October 2016 Port of the Month


Port of Melbourne will be leased for 50 years for $9.7bn


The Andrews Labor Government has announced that it has leased the Port of Melbourne for more than $9.7 billion and will use the funds to remove 50 of the State’s most dangerous and congested level crossings.

A formal close of the transaction will take place on October 31 this year, according to the winning consortium, the Lonsdale Consortium.

The Lonsdale Consortium, comprising of the Future Fund, QIC, GIP and OMERS signed a lease of the port’s commercial operations for a term of 50 years.

Ten per cent of lease proceeds will be invested in regional and rural infrastructure projects, totalling more than $970 million.

A new $200 million Agriculture Infrastructure and Jobs Fund has also been established to boost exports and “support Victorian farmers from paddock to port” in a statement from the Andrews Government.

“We will now work with the Commonwealth over the coming months to finalise the additional 15 per cent that Victoria is entitled to under the Commonwealth’s asset recycling initiative,” a Victorian government release states.

Treasurer Tim Pallas commented: “Leasing the port reinforces Victoria’s position as the freight and logistics capital of Australia and will make a great port even better.”

Meanwhile, the chairman of Port of Melbourne Corporation, Mark Birrell, added: “This is a great result for Australia’s largest maritime trade hub and reflects the port’s vital role in the State and national economies.”

The State will retain responsibility for the Harbour Master, Station Pier, relevant safety and environmental regulation, waterside emergency management and marine pollution response.

Industry Reaction – Shipping Australia

Commodore Rod Nairn, CEO of Shipping Australia, the peak body for overseas shipping interests active in Australia commented:

“Congratulations to the Victorian government on a successful sale; this will provide some stability on the way forward. However, we are quite concerned about the price being paid. We concerned that it will put pressure on increasing port user prices. We’ll be watching the Essential Services Commission price monitoring process closely, as this will certainly be a good test.”

Meanwhile, the Container Transport Alliance Australia added, “CTAA congratulates the winning consortium led by QIC, and looks forward to working with the new Port Management team to realise landside productivity improvements for containerised trade through the Port of Melbourne.”

“CTAA will be working with our Alliance companies and their regional export customers to ensure that the funds allocated for regional & rural agricultural infrastructure and job creation truly assists exporters to be more productive and competitive in accessing the Port of Melbourne.  This should include much needed road infrastructure investment to remove the impediments to Higher Productivity Freight Vehicles (HPFVs) delivering regional exports to the Port at higher mass.”

Paul Zalai, director of the Freight & Trade Alliance, said: "We have no doubt that the consortium will aim to maximise returns for shareholders and in doing so will make for far more consistent long term management of the port rather than the revolving door of port ministers each with differing interests and strategies. We look forward to working with the consortium on their industry engagement program on road, rail and port management issues. We see the management of the port being privatised as being a positive step allowing for long term strategic planning."

Reaction of the winning lessee

The Lonsdale Consortium also commented on the transaction, saying that it was extremely pleased to be selected to acquire the lease and become custodians of Australia’s largest container, automotive and general cargo port.

Members of the Lonsdale Consortium own infrastructure interests across Australia, including stakes in Victorian assets such as Melbourne Airport, Iona Gas Storage Facility and EastLink toll road. The Consortium also have global and local port ownership experience with involvement in assets such as Port of Brisbane, NSW Ports and Associated British Ports (the UK’s largest port operator).

“Peter Costello, Chair of the Future Fund Board of Guardians, said: “The Port of Melbourne is a high quality asset and an important link between Australia and its trading partners. We’re delighted to invest in it and to add it to our portfolio of Australian and global infrastructure assets. It will be an important contributor to our long-term investment objectives as Australia’s sovereign wealth fund.”

QIC Global Infrastructure Head, Ross Israel said: “The Port of Melbourne is core infrastructure - it is a critical and strategic piece of the Victorian and Australian logistics supply chain. Our Consortium has developed a long term vision and business plan. Leveraging our global port and regulated asset experience QIC is focused on delivering long term stewardship and improvements to the port and for its users.”

GIP Australia Partner Russell Smith added: “GIP looks forward to bringing to bear our strong port and rail industry expertise to drive forward the efficiency and capacity of the Port of Melbourne and focus on the necessary transformational change in the road/rail mix servicing the freight task moving through the port to the benefit of all stakeholders.”

Ralph Berg, Executive Vice President & Global Head of Infrastructure, OMERS Private Markets, said: “We are confident that our global expertise in managing similar assets will see the Port of Melbourne continue to operate as Australia’s leading container and multi cargo port and we look forward to working with port users and stakeholders to further improve the productivity of this important asset.”