NSW government body, IPART, has ruled that the Port of Newcastle need only make a one-off compensation payment of a mere $13 million (thirteen million Australian dollars) to be be rid of its container trade restrictions.
If the one-off payment is made, it will remove the port’s liability to reimburse the State for payments that would have otherwise been owed to NSW Ports (the owner of ports Botany and Kembla) if Newcastle handles container trade above a certain level.
Independent Pricing and Regulatory Tribunal (IPART) Chair Carmel Donnelly said the Tribunal determined the value of the payment according to the requirements set out in the Port of Newcastle (Extinguishment of Liability) Act 2022.
“IPART was appointed under that legislation to determine this value and the law requires that determination to be made in a very specific way,” she said. IPART was required to determine how much the inclusion of the reimbursement provision would have reduced the financial value of the right to operate and lease the assets of the Port of Newcastle for 98 years, in the opinion of a reasonable person, at the time the Port of Newcastle Deed was entered into.
“This could be described as what a reasonable person, bidding for the right to operate and lease the Port of Newcastle in 2014, would have reduced their bid by, because of the requirement to reimburse the State for payments to NSW Ports,’” said Ms Donnelly.
“IPART was only allowed to consider information that could have been known in May 2014, when the transaction to privatise the Port of Newcastle was finalised.”
The Port of Newcastle was privatised on a 98-year lease back in 2013 for A$1.75 billion from a consortium of overseas investors (there have been changes int he shareholder base since then). Meanwhile, Ports Botany and Kembla were sold as a package for A$5.07 billion in 2013 on a 99-year lease.
The whole privatisation deal was shrouded in secrecy but. later, a person or persons unknown anonymous leaked details of the deal to the media.
It transpired that, in an effort to boost the price of Botany and Kembla, the NSW State Government had agreed to a deal in which the State Government would compensate NSW Ports for every container moved in Newcastle above a certain trigger point (which was, at the time, 30,000 TEU but that has since increased). The second part of the deal was that the new owners of the Newcastle lease would then have to reimburse the NSW State Government.
Prior to the change in the NSW Government at the 2023 election, the previous State Government sought to address the situation and passed legislation allowing Newcastle to free itself of its liabilities if it paid a premium to the State Government.
That premium has now been determined by IPART to be A$13m.
However, the liability of the NSW State Government to NSW Ports remains.
According to recent modelling carried out by a consultant for the NSW State Government, the NSW taxpayer could be on the hook for anywhere between A$600m and $4.3 billion in compensation to NSW Ports if Newcastle develops a competing terminal.
FURTHER READING
Read the full reasoning of IPART here.
