The Independent Pricing and Regulatory Tribunal (IPART), a New South Wales Government body charged with regulating markets and government services, has ruled that the Port of Newcastle need only make a one-off compensation payment of $13 million to be rid of its container trade restrictions.
If the one-off payment is made, it will remove the Port of Newcastle’s liability to reimburse the State Government for compensation payments owed to NSW Ports (the operator of Port Botany and Port Kembla), if the Port of Newcastle handles container trade above a specified level.
IPART Chair, Carmel Donnelly, said that the Tribunal determined the value of the payment according to the requirements set out in the Port of Newcastle (Extinguishment of Liability) Act 2022.
“IPART was appointed under that legislation to determine this value and the law requires that determination to be made in a very specific way,” Ms Donnelly said.
IPART was required to determine how much the inclusion of the reimbursement provision would have reduced the financial value of the right to operate and lease the assets of the Port of Newcastle for 98 years, in the opinion of a reasonable person, at the time the Port of Newcastle Deed was entered into.
“This could be described as what a reasonable person, bidding for the right to operate and lease the Port of Newcastle in 2014, would have reduced their bid by, because of the requirement to reimburse the state for payments to NSW Ports.
“IPART was only allowed to consider information that could have been known in May 2014, when the transaction to privatise the Port of Newcastle was finalised.”
Any amount payable by the state to NSW Ports under a separate 2013 arrangement, may be quite different to the amount IPART has determined the Port of Newcastle can pay the state to extinguish its liability.
The amount of any compensation payable by the state to NSW Ports is calculated each year based on actual container throughput at the Port of Newcastle and wharfage charges at Port Botany and Port Kembla. IPART was not tasked with determining the amount payable under this separate 2013 arrangement.
Industry response
NSW Ports has released a statement which said that the extraordinarily low compensation value attributed by IPART re-affirms that the state’s container port policy remains fit-for-purpose.
At 0.6 per cent of the total acquisition cost by the Port of Newcastle, NSW Ports said that the compensation value confirms that there is limited economic viability in a container terminal at Port of Newcastle.
“The billions of taxpayer dollars that would need to be spent on road and rail infrastructure to support a container terminal at Newcastle remains unjustified,” NSW Ports said.
“There has been no change since Port of Newcastle was privatised that alters this position, as reflected in the Federal Court’s judgement in 2021 in the action brought by the ACCC, which noted that the prospect of Port of Newcastle developing a container terminal in the reasonably foreseeable future while Port Botany has capacity ‘is fanciful, far-fetched, infinitesimal or trivial’.
“Container handling through Port Botany remains the most cost-effective, efficient and sustainable supply chain for the state.
NSW Ports said that once Port Botany reaches capacity, Port Kembla, as the next proximate location to the state’s largest population and business centres, makes the most sense for a second container terminal.
Port of Newcastle CEO, Craig Carmody, said that with the determination figure handed down, the Port has one final regulatory roadblock to remove before meaningful progression can occur on a container terminal.
“Today is a significant and historic milestone for Port of Newcastle and regional New South Wales, a path forward that means we will no longer be penalised for wanting to offer choice and competition in New South Wales container trade,” Mr Carmody said.
The Port of Newcastle said that it extended its appreciation to all sides of parliament for their pragmatic approach to the legislative process.
“Support across the political divide for this Act has been wonderful to see, but I must extend particular thanks to the Member for Lake Macquarie, Greg Piper, who courageously fought for regional New South Wales and ensured all political parties aligned for the benefit of the state.”
With the legislative process nearing completion, attention for the Port turns to the NSW Freight Reform Review, which is a determinant of state planning decisions.
“While we are delighted that the determination has been made, we now need to ensure the NSW Freight Reform Review, which the State Government has commenced, also reflects the decision by Parliament to promote competition through the Port of Newcastle (Extinguishment of Liability) Act.
“The current Freight and Ports Policy states that Port Kembla is the designated second port for a container terminal in New South Wales, which impacts Port of Newcastle’s ability to get planning approvals for its own container terminal.
“We hope the NSW Freight Reform Review will agree that there should be a level playing field for competition rather than the state trying to pick winners.”
With the legislative process nearing completion and the NSW Freight Reform Review underway, Port of Newcastle said that it will continue to focus on growing existing container trade through its new Multipurpose Terminal.
“Our immediate focus will be the continued growth of container trade through our existing Multipurpose Terminal, which we have invested over $35 million in and currently has planning approval for 350,000 containers a year.”
