Australia’s largest port up for grabs

Victoria’s state treasurer, Tim Pallas, has announced details of legislation that is being introduced to Parliament that will enable the privatisation of the Port of Melbourne.

Port of Melbourne is the busiest container port in Australia, visited by more than 3,000 ships per year. The proposed 50-year lease of the asset is expected to deliver proceeds of between A$5 billion (€3.5 billion; $3.8 billion) and A$6 billion.

Under an asset recycling scheme, the proceeds will go towards funding new infrastructure in the state and will also be used to remove 50 level crossings which are perceived to be dangerous. The sale will also help to protect Victoria’s AAA credit rating.

Media reports have indicated that at least three bidding groups – reportedly led by IFM Investors, QIC and Hastings Funds Management – are lining up to take part, while a fourth group including Chinese funding is also tipped to enter the race.

While there has been talk of a second container port being built in Victoria, the legislation would allow for a compensation pay-out to the owners of the Port of Melbourne lease if such a port were built before Melbourne had reached capacity.

Pallas said he did not believe such compensation was likely to come into effect “given the amount of time that would be required to actually establish and develop a port”.

The Labor state government requires the support of opposition parties in Parliament for the legislation to go through. The government hopes the lease sale will be concluded early next year, but the opposition have expressed concerns about the sale – particularly in relation to the compensation clause.

The planned sale follows earlier port privatisations in New South Wales. In April 2013, a 99-year lease of Ports Botany and Kembla was sold to a consortium of private investors for just over A$5 billion; while in April 2014, Port of Newcastle was sold for A$1.75 billion to Hastings Funds Management and China Merchants.