The New South Wales government and the Port of Newcastle Investments consortium signed a final contract on 30 May for the 98-year lease of the Port of Newcastle.
The Port of Newcastle Investments, a 50:50 joint venture formed by Hastings Funds Management and China Merchants, won the auction for the project one month ago. The consortium will pay a total of A$1.75 billion which represents a multiple of 27 times EBITDA.Morgan Stanley managed the sale on behalf of the government. Law firm Minter Ellison and accounting firm PwC were also retained by NSW government after advising on earlier privatizations.
Andrew Constance, NSW Treasurer, stated:
With the conclusion of this transaction, we can now guarantee an extra $1.5 billion for investment in much-needed infrastructure in NSW, with 30 per cent to be invested in rural and regional projects. This builds on the NSW Government's successful track record of recycling mature assets and heralds a new period of economic development for the city of Newcastle.
Newcastle will receive A$340 million of the gross proceeds which, together with an additional A$120 million already committed by the NSW Government, will fund a revitalisation of Newcastle's CBD including a light rail service. Remaining gross proceeds of around A$1.2 billion will be invested in the NSW Government's dedicated infrastructure fund, Restart NSW.
The contract will include a 98-year lease of Newcastle port's precincts where three coal terminals sit. They are owned and operated by Port Waratah Coal Services (PWCS) and Newcastle Coal Infrastructure Group (NCIG). In 2012, Newcastle port's three terminals together shipped around 132.5 million mt of coal - 105.8 million mt for PWCS and 26.7 million mt for NCIG.
The port of Newcastle is the world's largest coal terminal and forecasting A$69 million earnings before interest, tax, depreciation and amortisation in the 2013-14 financial year.
The lease will include more than 700 hectares of land owned by the Newcastle Port Corporation (NPC), as well as all road and rail infrastructure and wharves owned by NPC within the port boundary.
NSW Government indicated that NPC will retain a number of important maritime functions and services, including the Harbour Master, dangerous goods approvals, emergency response and administration of the existing coal chain Capacity Framework Arrangements.