Will common sense prevail?
COMMENT: The port of Melbourne sale to the private sector has realised a whacking A$9.7bn (US$7.2bn), much more than anticipated, writes Mike Mundy.
The successful bidder was the Lonsdale consortium, consisting of four major institutional investors – Brisbane-based QIC, the Future Fund, Global Infrastructure Partners and Canada’s OMERS pension fund.
The price paid was a striking 25 x EBITDA and included a 15-year pre-payment of an annual A$80m port licence fee.
Why such a high price? Some put it down to the timing of the opportunity, others say the inclusion of a 15-year non-compete clause blocking the development of a second container port in Melbourne. But theories abound and another may well be the good experience of certain institutional investors in the port of Brisbane.
Whatever the reasons - and probably there are a combination of factors - it is self-evident that the new owners have set themselves an interesting challenge with the robust price offered. The lease period is for 50 years so there is ample time to plot good returns, but there will obviously be a keenness to ‘get the show on the road’.
Will decisions now be made on the basis of good commercial reasoning as opposed to currying political favour, a tendency that has permeated the Port of Melbourne Corp (PoMC) in recent times? And that commercial reasoning must embrace the objective of consolidating and expanding Melbourne’s position as Australia’s No 1 containerport, an aspect that has been thrown into some doubt recently due to PoMC’s seeming refusal to address vessel size and access issues. Any further delays on this front may well see port Botany becoming the hub from which Melbourne is feedered, thereby relegating it to secondary port status.
Privatisation has generally proven to be a massive positive for the international ports industry, let’s hope this proves to be the case in Melbourne.
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