Port of Melbourne lease finalised for $9.7 billion


Proceeds from the sale to support level crossing removal project, and boost regional and agricultural investment

Port of Melbourne lease finalised for $9.7 billion
The more-than-expected price is expected to help unlock many infrastructure opportunities across the state.

 

The 50-year lease of the Port of Melbourne has been finalised following months of negotiations.

Lonsdale Consortium, which includes the federal government’s Future Fund, Queensland Investment Corporation (QIC), global fund manager GIP and Canadian pension fund OMERS, made the winning bid of over $9.7 billion.

Future Fund, QIC's global instructure fund and OMERS will each hold 20 per cent stake while GIP will manage the remaining 40 per cent (comprising Chinese wealth fund CIC Capital's 20 per cent stake, and Korean pension fund NTS and other investors' remaining 20).

It is good news for the state government, which was expecting the deal to fetch a figure close to $7 billion.

"The strength of this result underlines the continued high performance of the Victorian economy – the fastest growing in the country," Victorian treasurer Tim Pallas says.

The government says the value of the lease reflects strong bidder interest and the port’s worth, as the biggest container and cargo port in the country.

The proceeds from the lease will go towards:

  • funding the ongoing level crossing removal project
  • investment in regional and rural infrastructure projects, worth over $970 million
  • supporting a new $200 million Agriculture Infrastructure and Jobs Fund to boost economic growth in our regions, boost exports and support Victorian farmers from paddock to port.

"This is a $9.7 billion vote of confidence in the Victorian economy," Victorian premier Daniel Andrews says.

"We promised to lease the port, get rid of Victoria’s most deadly and congested level crossings and create thousands of jobs, and that’s exactly what we are doing."

The state government says it will also work with the federal government to finalise the additional 15 per cent that Victoria is entitled to under the Commonwealth’s Asset Recycling Initiative, which provides incentive payments to states and territories that sell assets and reinvest the proceeds to fund other infrastructure projects.

"Through this lease, we are supporting our state’s vibrant regional communities, putting infrastructure and agriculture back at the heart of Victoria’s economic development," roads and ports minister Luke Donnellan says.

While the state government will retain responsibility for the Harbour Master, Station Pier, relevant safety and environmental regulation, waterside emergency management and marine pollution response, Lonsdale will maintain access to public walkways and bike paths for community use.

The commercial and recreational vessels’ access will not be affected by the lease, with the port being returned to public hands at the end of the lease.

"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," Port of Melbourne Corporation chairman Mark Birrell says.

Industry reaction

Welcoming the news, both the Australian Logistics Council (ALC) and the Victorian Transport Association (VTA) press the need to advance proposed infrastructure projects to "maximise" the economic contribution of the port.

The Container Transport Alliance Australia (CTAA) says it will work with the industry to make sure the benefits of the government's regional and rural agricultural infrastructure funding meet the needs of exporters.

"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 director Neil Chambers says.

"CTAA will be working with our Alliance companies and their regional export customers to ensure that the funds allocated for regional and 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."

Meanwhile, ALC is encouraging the State and Commonwealth Governments to prioritise infrastructure investment to the port to ensure it can meet its economic potential.

"This includes an appropriate investment of the $58 million set aside for the port rail shuttle, which has been on hold while the Port lease transaction was being finalised," ALC MD Michael Kilgariff says.

"An appropriately regulated port, supported by efficient road and rail links, is vital to sustaining the Victorian economy and driving productivity improvements across the supply chain."

He says the lease of the port will help unlock significant funds for reinvestment.

"ALC looks forward to the government prioritising logistics infrastructure investment from the proceeds of the sale, and from the 15 per cent dividend to be provided to the state under the federal government’s asset recycling scheme."

VTA CEO Peter Anderson says he hopes the state government will direct some of the funds from the lease of the port to the much-awaited North East Link project.

"The Port is one of the state's greatest assets and the magnitude of the lease underscores it's importance for safeguarding the economic prosperity of the state, which freight operators contribute significantly to," Anderson says.

"The much needed funding the lease unlocks will significantly improve the state's transport networks, especially in regional areas.

"With the surplus funding of the $9.7 billion lease we hope that vital new infrastructure such as the North East Link can be seriously pursued."

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