferred from the wharf to the road. There is plenty of space around the ports that can be better utilised if we think more proactively,” adding that “Denmark has around 60 commercial ports but only a few of them are commercially run. We should take a more value-based approach when looking at our ports."

Green hubs

Ports need to boast more than just the clamour of seagulls, containerships and warehouses. Sornn-Friese points out that some ports should focus on attracting entrepreneurial environments in the green transition, which is already the case, for example in the Netherlands:

“Port authorities can build rental offices, shared facilities, labs and workshops for entrepreneurs. In an ideal world they could also offer a variety of economic business models to lure in the right companies and help them get started.”

According to Sornn-Friese another option is to become an integral part of the value chain for the offshore wind industry that Denmark is investing in heavily. Politicians have decided to build six new large wind farms in the North Sea, Baltic Sea and Kattegat. Since the wind turbines will be of an unprecedented size they will require a considerable amount of capacity to assemble and ship.

Another way to turn Danish ports into green hubs is power-to-X facilities, which use electricity to produce hydrogen. Sornn-Friese emphasises, however the importance of having an overall national vision because the facilities should preferably be located in larger ports that already have access to energy infrastructure, supply chains and deepwater.

"We need to stop thinking about ports as simply places where goods are transferred from the wharf to the road. There’s plenty of space around the ports that can be better utilised if we think more proactively."

Henrik Sornn-Friese, CBS Associate professor, PhD and Director of CBS Maritime

Amsterdam goes green

The Port of Amsterdam has already launched various green projects, its port authority seeking to become one of the greenest ports in Europe. To this end the port is working to attract companies that embrace the circular economy, has invested in solar and wind energy, and is promoting the use of electric cars and bicycles in the port area.

The city government runs the port through a municipal company but also has partnered with private investors. This ownership structure for individual commercial ports is an area that Denmark should consider learning more about, asserts Sornn-Friese, who says:

“Basically the ports are municipally owned. Consequently the chair of the board is often the mayor or a politically appointed individual, which means that the thinking is local and perhaps also relatively short-term and non-commercial.”

He adds: “In general, transforming municipal ports into limited liability companies may be a good idea since they typically have greater commercial freedom than municipal ports and can more easily raise capital and attract private investment.”

“Other forms of ownership and organisation could also be considered, that would allow a port to operate on market terms and with a commercial perspective. These could be self-governing institutions or foundation-owned entities. Or municipal ownership with more independent boards,” he clarifies.

An unsual construction

One of Scandinavia’s largest port and terminal operators, Copenhagen Malmö Port (CMP), with ports in Copenhagen and Malmö, avails itself of a slightly unusual construction. It is run by the limited liability company CMP, which is jointly owned by the City of Copenhagen and Malmö Municipality.

“We find that a limited liability company provides tremendous flexibility in many areas, including finance, business development and management of the company. We also find that decision making is fast and efficient,” says Ulrika Prytz Rugfelt, Chief Communications and Sustainability Officer, CMP, who continues:

“The model we use is an efficient way of working, where our municipal owners are property owners, and CMP, as a limited company, focuses on business development.”

Several years ago CMP announced its aim of making the blue industry green. Its vision involves acting as a platform where industry, research and entrepreneurship can converge, share knowledge and create new technologies, solutions and business opportunities.

“We find that a limited liability company provides tremendous flexibility in many areas.”

Ulrika Prytz Rugfelt, Chief Communications and Sustainability Officer, Copenhagen Malmö Port (CMP)

26 are operated by municipalities, similar to how roads and green areas are maintained, but the tasks municipal ports can perform are limited
25 are autonomous municipal ports and have a certain degree of independence but are still subject to municipal control
7 are public limited companies, including Copenhagen Malmö Port and the Ports of Odense and Aalborg
The remaining ports are smaller and privately operated

Source: Danskehavne.dk

Taxpayers liable for the port of Frederikshavn’s debt

Associate Professor Sornn-Friese believes that it is a matter of using ports innovatively.

“We need to view them as large companies with untapped potential. What do we want to use them for? What activities and businesses should they attract? How do they become proactive? This requires expansive budgets and management by people with excellent business skills,” he maintains.

The Port of Frederikshavn in North Jutland faced a crisis of management and problems with its business model, forcing the port’s board to resign due to the port accumulating 1.6 billion Danish kroner in debt as a result of unsustainable investments.

The port, an autonomous municipal port, was unable to pay the debt it was legally liable for. As a result taxpayers now have this debt hanging over their heads.

New strategy underway

In the event of bankruptcy, if a limited liability company had been in control, then the shareholders would have been liable for the debt with their equity share.

“As such limited liability companies are expected to have an independent interest in possessing a high level of expertise. Moreover, since they are in the market for conventional loans, they are likely to be scrutinised more closely when they seek to raise money for projects,” explains Sornn-Friese.

Since April 2023 a partnership under a government comprising Social Democrats, Venstre and Moderates has been working on a new strategy for the development of commercial ports in Denmark. Sornn-Friese hopes that it will result in an overall national vision that will encourage a more commercial approach.

The hope is also that the vision will define the future roles of ports and their importance to the Danish economy.

Revision of port law called for

“This means better coordination between ports to avoid significant overlaps. Large infrastructure projects require significant investments that often exceed the capacity of individual ports. National funding or public-private partnerships may be necessary,” says researcher Sornn-Friese.

He would also like to see politicians re-evaluate Denmark’s 25-year-old act on ports that sets the framework for the use of port property.

“Individual port authorities need more room to manoeuvre to make independent decisions. In this context the question of what the primary purpose of each port is and what should be considered port-related activity are relevant.”

Henrik Sornn-Friese

Associate professor of strategy and innovation at CBS
Director of the research unit CBS Maritime, which focuses on the challenges and potential of the operation of ships, port companies and the maritime industry in general
Guest professor at the Lee Kong Chian School of Business, Singapore Management University

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Danish ports: Broadening horizons from water to land

"We need to stop thinking about ports as simply places where goods are transferred from the wharf to the road. There’s plenty of space around the ports that can be better utilised if we think more proactively."

“We find that a limited liability company provides tremendous flexibility in many areas.”

The 63 commercial ports of Denmark

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