IPART makes Port of Newcastle compensation determination

Upper Hunter MP Dave Layzell and then NSW Nationals Leader Paul Toole inspecting the Port of Newcastle in January 2023.

THE Independent Pricing and Regulatory Tribunal (IPART) has determined that the Port of Newcastle would need to make a one-off compensation payment to the NSW Government of $13 million if it intends to become a competitive container terminal.

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.

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Independent Pricing and Regulatory Tribunal (IPART) Chair Carmel Donnelly said the Tribunal determined the value of the payment according to the requirements set out in the Port of Newcastle (Extinguishment of Liability) Act 2022.

“IPART was appointed under that legislation to determine this value and the law requires that determination to be made in a very specific way,” she said. IPART was required to determine how much the inclusion of the reimbursement provision would have reduced the financial value of the right to operate and lease the assets of the Port of Newcastle for 98 years, in the opinion of a reasonable person, at the time the Port of Newcastle Deed was entered into.

“This could be described as what a reasonable person, bidding for the right to operate and lease the Port of Newcastle in 2014, would have reduced their bid by, because of the requirement to reimburse the State for payments to NSW Ports,” said Ms Donnelly.

“IPART was only allowed to consider information that could have been known in May 2014, when the transaction to privatise the Port of Newcastle was finalised.”

Any amount payable by the State to NSW Ports under a separate 2013 arrangement, may be quite different to the amount IPART has determined the Port of Newcastle can pay the State to extinguish its liability.

The amount of any compensation payable by the State to NSW Ports is calculated each year based on actual container throughput at the Port of Newcastle and wharfage charges at Port Botany and Port Kembla.

IPART was not tasked with determining the amount payable under this separate 2013 arrangement.

Upper Hunter MP Dave Layzell, who serves as the Shadow Minister for Regional Transport and Roads, has welcomed the IPART decision.

“The Independent Pricing and Regulatory Tribunal’s finding that a one-off, $13 million compensation payment to remove the liability placed on Newcastle once it exceeded a cap on container movements is fair, reasonable and a win for common sense,” Mr Layzell said.

“I hope this now allows the Port of Newcastle to take a long-awaited step forward on progressing plans to diversify its business for the future economic prosperity of the Hunter region and northern NSW.

“It is important for the Upper Hunter that the private sector can make investment decisions and I am optimistic IPART has now cleared the way for the Port of Newcastle to make a significant one for the region and NSW.

“We have a great vision for manufacturing in the Upper Hunter and in the Hunter Valley by making the best use of our assets to build new industries, today’s decision will hopefully be the trigger to get that industrial restructuring on the road to reality.”

Speaking to the decision, Treasurer Daniel Mookhey said, “The Hunter region should always have been able to decide the future of its port free from any competitive restraint.

“It would have been preferable to have had an elected government making decisions that affect the people of NSW.

“Privatisation under the previous government has had a real impact on household budgets when it comes to electricity, tolls and container movements.”

The full Tribunal determination and an information paper outlining the relevant considerations are available from the IPART website.

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