When the port of Newcastle was privatised in 2014 the successful bidders bought two ways to earn money. First, they were given the right to clip the ticket of every cargo vessel, mainly carrying coal, that traversed the harbour. Second, they were given the rights to collect rent from tenants of 790 hectares of portside land.
Initially, there was outrage about the privatisation. People weren't keen on losing control of an important piece of public infrastructure. There was concern about the successful bidders, one being a long-term investment fund, the other, a state-owned enterprise from China. Then, and this was kept secret at the time, there was a contract clause imposing a penalty fee limiting significant container throughput at the port.
The reward for Newcastle, a cause for great celebration, according to the then premier of NSW, Michael Baird, was the closure of the downtown rail service and the construction of a shortish light rail service to trundle up and down a CBD on its last legs. We know how that has unfolded.
But what about the privatised port of Newcastle? How's it going? I mean, is it a good investment, a profit maker for its owners?
There is considerable material displayed on the web by Port of Newcastle Holdings, the corporate entity now running the show. The good news for this holding company is that the ticket-clipping caper Is more than a modest earner. Indeed, even the coal exporters have complained to the regulators and the courts that port navigation charges are unreasonably high. The bad news is that when the volume of coal exports falls - and they've been down a few times since 2021 - revenue for Port of Newcastle Holdings also falls.
This means the port needs a plan to ensure its long-term financial viability as the end of coal rushes towards us.
Away from navigation charges, the obvious opportunity for new sources of revenue, you would think, involves portside property ventures. But, the holding company's 2040 master plan, released in 2018, has been shelved, replaced by a development plan (2023 to 2028) with a much shorter horizon, which means the holding company has erected a 'watch this space' sign over its property plans.
Indeed, we should watch more closely. Proposals by the holding company for a container terminal on portions of the old BHP steelworks site are on the back burner with the site turned over to loading equipment, like giant wind turbine blades, for the renewables rollout up the valley and beyond. This site will be very busy, but only for a few years. What then?
The other major property venture for the holding company involves site preparation and regulatory approval for the rollout of hydrogen generation and downstream processing activity. But the commercial viability of hydrogen to store and use renewable energy Is increasingly questioned. Will the new port site attract a large-scale hydrogen producer with long-term financial backing?
With these uncertainties, it will be interesting to track the diversification plans of the holding company as a self-imposed milestone approaches. The holding company says by 2030 its earnings from the shipment of coal should be no more than 50 per cent of its total revenue. Currently this proportion exceeds 70 per cent. Lowering the port's financial dependence on coal shipping charges is a massive task.
Then, there are the huge parcels of prime waterfront land that will empty when the holding company's major tenant, Big Coal, starts packing up in the next decade or two. Interestingly, another clause in the privatisation lease comes into play. This is a requirement that the lands leased by the holding company can only be used for port-related and industrial purposes. Other land uses such as schools, hospitals and residential development are not permitted.
So, Port of Newcastle Holdings faces an enormous task of finding commercially viable uses for the port and its adjacent lands. But currently the holding company has no long-term plans, or none it is prepared to reveal to the public. Watch this space indeed.
