Cap on Numbers

LEGISLATIVE COUNCIL 17 October 2013

PORT BOTANY CONTAINER TERMINAL

The Hon. ADAM SEARLE: My question is directed to the Minister for Roads and Ports. How much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?

The Hon. DUNCAN GAY: The rules in the organisation that did the scoping study for Port Botany and Port Kembla and introduced guidelines there indicate that while general cargo is allowed there will not be an extension under the rules for the lease of Newcastle Port. So the short answer to the question is that we do not envisage that any compensation will need to be put in place. The Government has been clear on this all the way through the process, even before it indicated it would lease the port at the stage when Newcastle Port Corporation was in place. I have indicated in the House, as I have in Newcastle—indeed, I made a special visit to Newcastle to talk to the board, the chief executive officer and the local community—that part of the lease and the rationalisation was a cap on numbers there. I am not saying that there will be no containers into Newcastle. Certainly, a number of containers will come in under general cargo, but there will not be an extension. The only time an extension is allowed is when a specific number is reached and is tripped in Port Botany and Port Kembla.

In 2012, the NSW government decided to pay compensation to a future leaseholder of Port Botany and Port Kembla based on the number of containers handled at the Port of Newcastle. The government made this decision before announcing, on June 6 2012, the inclusion of Port Kembla in a scoping study for leasing Port Botany.

The government decided to set a limit, or “cap”, on the number of containers handled at the Port of Newcastle for which compensation would not be payable to the leaseholder of Port Botany and Port Kembla. Compensation became payable only when the “cap” was exceeded. For purposes of calculating this “cap” the government defined “container” to mean:

Any moveable device, designed for continuous use in loading and unloading cargoes on and from Ships, including boxes, crates, cylinders, tanks, TEUs, other stackable units and any similar cargo-carrying device which is designated as a container by international stevedoring standards from time to time and Containerised has a corresponding meaning.

Container includes:

(a) overseas import containers;

(b) overseas export containers; and,

(c) local containers (coastal inwards or outwards); and

(d) empty containers and transhipped containers.

Source: Port Commitment – Port Botany and Port Kembla

The amount of payment is calculated by multiplying the weighted average charged per TEU container handled at Port Botany by the number of TEU containers handled at the Port of Newcastle above the “cap”.

The government decided that a future operator of a container terminal at the Port of Newcastle would be required to make the government whole for any cost the government incurred to a future leaseholder of Port Botany and Port Kembla in respect of the “cap” being exceeded. The government took this decision because a source of funds other than government consolidated revenue was required.

In 2009 the government decided to develop a container terminal at the Port of Newcastle and did not change this decision in 2012 because to do so would be to deny the government its source of funds. It is highly likely the “cap” is exceeded every year despite there being no specialised terminal for TEU containers. However, only TEU container movements are counted at the Port of Newcastle.

The government contractually committed to paying compensation to NSW Ports, which leased Port Botany and Port Kembla on April 12 2013, by setting the “cap” at the Port of Newcastle at 30,000 “containers” (as defined) per year, as at July 1 2013, increasing by six per cent per year, for 50 years.

Container ships are unable to use the Port of Newcastle because there is no container terminal. In 2014, general cargo ships carried 10,000 TEU containers through the port. General cargo ships carry their own cranes and do not require a dedicated terminal for TEU containers.

Mr Gay was reported by the “Newcastle Herald” on 15 September 2015 as saying that Port of Newcastle container freight was expected to “more than triple by 2031”:

Mr Gay said Newcastle container freight was expected to ‘‘more than triple’’ by 2031 but in an answer to a question about a Newcastle container terminal he said the current arrangements were working well.

A tripling in container movements from 10,000 per year is 30,000 per year.

In a media statement on 1 May 2014, NSW Treasury referred to “organic” growth of container throughput at the Port of Newcastle:

The lease has been drawn up in accordance with the current NSW Government freight policy of Port Botany being the first container facility priority, with Port Kembla designated to take the overflow once Port Botany is full. Newcastle will be further developed once Port Kembla is full. Newcastle container throughput is, in the meantime, fully able to grow organically.

The “Draft Strategic Development Plan for the Port of Newcastle, February 2013” referred to growth at the port “connected to population growth”.

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Some import cargoes service the expanding population of the region, such as fuels and cement. In time the port will handle containerised cargoes to service the expanding population. Growth in these sectors will be connected to population growth. Some cargoes are necessary to supply industry in the Hunter Region, such as the aluminium industry, where the port handles both the input raw materials and the exported product.

References to “organic” growth and growth “connected to population growth” are references to the cap on numbers increasing at the rate of six per cent per year.

The weighted average charge at Port Botany is nearly $100 per container. For a typical container ship with capacity for 5,000 TEU, visiting the Port of Newcastle fully loaded, and leaving fully loaded, will cost $1 million more than visiting Port Botany.

Mr Gay informed Budget Estimates on 31 August 2015 that there is no “cap” at the Port of Newcastle but “within the general cargo that needs to go to Newcastle that is fine”:

The Hon. SOPHIE COTSIS: In terms of the cap on containers, are any fees paid if the number of containers through Newcastle exceeds a set amount?

The Hon. DUNCAN GAY: Not that I am aware of.

The Hon. SOPHIE COTSIS: You are not aware of that?

The Hon. DUNCAN GAY: You asked me whether there was a cap in Newcastle and I said there is not. Now you are asking me whether there is a fee paid if they go beyond a certain number. General cargo containers are part of what happens in Newcastle. My understanding is that within the general cargo that needs to go to Newcastle that is fine.