Australia’s Northern Territory government is considering divesting the country’s last public insurance company, the Territory Insurance Office (TIO) – which has A$326.7 million (€227 million; $285 million) of assets under management – as well as leasing certain parts of its Darwin Port ($11 million pre-tax profit for 2012-2013), as it seeks to re-balance state budgets and find more funding for its ambitious infrastructure investment plans.
“The Northern Territory Government is beginning a mature conversation about the future of both the Territory Insurance Office and the Darwin Port so that we can deliver the best value for taxpayers’ money and ensure our infrastructure meets the future needs of a growing Northern Australia,” announced Adam Giles, Chief Minister for the Northern Territory, in a statement on Friday.
The Northern Territory government has been investigating for several months opportunities for the Territory under the Commonwealth’s asset recycling incentive programme, a scheme which recompenses states and territories which complete public asset sales and manage to reinvest sale proceeds in “critical, new economy-growing community infrastructure” by paying them 15 percent of the asset price. From this exercise, it has only found two assets big enough to fit the bill.
Adam Giles said the territory’s government was considering selling the country’s only public-owned insurance company and had hired a consultant to review options for Darwin Port, a gateway for livestock exports and other goods.
Infrastructure Australia, which advises the federal government, has said that at least A$300 billion needs to be spent on new infrastructure to avoid a crippling impact on productivity.
The insurance company was set up in 1979 at a time when hardly any other financial institutions were operating in the region. However, 12 insurers are now competing in the Territory market, all of which offer cyclone insurance and all but one of which offer flood insurance.
The insurance company’s management model is currently encountering issues related to high-risk client profiles, which the government would like to see mitigated through adequate spreading of risk across the country. A company spokesperson said that company management believed a sale of the asset to the private sector could enable this.
In February, the government announced the appointment of consultants, Flagstaff Partners, to investigate private investment options at Darwin Port.
“We’ve asked these highly credentialed consultants to come up with a strategy to address the need for investment in Darwin's port facilities, the development of the Marine Industry Park and the potential redevelopment of other foreshore infrastructure. We are interested in development and expansion opportunities through private investment in areas such as future quay line, hard stand and reefer points,” said Giles.
“This could involve long term leases on specific pieces of Port infrastructure but the Port is not for sale because it is a strategic asset that holds the key to the future economy of Northern Australia,” he explained.