Why the outcome of the Port of Melbourne sale is important for Australia’s future

“The proposal to lease out the current Port of Melbourne (Port of Melbourne sale) for 50 years to fund rail and road infrastructure in the east and south-east of Melbourne is the greatest fraud ever conducted on the people of the west of Melbourne. It locks the west of Melbourne into guaranteed congestion and pollution for half a century.” – Michael Dowling, deputy chairman of the Victorian Channels.

Is the Port of Melbourne sale a wise decision for the government?

This feisty statement does very little resolution to the growing issues and disputes raised against the proposed privatisation. Allegations of it being “an infrastructure fiasco rivalling the desalination plant and the East West Link ”  contributes to the on-going debacle between the Andrew’s Government and the Opposition.

Complicating the matter further are the land tax being slashed, a national security issue being raised, and IBAC being tasked to conduct further investigation.  These series of events causing many to wonder if the matter has become a battlefield of political parties.

Be the judge of this matter. Read the major issues constantly being debated upon in various social media feeds and make a stand.

Haunted by the past:  The cost of the Port of Melbourne sale

If the Port of Melbourne is not the last significant public asset in the state, is there a chance that scrutiny of its privatisation could have been less lenient? Probably, if and only if, one hasn’t learned from the past. But previous privatisations and sale of public assets have only lead to much regret.

Australia port sales in the past three years

In the past three years, Australia has seen the privatisation of four major ports: Port Botany, Port Kembla,  Port of Brisbane, Port of Newcastle and Port of Darwin under these terms:

2013 – The Privatisation of Port Botany, Port Kembla and Port of Brisbane

Both Port Botany and Port Kembla were leased for 99 years at a cost of AUD 4.31 and AUD 0.76 billion, respectively to NSW Ports. During that time, the NSW Government forecasted an aggregate figure of AUD 5.07 billion which was 25 times the annual earnings of the two ports combined.

The Port of Brisbane followed shortly after it had approved the Canadian Pension Fund CDPQ to acquire 26.67% of its stake for about AUD 1.4 billion. They had approximated its enterprise value, including debt, of AUD 6.2 billion which was 27 times its annual earnings.

2014 – Port of Newcastle

The Port of Newcastle was leased for 98 years to the Hastings Funds Management and China Merchants for AUD 1.75 billion. This figure was projected to be 27 times the annual earnings of the port.

2015 – Port of Darwin

The Port of Darwin was leased for 99 years at a cost of $506 million in late 2015 to Landbridge, a Chinese-owned company. The amount was said to be 25 times the port’s annual earnings.

2016 – Potential Port of Melbourne sale

Given the fact that the Port of Melbourne earnings; before interest, tax, depreciation and amortisation is at AUD 200 million; and applying similar valuation of 25 times it estimated value; the Port of Melbourne is most likely to have a price of AUD 5 billion for a 99-year lease.

Reports for 2014 and 2015; however, show a significant growth of the Port, making the figure of AUD 5 billion for a 99-year lease a very conservative valuation range. But recent talks with the opposition argues that a 50-year lease is deemed more acceptable. The next question is, how much would it be? Would it be AUD 2.5 billion?

Is the multi-billion dollar Port of Melbourne sale worth it?

There is no doubt about it: The growing traffic congestion and the need to expand the Port of Melbourne is of major concern. But is privatisation the only solution? Better yet, are these billions of dollars a better deal compared to sensible development?

Swanson Dock Rail Terminal upgrade

At present, 100% of Melbourne’s import and export are exported by truck. By pursuing the Swanson Dock Rail Terminal upgrade, it would replace 3,500 container trucks in a day with only 28 freight trains. This aims to slash pollution levels due to heavy vehicles and ease traffic congestion.

What is in question is the sudden suspension of the project amidst it having $58 million of state and federal money. No wonder many are seeing this as a “political strategy” of the Andrew’s Government for everyone could focus on the Port of Melbourne sale.

Compared to the the Port of Melbourne sale, many believe that the terminal upgrade would be more beneficial to the community. Salta, an Australian property and development company, has already poised a $3 million investment on a one-kilometre rail that will link the Altona freight terminal to the port, which doesn’t include the additional $30 million-worth of freight facilities it wishes to invest on the site.

Read more about it here.

Port of Melbourne sale: Other disputes and issues

Other reasons complicating the government and opposition’s final agreement on the fine print of the sale include:

• Extending the lease period
• The forward payment of licence fees, $80 million per annum
• Creating a compensation scheme for future private leaser, should the government decide to build a second port during the lease periods

Both parties have agreed on capping the lease period at 50 years. Amendments to the licence fees and compensation scheme however are another story, as “either or both of the changes being pushed by the opposition would result in a materially lower sale price,” said Matthew Stevens of The Financial Review.

Political vengeance is best served cold

In the same article, Stevens noted that there may be more than simply securing a privatisation deal involved in the sale. In his words,

“It is hard to believe any mainstream party would put political interest so far ahead of the interests of the broader community they represent. But, at the same time, it is increasingly difficult to see the opposition’s concerns through any other prism but fiscal vandalism.”

True or not, issues raised from different political parties since December 2015 have caused roadblocks to the port’s sale. A more recent one involves new powers granted to the Independent Broad-based Anti-corruption Commission or IBAC.

Talks in good faith are better in writing

Fears of being subject to a future anti-corruption investigation had Victorian opposition leader Matthew Guy place “every piece of offer, discussion, negotiation with the government” in writing, reported The Weekly Times.

Under that note, Nationals’ Peter Walsh and Victorian Farmers Federation’s Brett Hosking had expressed their hope of seeing a written response from the government about the Coalition’s proposed lease registration.

Walsh said that they had already issued a letter twice to the Government since December and had not yet received a response.

Looking past the Port of Melbourne sale

Considering the circumstances surrounding it, the sale of the Melbourne Port may be bleak. Ourthoughts on this matter include:

“The main point to consider with the “Port of Melbourne Sale/50-year lease” is to clearly see how or if it would benefit the community as a whole over the long term. I am concerned as I have been unable to do so at this stage.

“What is crucial however about this matter is the final outcome is going to show whether politicians from the different government parties have learned from past mistakes and whether they have indeed a shared intent of a better nation for all.

“It would be great if the public kept a careful eye on further details about this as it long term impact would most likely be significant.”

About the Port of Melbourne

The Port of Melbourne is Australia’s biggest and busiest container port hub, and virtually one of the last public assets of Australia. It is one of the top four container ports in the southern hemisphere and is the most important maritime trade hub for containers, automotives and general cargoes.

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