New South Wales alters ports privatization agreement

The bill passed by the NSW legislative assembly will lift restrictions on traffic at the Port of Newcastle that potentially required penalty payments to NSW Ports.

The Port of Newcastle will have its container cap removed following a bill passed by the New South Wales legislative assembly to lift the restriction, undoing part of a previous privatisation agreement and paving the way for the port to develop a large-scale container terminal.

The port had been restricted to moving 50,000 containers a year, which was imposed on it as part of the privatization of Port Botany and Port Kembla (collectively known as NSW Ports) in 2013. As part of that process, NSW Ports signed agreements with the NSW government that required ministers to compensate the ports if container traffic at the Port of Newcastle rose above the cap.

The new bill will see the cap removed while requiring the government to carry out an independent assessment of the fair value of the lease of the port, if the restrictions on container traffic were not in place in 2014.

NSW Ports is 80 percent owned by a consortium comprised of IFM Investors, AustralianSuper, Australian Retirement Trust and Tawreed Investments. The Port of Newcastle was privatised in 2014 and is co-owned by the Macquarie Infrastructure and Real Assets-managed The Infrastructure Fund and China Merchant Port Holdings. The changes follow a failed challenge to the restrictions in 2019 by the Australian Competition and Consumer Commission, which described the privatisation agreement as “likely to have the effect of substantially lessening competition.”

At the time, the Federal Court of Australia ruled against the ACCC and in favour of NSW Ports, backing the state government’s existing container port strategy, which decreed that container terminal development should be conducted in sequence, with existing capacity at Port Botany and Port Kembla to be utilised before the Port of Newcastle. In a statement following that outcome, NSW Ports chief executive Marika Calfas hailed the court’s decision as “an emphatic win for the state of NSW and NSW Ports.”

Now that the cap has been removed, a spokesman for NSW Ports said: “NSW Ports is not a party to the privatization arrangements between the NSW Government and Newcastle and, therefore, this is a matter between those two parties.

“NSW’s container supply chains are most effectively serviced (economically, environmentally and socially) by Port Botany, followed by Port Kembla when Port Botany nears capacity. The decisions in parliament do not change that fact.

“NSW Ports will continue with its strategy and investment plans, which have seen more than A$2.3 billion ($1.5 billion; €1.5 billion) in private investment spent at our ports and intermodal terminals over the past nine years since privatisation.”

IFM referred a request to comment to NSW Ports. AustralianSuper and the Australian Retirement Trust were contacted for comment but could not be reached in time for publication.

In February last year, then-Australian treasurer Josh Frydenberg backed the Port of Newcastle in a separate dispute over access charges between its owners and the NSW Minerals Council.