Opinion | Investigation welcome into container terminal arrangements at Newcastle Port

GET MOVING: "A sensible solution is for an orderly transfer of container terminal operations from Port Botany to Newcastle and Port Kembla," Greg Cameron says.
GET MOVING: "A sensible solution is for an orderly transfer of container terminal operations from Port Botany to Newcastle and Port Kembla," Greg Cameron says.

The ACCC’s decision to investigate arrangements that “may limit or prevent the development of a container terminal at the Port of Newcastle”, is welcome news. The ACCC says of “relevance” to its concerns is section 45 of the Commonwealth Competition and Consumer Act 2010 (Competition Act), which “prohibits contracts, arrangements or understandings which have the purpose or effect of substantially lessening competition”. A container terminal is a near certainty, if the NSW government removes the fee it charges. This fee is paid to the lessee of Port Botany and Port Kembla (NSW Ports) as compensation for loss of container shipping business to Newcastle.

A container terminal built on the former Newcastle steelworks site would be able to move two million TEU containers a year. At this volume, the NSW government will be required to pay NSW Ports $8 billion between 2023 and 2063. NSW Ports paid $5.1 billion for a 99-year lease in 2013. The government was authorised by the Ports Assets (Authorised Transactions) Act 2012 to lease Port Botany, Port Kembla and Port of Newcastle. But this act did not authorise the government to pay the lessee of Botany/Kembla for containers shipped through Newcastle.

Paying NSW Ports anything defeats the purpose of leasing Botany/Kembla, which was to release capital value. However, by artificially inflating the lease value of Botany/Kembla – by promising payment of compensation – the government got a false valuation. Competition from Newcastle would have made the lease value of Botany/Kembla less than the retention value, whereby these ports would not have been leased in the first place.

The government concealed its decision to pay the lessee when the Ports Assets (Authorised Transactions) Bill 2012 was being considered by parliament. The government also concealed its source of funds to pay the lessee. The government decided in 2012 that a private company, Newcastle Stevedores Consortium, would be the source of those funds. A negotiation by the government to lease Newcastle’s container terminal site to the consortium, for development of a container terminal, started in 2010. A key lease condition was that the consortium should build and operate a container terminal with minimum capacity for one million TEU containers a year. Since a lease contract with a condition requiring the consortium to pay a fee for containers was likely to breach the Competition Act, the government terminated the negotiation in November 2013. The government then decided to lease the Port of Newcastle to give it a source of funds to pay NSW Ports outside the operation of the Competition Act. Government policy, as confirmed by Gladys Berejiklian MP on September 29, 2015, is that the port lessee (Port of Newcastle Investments) “could develop a container terminal if it wished to do so”.

A Newcastle container terminal will create base load cargo to pay for a rail freight bypass of Sydney – from Newcastle to Port Kembla via outer western Sydney. A sensible solution is for an orderly transfer of container terminal operations from Port Botany to Newcastle and Port Kembla. NSW Ports, which is 80 per cent owned by industry super funds, can have its investment protected if it participates in the rail freight bypass. 

There is enough money to be made in railing containers from Newcastle, rather than trucking them from Port Botany, to protect the interests of all investors, by taking a commonsense approach in the interests of fund members and the NSW community.

Greg Cameron is a Canberra analyst