Secrecy surrounds NSW government compensating private operator of Port Botany

Greg Cameron

Greg Cameron

The NSW government refuses to disclose the amount of money it pays the private operator of Port Botany when container movements at the Port of Newcastle exceed the government’s limit.
Nor will the government disclose the amount of money it charges the private operator of the Port of Newcastle when container movements there exceed the government’s limit.

No reason is given for the secrecy.
On 17 October 2013, The Hon. Duncan Gay MLC, told state parliament that because a ”cap” had been placed on container ”numbers” at the Port of Newcastle, the government did not ”envisage that any compensation will need to be put in place” for the private operator of Port Botany.
Mr Gay said the government had been clear about the cap and the compensation payment throughout the process of leasing Port Botany and Newcastle port.
”I have indicated in the House, as I have in Newcastle—indeed, I made a special visit to Newcastle to talk to the board, the chief executive officer and the local community—that part of the lease and the rationalisation was a cap on numbers there. I am not saying that there will be no containers into Newcastle. Certainly, a number of containers will come in under general cargo, but there will not be an extension. The only time an extension is allowed is when a specific number is reached and is tripped in Port Botany and Port Kembla,” Mr Gay said.
Hansard will contain any mention by Mr Gay of a cap on container numbers at the Port of Newcastle, or compensation payment to the private operator of Port Botany. But if Hansard contains no such record, Mr Gay is obliged to issue a correction.  Newcastle City Council, Hunter Business Chamber and Newcastle Trades Hall Council, are all yet to indicate whether or not they were informed by Mr Gay. The information was not reported by the local newspaper, the Newcastle Herald.

Unless the government charges the private operator of the Port of Newcastle for container movements above the ”cap”, the unfunded liability for the remainder of the Port Botany lease- some 97 years – represents a potentially major exposure for the state’s finances. The state’s accounts should be suitably qualified.

At present, Port Botany operates as a monopoly container port in NSW. With 25 per cent of the state’s population living north of Sydney, Newcastle is the logical port to meet this demand. It stands to reason that the demand for container port services at Newcastle is at least 25 per cent of Port Botany container traffic. With construction of suitable rail freight infrastructure, Newcastle port would also be able to compete with Port Botany for Sydney business.
However, Port of Newcastle Investments, the port’s private operator, disagrees.
”We are committed to the continued growth and development of existing and new trades within the Port of Newcastle including containers,” said Acting CEO, Mr Simon Gelder.
”The Port of Newcastle currently receives containers via geared vessels which have their own loading and unloading equipment.
”At the moment, we don’t see sufficient demand for a container terminal. Our priority remains building demand for all trade opportunities, including inbound trade,” he said.

Anglo Ports was the lead partner of a consortium which proposed a one-million-per year container terminal at Newcastle port in the period 2009 to November 2013, pursuant to a tender conducted by Newcastle Port Corporation.
Anglo reacted to this statement made by NSW Treasury on 22 August 2014, in response to questioning in budget estimates: ”Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption. As the container port did not proceed, there is no decision to review,” said Treasury.
In a statement dated 10 February 2015 published on the NSW parliament web site, Anglo responded:
”The answer conflates the proposal of Anglo Ports or its consortium with government dictation, with uneconomic enterprises, with the absence of market demand, with influence peddling and with corruption. Anglo Ports on behalf of the consortium categorically denies that its proposal or the tender under which it was conducted had any of these characteristics.
”Further the second sentence in the answer – “As the container port did not proceed, there is no decision to review” – is erroneous because the Hon M Baird MP, as Treasurer, by decisions of 30 August 2012 and 26 July 2013 dictated that a container port not proceed at Newcastle. There were other decisions on the container port proposal, including by Mr Baird and by Mr E Roozendaal. There were thus several decisions about the container port proposal capable of being reviewed.
”The second sentence is misleading in allowing the interpretation that the proposal for the container terminal did not proceed because of a supervening event or because the proposal was withdrawn. Anglo Ports did not withdraw the proposal and denies there was any such supervening event.”
But in a statement, the NSW government said: ”Newcastle Port Corporation concluded its negotiations with Anglo Ports in November 2013 after it was unable to reach a suitable outcome for the redevelopment of the Mayfield site.”
The ”suitable outcome” sought by the government was re-development of the former Newcastle steelworks site without a container terminal. Government policy is that ”a major container terminal will be a priority at the Port of Newcastle only once Port Botany and Port Kembla reach capacity”.
Although the site is the best available deepwater port site on the east coast of Australia, the government would have it re-developed for non-port use.
In order to avoid an unfunded liability, the government will have to establish that charging a fee for container movements at Newcastle port is legally enforceable. (The government also refuses to disclose whether the charge applies to a container terminal developed on land not leased to Port of Newcastle Investments.)
Last October, the ACCC warned that governments should avoid any restrictions in sale agreements for government assets ”that may be unlawful or could be unenforceable”.

The ports leasing arrangements may be subject to section 50 of the ”Competition and Consumer Act 2010”, which prohibits acquisitions that would have the effect, or likely effect, of substantially lessening competition in any market.
”The sale of ports assets should promote competition where possible, for example by separating rather than integrating potentially competitive facilities and avoiding anti-competitive provisions from agreements with successful bidders,” the ACCC said.
”The ACCC encourages early engagement from State governments on any competition issues that may arise in relation to the proposed sale structures or sale conditions for any monopoly or near monopoly assets, including any restrictions on competition proposed in the arrangements. Such restrictions may be unlawful and could be unenforceable.”

The ACCC has not publicly acknowledged that the government pays the private operator of Port Botany when container movements at the Port of Newcastle exceed the government’s limit; and, it charges the private operator of the Port of Newcastle when container movements there exceed the government’s limit.
To do so would require the ACCC to consider the arrangements for compliance with section 50 of the Competition and Consumer Act 2010.

Greg Cameron

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