Rationale of Newcastle’s suitors

Newcastle may be moving from its coal origins Photo: jeayesy/123rf Newcastle may be moving from its coal origins Photo: jeayesy/123rf
Industry Database

COMMENT: The Port of Newcastle, New South Wales, has reported explicit interest on the part of international terminal operators to develop a container terminal at the port, writes Mike Mundy.

Craig Carmody, chief executive of the port, has publicly stated that the port has received a number of “unsolicited bids”.

While there may well be growing interest in Newcastle as a potential container handling location, whether this has gone so far as to amount to a formal bid or a bid with any sort of number attached is unlikely.

Logic dictates that an awful lot of due diligence work needs to be completed by an operator before submitting a bid. Based on worldwide experience, what appears more likely at this stage is that Newcastle has received what amounts to ‘expressions of interest’ from operators – essentially a desire to know more about the project.

However, this may, in some cases, not be the real motive – operators with established terminals nearby may want to assess the project’s competitive implications and in turn build defensive strategies. There could also be an element of an operator approaching the port to assess the opportunity on behalf of an affiliated company such as a construction entity – the China Inc. sort of approach.

That said, there is clearly reason for Newcastle to take heart from the Australian Competition and Consumer Commission’s decision to initiate an investigation into potential anti-competitive arrangements affecting Newcastle. These were established during the period when the New South Wales government privatised key ports and compelled Newcastle to pay NSW ports – which owns Botany and Kembla – to compensate it for loss of container business if it handled more than 30,000 containers a year. The rationale behind this was to take Newcastle out of the competitive picture when it came to establishing the valuation of the privatised ports.

The pros and cons of this are debatable – why should the investors in the privatised ports suffer when this arrangement was offered to them as part of their buy-in? On the other hand, shouldn’t the market be the real judge of project viability?

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