The private sector is playing an increasing role in port development across Western Australia, as rising demand outstrips the government’s capacity to deliver.
The private sector is playing an increasing role in port development across Western Australia, as rising demand outstrips the government’s capacity to deliver.
Planned port developments at Port Hedland and Esperance will provide the acid test for whether the private sector really has an appetite for investing in these assets.
The Port Hedland Port Authority is in the early stages of developing a $340 million general cargo facility at Lumsden Point and, as part of that process, is evaluating private versus public sector procurement.
The Esperance port authority is more advanced in its planning for a common-user iron ore export facility that is tipped to cost about $200 million.
Five private sector proponents have pre-qualified for the tender process, with three due to be selected for the ‘request for proposal’ stage.
If the private sector proceeds with these common-user projects, the state government will be sorely tempted to seek more private investment.
They follow big investments by some of the state’s largest exporters in dedicated port infrastructure.
BHP Billiton is spending about $3.5 billion expanding its port facilities at Port Hedland, while Fortescue Metals Group is spending $2.4 billion on its port infrastructure.
Rio Tinto is in the midst of an even bigger spend at Cape Lambert, as part of an increase in its iron ore export capacity to 360 million tonnes a year.
Iron ore exporters have also made big investments in port infrastructure at Geraldton and Kwinana.
In the farm sector, CBH Group has historically been a big investor in grain storage and loading terminals and will soon be joined by private competitors following deregulation.
International company Bunge has started preliminary works for a bulk grain export facility at Bunbury, where it plans to invest $30 million to $40 million upgrading an under-utilised berth and ship loader.
The Bunbury facility will have storage capacity of 50,000 tonnes, with permits to export up to 500,000 tonnes in the first two years, and the capacity to increase that.
It is expected to be completed and operational by mid-2014.
A Chinese farm group is assessing a similar investment at Albany.
These single-user projects are a relatively simple proposition compared to the multi-user facilities being proposed at Esperance and Hedland.
The failure of much more ambitious multi-user port projects to proceed at Oakajee and Anketell will also provide a note of caution.
At Esperance, the private sector proponents will be required to design, finance, construct and operate the export facility, which is likely to nearly double the port’s capacity of 11.5 million tonnes a year.
One of the key steps in the process will be signing-up aspiring iron ore miners as anchor customers, in order to build a bankable business case.
The miners – companies like Mindax, Jupiter Mines and Cazaly Resources – don’t actually have operating mines, in part because they have not got anywhere to put their ore on to a ship.
The pre-qualified organisations are believed to include a consortium consisting of Brookfield Rail and port logistics company Qube.
A second organisation is understood to comprise rail operator Pacific National and engineering construction contractor McConnell Dowell.
Port chief executive Shayne Flanagan said evaluation of the pre-qualified entities was due to be completed by the end of this month, after which the shortlisted companies would have up to five months to finalise their tenders.
The preferred proponent would be selected before the end of the year.
At Hedland, two projects have been pencilled in for Lumsden Point; one is a common user infrastructure facility, the other is for two new general cargo berths.
The common user facility has been dubbed the AMC of the north, as it would have similar facilities to the Australian Marine Complex at Henderson, including a fabrication and services estate, a shiplift and slipway and a 300-tonne portal crane.
A preliminary study released last year recommended the facility be developed in three stages, beginning in 2015, to align with likely demand.
Consulting group GHD is following up with a second study of potential engineering and design options.
The proposed general cargo berths are based on projections that the volume of imports will grow in rough proportion to the volume of iron ore exports.
The port’s cargo volumes are forecast to grow from 4.9mtpa in 2011-12 to 9.2mtpa in 2016-17, well above the efficient capacity at its three existing general cargo berths of 6.5mtpa.
The port authority has hired accounting firm Deloitte to help it develop a business case for the proposed facility, which would feature a 430-metre wharf deck and a 2.7-kilometre access road.
The funding and delivery models under review range from the traditional government-led development to the private sector using a ‘build, own, operate, transfer’ model.
Other private funding models include the sale of future demand-linked general cargo revenue streams in consideration for a capital contribution.
Yet another option is the sale of preferential rights to foundation users.
