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.