The NSW Government has leased Port Botany and Port Kembla on a 99-year contract.
Following a six-month competitive bidding process, the 99-year lease of state-owned port assets at Port Botany and Port Kembla has been awarded to the NSW Ports Consortium for $5.07 billion, with net proceeds of around $4 billion to be invested in the NSW Government's infrastructure fund – Restart NSW.
$4.31 billion came from the Port Botany transaction package and A$760 million from Port Kembla.
Net proceeds from the two leases will be invested in the government's infrastructure fund, Restart NSW, with 30 per cent of funds reserved for projects in regional areas and a further $100 million dedicated for infrastructure projects in the Illawarra.
Mr Baird said: "There are now vital funds for the delivery of WestConnex, Bridges for the Bush, the Pacific Highway and the Princes Highway. The government has now funded its commitment to WestConnex and there is $100m for spending on new infrastructure projects in the Illawarra region."
NSW Ports Consortium comprises Industry Funds Management (IFM), Australian Super, QSuper and Tawreed Investments Limited, a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA). QSuper's investment in Port Botany and Port Kembla will be managed by Global Infrastructure Partners (GIP).
The NSW Government will retain regulatory oversight of the ports as well as responsibility for a range of maritime safety and security functions, including the role of Harbour Master, the dangerous goods function and pilotage.
Mr Baird said a small number of Sydney Ports Corporation and Port Kembla Port Corporation employees would transfer to the port lessee.
"Enterprise agreement employees will receive a two-year employment guarantee, a transfer payment of up to 30 weeks pay, continuation of current superannuation arrangements, transfer of all sick leave and the ability to transfer or cash out annual and long service leave. These employees will transfer on the same terms and conditions.
"Remaining Sydney Ports Corporation and Port Kembla Port Corporation employees will continue to manage and administer those important maritime functions which will remain with the State," Mr Baird said.
The transaction is expected to close on 31 May 2013.
Bouquets and brickbats
As can be expected, the decision drew a variety of responses from industry.
Greg Cameron: a bad deal
The bi-partisan political decision that there will never be a container terminal at Newcastle is for the purpose of preventing the Hunter and northern regions of New South Wales benefiting from a container terminal. It is a sad reflection on the quality of representation.
In 1997, BHP proposed a container terminal on the company's steelworks site as a commercially viable future use of the site after steelmaking. In 2000, confidential negotiations took place between BHP and the state government to transfer the site into government ownership, as revealed in a Question On Notice from the (former) member for MyallLakes, Mr John Turner, on 11 October 2000 (enclosed).
The NSW government took ownership of the container terminal site in 2001 to prevent competition with Port Botany Container Terminal.
Last year, the number of containers moved through Port Botany Container Terminal was 2 million TEU. Eighty-five per cent of these containers were packed or unpacked within 40 km of Port Botany. Fifteen per cent of containers were transported by rail and 85% were transported by truck.
When container movements through Port Botany reach 7 million TEU a year in 2030, between 4 million and 5 million will be sent by train and truck to intermodal terminals in outer western Sydney. Containers, or their contents, destined for northern NSW will then be sent from western Sydney. For the Hunter and northern NSW regions, the impost in both cost and time is unjustified.
But transporting containers by rail between Newcastle and outer western Sydney is faster and at comparable cost compared with using Port Botany.
In 1997, BHP's motivation was economic development – jobs. BHP was replaced by the state government. Then, as now, there is bi-partisan political support against using the container terminal site for economic development and job creation .
Selling the long-term lease to Port Botany Container Terminal for $4 billion does nothing to benefit the Hunter or northern Regions of NSW. The cost of completing the Northern Sydney Freight Corridor alone is $4 billion.
FTA: wait and see
As per the experience at other ports subject to privatisation, potential exists for the consortium to increase rates on incumbent tenants at bulk liquid berths and container terminals. Industry and public concerns centre on the downstream implications on increased petrol prices and fees associated with international trade through the ports.
Director of Freight & Trade Alliance (FTA) Paul Zalai said assurances have been received by the NSW Treasurer that pricing safeguards are in place: "The consortium will have to notify the government of any charge increase, allowing the Minister to seek further detail and/or refer the matter for consideration by the Independent Pricing and Regulatory Tribunal."
Mr Zalai also said that avenues exist via the National Competition Council under Commonwealth legislation in the event of a pricing dispute.
Mr Zalai acknowledged the rationale to privatise Port Botany and Port Kembla, allowing the NSW government to gain much needed revenue, adding that it also provides potential benefits for commerce: "It is envisaged that the new port operators will focus on efficiency gains through better use of existing assets and co-ordination of resources."
Mr Zalai also highlighted the importance of the Port Botany Landside Improvement Strategy (PBLIS), which has significantly reduced truck queues, delays to deliveries and waiting time detention fees. "We need to know how this important reform initiative will be managed under the new port arrangements to ensure that we build on the results achieved to date."