What we are required to do
IPART has been appointed under the Port of Newcastle (Extinguishment of Liability) Act 2022 (the Act) to determine the value of a one-off compensation payment that can be made by the operator of the Port of Newcastle to the State.
Under the Act, this one-off compensation is to be calculated as the amount by which the financial value of the right to operate and lease the assets of the Port of Newcastle for 98 years would have been reduced, in the opinion of a reasonable person at the time the transaction deed was entered into, because of the inclusion of the reimbursement provision in the transaction deed.
If the operator of the Port of Newcastle pays this one-off compensation amount to the State, from that date, they will not be required to reimburse the State for payments made to the operator of Port Botany and Port Kembla under the transaction deeds.
The State and the operator of the Port of Newcastle entered the transaction deed in May 2014. In calculating the one-off compensation payment, IPART can only consider information that would or could have been known in May 2014.
Background
In 2013 and 2014, the State entered commercial transactions granting long-term leases over the State’s port assets to private operators.
The transaction deeds entered in 2013 with the winning bidder for the right to operate the assets of Port Botany and Port Kembla require the State to pay the port operator an amount of money where certain preconditions relating to container traffic at the Port of Newcastle are met.
The transaction deed entered in 2014 with the winning bidder for the right to operate the assets of the Port of Newcastle, requires the operator of the Port of Newcastle to reimburse the State for those payments.
Timeline for the review
IPART was appointed to determine the one-off compensation amount on 2 March 2023. We have 6 months to make a determination, or 9 months if we issue a draft determination to the operator of the Port of Newcastle and the State.
The timeframe can be extended by up to a further 6 months if necessary. IPART has given notice to the Port of Newcastle and the Treasurer that additional time is required. IPART is now required to complete its determination by 2 March 2024 or by 2 June 2024, if it issues a draft determination.