One regulatory road block stopping planned expansion of the Port of Newcastle has been removed with the Independent Pricing and Regulatory Tribunal (IPART) determining the payment amount that the port make to the NSW Government to remove the financial constraints of the past 10 years and allow it to compete in the container market.
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Under the Port of Newcastle Extinguishment of Liability Act 2022 (NSW), IPART has determined a payment of $13.1 million ($10.12 million in 2014 dollars, adjusted for CPI to the date of payment) will bring an end to the legislative process and allow Port of Newcastle to compete against the other NSW ports without penalty.
However, the liability remains in the agreement with NSW Ports and could see NSW taxpayers forced to bear the brunt of any payouts.
Last month, preliminary modelling from Deloitte Access Economics showed the NSW Government faces a potential liability of between $600 million and $4.3 billion to compensate NSW Ports, should the Port of Newcastle fully containerise.
Port of Newcastle CEO, Craig Carmody, said the determination is a significant stepping stone for competition in the container terminal space.
"Today is a historic milestone for Port of Newcastle and regional NSW, a path forward that means we will no longer be penalised for wanting to offer choice and competition in NSW container trade," Mr Carmody said.
There is still has one final regulatory roadblock to remove before the port can progress with its planned Newcastle Deepwater Container Terminal at Mayfield and the port is now turning its attention to the NSW Freight Reform Review.
"While we are delighted that the determination has been made, we now need to ensure the NSW Freight Reform Review, which the NSW Government has commenced, also reflects the decision by Parliament to promote competition through the Port of Newcastle Extinguishment of Liability Act," Mr Carmody said.
"The current Freight and Ports Policy states that Port Kembla is the designated second port for a container terminal in NSW, 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.
"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."
Port Botany ($4.31 billion) and Port Kembla ($760 million) were sold to NSW Ports in 2013 while the Port of Newcastle ( $1.75 billion) was sold the following year to a separate buyer.
When the ports were sold, the sitting NSW Government initially signed a deal which required Port of Newcastle to match dollar-for-dollar any amount the state would be required to pay NSW Ports in penalties.
These penalties were written into the privatisation contracts for all three ports when the government leased them for close to 100 years in 2013 and 2014.
Mr Carmody said the port saw the $600 million figure set by the modelling from Deloitte Access Economics as highly inflated.
"I always said it should be somewhere between zero and $50 million," he said.
NSW Farmers President Xavier Martin said the determination is good news for growers.
"We have been supportive of plans to better utilise the Port of Newcastle, and release it from the artificial constraints that are holding back its potential," he said.
"Giving growers the opportunity to send more containerised produce through the Port of Newcastle in a more efficient manner would save farmers significant costs, allowing them to reinvest in their businesses and drive even more economic activity in the regions."
NSW Treasurer Daniel Mookhey believes it is future generations who will end up paying for privatising the state's ports.
"IPART has made its decision. Work will continue on contingency planning, should the liability arise," he said.
"The Hunter region should always have been able to decide the future of its port free from any competitive restraint.
"Privatisation under the previous government has had a real impact on household budgets when it comes to electricity, tolls and container movements."
In a media statement, IPART said it determined "the current value of a one-off compensation payment that can be made by the Port of Newcastle to the state of NSW is $13 million".
"If the one-off payment is made, it will remove the Port of Newcastle's liability to reimburse the State 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," the statement said.
