The Future Port Study released last week says Auckland should consider letting a private company run a relocated port’s operations, with Auckland Council remaining a partial landowner.
BusinessDesk says the report found the council-owned port is likely to need to move in the long-term and identified two favoured sites in the Manukau Harbour and Firth of Thames for further investigation.
In the interim, BusinessDesk says findings say the port will require extra berth space at Bledisloe Wharf, which is likely to re-ignite community concerns about the port’s encroachment into the Waitemata Harbour.
With capital costs of an estimated $4 billion to $5.5 billion for relocating the port depending on which site is chosen, the report says infrastructure investment is constrained.
Internationally there are many funding/ownership models around major infrastructure investments such as a port which vary from full council ownership to full private sector ownership, the report said.
Consideration could be given to funding the land component of the new port separately from the operating company, which might enable equity participation in the “Landco” by council and iwi, it says. The proposed sites are subject to Treaty of Waitangi settlement negotiations that could result in iwi co-governance and co-ownership interests.
Chair of the council-appointed Consensus Working Group, Rick Boven says the separation suggestion would only be considered as part of the funding and governance solutions for a relocated port rather than under the status quo.
A consultant’s report prepared for the study group by EY says some ownership considerations would have to be taken into account for a new port. Options included establishing a port operations company (Opco) and a land holding company (Landco), with a contract outlining and governing land use between the two.
“Separating operating assets and land assets can provide independent and more robust decision-making that will optimise outcomes for both companies,” said EY, noting a trend in recent Asia-Pacific port transactions for private sector involvement.
Advantages of separating ownership of land and the operating company would include lease proceeds providing some funding for the new port location, and on-going capital development would be funded by the lessee.
Decisions could be made outside operating to accommodate the best use of the land assets, operational risks would be transferred to the operating company, and a potential lease agreement would oblige the private sector to coordinate and execute the relocation.
Disadvantages outlined in the EY report included the potential loss of dividends and income, loss of operating control though that could be mitigated to an extent by other regulatory controls, and accounting and tax implications.
According to BusinessDesk, the report provided a case study on private sector involvement in the Port of Darwin in Australia, where the government retained ownership of the land and the leased port assets are returned to the state at the end of the 99-year lease period.
The port was leased for A$506 million with 20% held by the government with the intention of transferring that to an Australian investor in time.
The state territory receives a share of future revenue where trade performance is better-than-expected, and the lessee is committed to sponsoring community initiatives according to BusinessDesk.
