Cameron Boggs

Port of Fremantle - Photo Fremantle Ports

Mayor fears Freo port sale could be bad for rail

Fremantle mayor Brad Pettitt is concerned the sale of the port to a profit-focused, private operator will lock the city into a road-based freight model at the expense of investment in rail infrastructure.

“This is the worst possible time to privatise the port,” Pettitt said.

“The very future and location of the inner-harbour is under serious debate. Key questions such as how many containers should go through the inner harbour and when key parts of the port should be moved are very live debates.”

It was announced earlier this month that Fremantle Ports would be privatised as the state government moves to pay for major projects and reduce debt through a long-term lease.

State premier Colin Barnett dropped the bombshell news while reading the state budget on May 14, as WA faces a predicted net operating balance deficit of $2.7bn for 2015/16 and a net debt projection of $31bn by June 30, 2016.

Barnett acknowledged that he had previously said the state government would not be selling utilities or ports.

He added that the sale of the port was not a condition of a $499m Federal government package, as that funding was directly assigned by the Commonwealth to a selection of road projects around WA.

But he said the government had decided to sell Fremantle Ports to continue building the state’s economic infrastructure without adding to its debt.

State treasurer Mike Nahan said the government was responding to the “perfect storm” of economic conditions which led to revenues falling $3.9bn in 2015/16 (down 13%), and a forecast $10.21bn decline between 2014/15 and 2017/18.

“Commodity prices have plummeted, our share of GST revenue has been driven to record lows and softening economic conditions have directly reduced all other major sources of state tax revenue,” Nahan reasoned.

He said the sale of the Kwinana Bulk Terminal – announced in the first tranche in 2014 alongside Utah Point bulk terminal at Port Hedland – will be incorporated into the “disposal” of the Fremantle Port Authority’s assets and operations.

He said the decision to package the deal “significantly broadens” the size and appeal of the transaction to international investors and trade buyers, as well as the anticipated proceeds to the state.

However, returns from the sale will not be reflected until transactions are complete.

Ports Australia’s chief David Anderson told Rail Express sister publication Lloyd’s List Australia that he was not surprised by the asset sale announcement and that his instincts told him “it was coming”.

While past WA governments of either persuasion have been committed to keeping port authorities in government ownership, Anderson said the current regime has become increasingly pragmatic and most assets are in the hands of the private sector.

“But I think [the state government] will get a good price for Fremantle,” he said.

“I would be surprised if they didn’t throw out the tender for the long-term lease globally, but I certainly think they would encourage domestic investors.

“WA is particularly sensitive, not just about home grown things but WA things – I mean they don’t even like people from the east telling them what to do, let alone anybody from overseas.”

Anderson said there will also be increasing pressure to have oversight on port pricing, alluding to the 767% increase in rent aimed at DP World Australia for its West Swanson Dock terminal in Melbourne.

The Port of Melbourne privatisation case has prompted interest in the contracts that state governments release when they put these assets out to long-term lease.

“In some of the other port privatisation models, new shareholders have been pretty unfettered by the contracts that the governments provided to them on the basis that they will get the maximum buck by not hindering the new owners in the way that they have,” Anderson said.

“And as that’s now coming back to roost. I think people are getting a bit concerned about it.”

DP World Australia and Asciano-owned stevedore Patrick are also looking at Fremantle with interest as their respective long-term leases for the adjoining container terminals on North Quay, will expire in 2017.

Fremantle Ports publicly announced the call for expressions of interest in the terminals late-2014.

Infrastructure Partnerships Australia chief Brendan Lyon said asset sales are the only real option to rehabilitate WA’s budget to pay for new infrastructure.

“With the right structures, WA can expect very healthy interest from investors in the port of Fremantle, energy generation and the other assets and businesses earmarked for sale,” Lyon said.

“The sale and lease of public assets gives WA breathing room and flexibility to make the infrastructure investments to soften the landing from the mining boom and transition to new economic drivers.

“The government has made the right call on asset recycling.”

Fremantle Port Authority’s asset investment program for 2015/16 to 2018/19 totals $190.8m.

Port of Fremantle - Photo Fremantle Ports

Rail struggle in Fremantle due to ‘shorthaul’ competition

WA transport minister Dean Nalder says while the government is trying to get more freight on rail running through the Port of Fremantle, the mode is not a natural fit for the bulk of its trade.

Nalder has told WA parliament that current market share for freight moved by rail is around 14%.

The government hopes to lift that figure to a 30% share for rail, but the distance travelled by most of Fremantle’s containers is inhibiting that transition.

“It is difficult for rail to compete effectively with road over the shorthaul distances which are involved with the greater part of the Fremantle container trade,” the minister said.

According to Nalder, the state government’s key strategies to increase the percentage of freight moved by rail from Fremantle Ports include investment in railway infrastructure at the port and on lines running to and from the port; improvements in efficiency of rail operations; and continuing subsidies for containers moved by train.

Nalder expects the port of Fremantle to reach maximum container capacity in eight years if there is a high average annual growth rate.

Alternatively a low average annual growth rate would mean the port will not reach capacity for 21 years (through to 2036).

Nalder said the current estimated annual container capacity at the port is between 1.2 and 1.4 million 20ft equivalent units (teus).

The most recent truck survey, taken in 2014, determined that an average of 2600 container vehicles were visiting the port each week day.

Photo: DP World

Stevedore considers competition ruling in Melbourne rent stoush

One of Melbourne’s biggest container stevedores, DP World, has told Rail Express affiliate Lloyd’s List Australia it’s considering filing an application to the National Competition Council for services provided by the port to be declared under the National Access Regime.

If the port infrastructure is established as officially vital to national infrastructure, access to it could be mediated or regulated by the government.

This potential application follows the proposal of a 767% rental increase at the stevedores’ Melbourne terminal.

Under the Port of Melbourne’s proposal, rent at DPWA Melbourne’s West Swanson Terminal would rise from $15 per square metre to $120 per square metre.

“We have started down that path, but [the application] is all very much in speculation-land at the moment,” a spokesperson for the stevedore told Lloyd’s List Australia, adding that the stevedore was “considering all options, including asking for regulated access at the port of Melbourne.”

Lloyd’s List Australia understands from one well-informed executive that, contrary to speculation in the general media, a National Access Regime declaration would not “sink” the privatisation of the port on a 40-year lease.

But any potential future lessee of the port would be subject to greater restrictions than previously anticipated.

Such uncertainty would impact the level of market interest and may impact the price paid.

The Department of Treasury and Finance, which represents the port’s owner – the state of Victoria, said that the Port of Melbourne is “rigorously regulated” by the Essential Services Commission.

“Preparations for the lease transaction will continue with policy settings designed to maximise the overall economic outcome for all Victorians,” the department’s spokesperson said.

A spokesperson for Victorian ports minister Luke Donnellan said these issues are part of normal business lease negotiations between the PoMC and its users, over which disagreements around market-based rent are not unexpected.

“This is why there are provisions in the lease to appoint an independent third-party valuer to assess what the market based rent should be,” the ministerial spokesperson said.

Shipping Australia chief Rod Nairn argued that access to essential infrastructure and services under the National Access Regime needs to be considered generally, owing to pricing issues.

“This is something that needs to be considered because prices seem to be getting out of hand in a number of areas, and maybe it is not limited to Melbourne,” Nairn said.

Andrew Hudson, a partner at law firm Gadens, thinks the suggestion that Melbourne’s port infrastructure may fall within the scope of the National Access Regime will give potential bidders for the privatisation/lease reason to even more carefully consider their bidding.

And that is because a declaration could, ultimately, put some conditions on how the port can be operated.

“Basically, it comes down to the ACCC to prescribe how they charge things. It will still be in the hands of the buyer to run the regime, to run the port and the like,” Hudson said.

“But how the buyer will charge things and how it will operate the place will be subject to a competition regime, which is probably more prescriptive than they anticipated.

“So it will be a more limiting and restrictive operation. The declaration hasn’t been used very much, but it certainly could be of concern.”

Port of Melbourne Corporation declined to comment.

This is an edited version of an article which originally appeared on Lloyd’s List Australia. Additional reportage by Jim Wilson.

Pacific National - Credit Asciano

Asciano weighs in on workplace relations

Asciano has voiced support for the Fair Work Amendment (Bargaining Processes) Bill 2014 that would mandate that productivity improvement discussions take place during enterprise bargaining agreements.

The parent company of Pacific National said industrial action is a somewhat Marxist approach to the relationship between employers and employees, in its recently published submission to the Productivity Commission’s Workplace Inquiry.

But Asciano accepted the notion that disputes are a bargaining tool that may reduce power imbalances between parties.

“Asciano recognises that the efficiency and quality of enterprise agreement negotiations to a large extent is in the hands of the parties negotiating agreements,” the company said.

“[But] there are aspects of the bargaining framework as set out in the Fair Work Act which hamper efficient and equitable negotiations.”

The company said it believes legislating productivity gains in enterprise bargaining should be approached with caution. However, the processes in place need to ensure genuine agreement is reached.

That said, Asciano voiced support for the requirement that the Fair Work Commission, when approving enterprise agreements, be satisfied productivity improvements were discussed during bargaining.

Complexities arising from negotiating process − as flagged by Asciano – include multiple stakeholders. Negotiators may have to manage multiple and potentially competing interests; trade-offs (e.g. between rostering, wage increases and other flexibilities); and maintenance of constructive relationships between parties.

Asciano suggests the Fair Work Commission give greater consideration to supporting negotiations beyond an approval and dispute resolution role.

The Productivity Commission is currently carrying out an inquiry into the industrial relations laws.

Initial submissions were due by March 13; however details of submission have only recently been published by the Productivity Commission.

A draft report is due in July.

Lloyd’s List Australia