Latest Correspondence Commencing March 24 2017

Statement to Media and MPs
March 24 2017

A container terminal can be developed immediately at the Port of Newcastle. There is only one thing stopping it: a massive fee has to be paid to the NSW government.

A container terminal will be the single biggest generator of job-creating economic growth in northern NSW.

Worldwide, 90 per cent of traded goods between countries are transported in containers. Local firms cannot develop export markets without access to a container terminal. Local firms cannot value-add to imported goods for domestic consumption or re-export, without access to a container terminal. New firms will not locate their activities in northern NSW, without access to a container terminal.

It is economic madness not to have a container terminal at the Port of Newcastle.

The reason why the NSW government concealed charging a massive fee at the Port of Newcastle – as exposed last July by the “Newcastle Herald” – is that the government faces a massive compensation bill for paying NSW Ports Pty Ltd.

In April 2013, NSW Ports leased Port Botany and Port Kembla from the NSW government. The government will pay NSW Ports $100 million a year until 2063, if a container terminal is built at the Port of Newcastle and handles 1 million containers per year (payable at $100 per TEU container).

The government’s source of funds for this payment is Port of Newcastle Investments Pty Ltd (PON), the Newcastle port’s leaseholder. PON is not developing a container terminal because the government’s charge makes the venture commercially unviable.

Normally, Australia’s competition law would prevent the NSW government making its anti-competitive charge. To circumvent the “Competition and Consumer Act 2010” (CCA), the NSW government privatised the port. The CCA does not apply to a government in respect of an asset that is being privatised.

Between 2009 and November 2013, the government was not privatising the Port of Newcastle. Over this period, Newcastle Port Corporation (NPC) had government approval to invite the private sector to fund, build and operate a container terminal with capacity of at least 1 million per year. NPC chose Newcastle Stevedores Consortium Pty Ltd (NSC) to be its “Master Developer” for this project.

But in 2012, the government secretly decided to pay the future leaseholder of Port Botany if a container terminal was developed at the Port of Newcastle. In August 2012, the government ordered NSC not to develop a container terminal. This was a mistake because the negotiations with NSC were strictly confidential. So far as NSW Ports was concerned, the government was going to pay compensation from consolidated revenue. But compensating NSW Ports from consolidated revenue defeated the purpose of leasing Port Botany.

The government, if required, could not show how its contractual commitment to NSW Ports would be funded.

So the government decided to reverse the order it had given to NSC. The government permitted NSC to develop a container terminal on condition that NSC met the government’s costs for paying NSW Ports.

Only a government could come-up with such an arrangement. No wonder these deals were kept secret.

But the government made another mistake.

Charging NSC under contract for a container terminal developed by NSC, potentially contravened the anti-competition provisions of the CCA. If a Court held the charge to be unlawful, and a container terminal was developed because the impediment was removed, this would expose the government to compensating NSW Ports without having a source of funds.

The government’s solution was to terminate negotiations with NSC and privatise the port.

But did the government contravene the CCA?

Greg Cameron

www.containerterminalpolicyinnsw.com.au

March 24 2017

—

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Dear Mr Morrison,

I refer to Treasury’s letter (ref: MC17-000292) dated January 27 2017, which stated that the conduct described in my correspondence concerning the Port of Newcastle “does not appear to disclose any relevant conduct for the purposes of the “Commonwealth Competition and Consumer Act 2010” [CCA]. There does not appear to have been a contract, arrangement or understanding in place which had the purpose, effect or likely effect of substantially lessening competition.”

The conduct in question took place between 2009 and November 2013, and involved Newcastle Port Corporation (NPC), a statutory state-owned corporation, implementing its strategic plan for expanding its commercial business operations. NPC was engaged in this conduct on a regular and systematic basis, as proven by Annual Reports and other statements of corporate intent. NPC’s conduct was for the purpose of trade and commerce and took place in a business context. These are characteristics a Court examines when determining whether a government entity is carrying on a business for the purposes of the CCA. A reasonable person would conclude that NPC’s conduct was of this character.

NPC received approval from the NSW government in 2009 to issue an “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP). The ITSDP’s “stated objectives” were –

(a) have cargo handling terminal activity for containers and other cargo which may include bulk, break bulk, roll on roll off, etc., consistent with the characteristics, assets and capabilities of the Site;

(b) include a best practice container operation capable of handling in excess of 1 million TEU per annum;

(c) select a Proponent that is committed and has the capacity, resources and expertise to successfully deliver and grow their development proposal;

(d) increase the proportion of northern NSW trade for NSW ports;

(e) generate employment opportunities in the Hunter region;

(f) provide environmental, safety and community amenity benefits through reduced road traffic congestion in Sydney, thereby reducing greenhouse gas, vehicle emissions and noise;

(g) optimise public value for money by maximising land use intensity and engaging the private sector in the development of the State’s port and transport infrastructure for handling container and general cargo trades;

(h) ensure investment and development is delivered in a timely manner;

(i) recognise relationships between parties who may use the existing facilities and access points to and from the Site; and

(j) secure an appropriate commercial return to Newcastle Port Corporation.

A proposal received from Newcastle Stevedores Consortium (NSC) was chosen in 2010 and negotiations commenced. When agreement was reached in December 2010, NPC requested NSW government approval to enter into a contract with NSC, as the last step of the ITSDP process. For reasons later exposed by the NSW ICAC in their “Operation Spicer” Inquiry conducted in 2014, approval was not given before the NSW state election held in March 2011. Negotiations pursuant to the ITSDP contract continued after the election until they were terminated by NPC in November 2013.

Sometime after Port Botany and Port Kembla were leased to NSW Ports in April 2013, NPC amended the terms of the ITSDP contract by requiring NSC to make the NSW government whole for any cost the NSW government incurred for paying NSW Ports in respect of NSC developing and operating a container terminal at the Port of Newcastle. The amount of the government’s payment to NSW Ports was the average amount that NSW Ports charged in a calendar year for TEU containers shipped through Port Botany. The requirement on NSC to make the NSW government whole was contractual. The purpose, or likely effect, of this contractual requirement was to substantially lessen competition between the Port of Newcastle and Port Botany, by making it commercially unviable for NSC to develop and operate a container terminal.

A container terminal developed and operated according to NPC’s “stated objective” (b) would require the NSW government to pay NSW Ports up to $100 million per annum for 50 years, or $5 billion. NPC required NSC to make the government whole for the explicit purpose of securing a source of funds for recovering the cost of paying NSW Ports. Under the terms of the ITSDP contract, NPC had the right to change the terms and conditions as it saw fit.

The NSW government was obliged to satisfy itself that the charge complied with the CCA. If the charge contravened the CCA, a contract between NPC and NSC could not be approved by the NSW government and, therefore, a contract between NPC and NSC could not be concluded. Presumably, the NSW government satisfied itself about the potential lawfulness of the charge.

A reasonable person would conclude that NPC’s reason for terminating the ITSDP contract in November 2013 was because the charge potentially contravened the CCA. If this charge did contravene the CCA, this means that the NSW government leased the Port of Newcastle to circumvent the CCA for securing a source of funds for meeting the cost of paying NSW Ports in respect of future container capacity development at the Port of Newcastle.

In 2009, NSW government policy supported “stated objective” (b) of the ITSDP. In 2012, when the NSW government informed bidders for the Port Botany and Port Kembla leases that the lessee would be compensated in respect of future container capacity development at the Port of Newcastle, presumably, the intention was that NSC would be the government’s source of funds, because the ITSDP contract was in force at that time.

Because NPC’s negotiations with NSC were confidential, it was not publicly disclosed that on two occasions – August 30 2012 and July 26 2013 – the NSW government instructed NSC that “stated objective” (b) was withdrawn from the ITSDP contract. Presumably, this contractual change was reversed when NSC was contractually required to pay the NSW government in respect of NSC operating a container terminal.

NSW government policy in 2009 supported the immediate development of a container terminal at the Port of Newcastle and this policy has not changed, as the government formally confirms. Claims by the ACCC that NSW government policy does not support immediate development of a container terminal at the Port of Newcastle must be supported with factual evidence, or withdrawn.

Will you please advise if the ACCC claims that NPC’s conduct pursuant to the ITSDP contract did not constitute carrying on a business for the purposes of the CCA in the period 2009 to November 2013?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, Chairman, ACCC; NSW Auditor-General; NSW MPs; Media

March 23 2017

The Hon Darren Chester MP
Minister for Infrastructure and Transport

The Hon Anthony Albanese MP
Shadow Minister for Infrastructure, Transport, Cities, and Regional Development

Senator The Hon Fiona Nash
Minister for Regional Development, Minister for Local Government and Territories

The Hon Paul Fletcher MP
Minister for Urban Infrastructure

Dear Mr Chester, Mr Albanese, Ms Nash and Mr Fletcher,

A container terminal will be built at the Port of Newcastle should the massive charge applied by the NSW government in respect of such a terminal prove to be legally unenforceable.

A container terminal at the Port of Newcastle would provide the base-load cargo for building a rail freight bypass of Sydney, between Newcastle, Eastern Creek and Glenfield.

There are compelling economic benefits for using rail to transport all shipping containers in NSW.

A Newcastle container terminal will enable all containers for the Sydney market to be railed between Newcastle and intermodal terminals in outer western Sydney, where they would be unpacked and the goods transported by lighter trucks to Sydney end destinations.

Goods manufactured in Sydney for export would be trucked west to the intermodal terminals, loaded into containers and railed north, to Newcastle. Empty containers, which are 50 per cent of export containers, would be railed from Sydney to regional areas of NSW to be used for exporting goods in containers through the Port of Newcastle.

Worldwide, 90 per cent of traded goods between countries are transported in containers. Regional NSW firms cannot develop export markets without access to a container terminal. Regional firms cannot value-add to imported goods for domestic consumption or re-export, without access to a container terminal. New firms will not locate their activities in regional areas of NSW, without access to a container terminal.

A container terminal at the Port of Newcastle is a long overdue necessity for all regional areas of NSW.

A rail freight bypass would enable Sydney firms to relocate into regional areas. In western Sydney, 5,000 hectares of land are in use for industrial purposes. Many of these firms could profitably relocate to regional areas if they were able to use rail for transporting containers.

According to the Australian government, the total economic benefits of southwestern Sydney’s Intermodal Terminal at Moorebank, now under construction, are $10 billion over 30 years based on railing 1.2 million containers per year. Container movements are estimated to grow to 7 million per year over the next 30 years. Railing 100 per cent of containers will generate up to five times more economic benefits.

There would be no need to build stages 2 and 3 of the Northern Sydney Freight Corridor to provide the equivalent of a dedicated rail freight line between Newcastle and Strathfield. The cost saving is $5 billion. All of the current rail capacity between Newcastle and Sydney would be used for passenger services to provide a higher economic return than freight, by lowering the rate of growth in road transportation between the cities. A second, critical, rail bridge would be built over the Hawkesbury River for the rail freight bypass.

There would  be no need to build the Western Sydney Freight Line, between Chullora and Eastern Creek, to enable containers to be railed between Port Botany and outer western Sydney. The cost saving is $1 billion.

All of Sydney’s current rail capacity would be used for passenger services to provide a higher economic return than freight, by lowering the rate of growth in Sydney’s road transportation. The Southern Sydney Freight Line could be used for express passenger services from southwestern Sydney growth areas, including Badgery’s Creek Airport.

The Port Botany/Kembla leaseholder, and the Port of Newcastle leaseholder, are able to increase their net returns by participating in the rail freight bypass to achieve an orderly transfer of container operations from Port Botany to Newcastle after the 10-years it will take to build the privately funded line. Nominal container capacity would be retained at Port Botany to provide an alternative port to Newcastle when high seas required the Port of Newcastle to be closed.

The short parallel runway at Sydney airport could be extended from 2600 metres to 4000 metres by a major reduction in container operations at Port Botany.

The section of the bypass line between Eastern Creek, Badgery’s Creek and Glenfield would be built first. This would enable containers to be railed between Port Botany and Eastern Creek using existing rail freight capacity to achieve all of the claimed economic benefits for the Moorebank Intermodal Terminal, which would be cancelled.

A container terminal can be developed immediately at the Port of Newcastle. There is only one thing stopping it: a massive fee has to be paid to the NSW government.

The reason why the NSW government concealed charging a massive fee – as exposed last July by the “Newcastle Herald” – is that it faces a massive compensation bill to NSW Ports Pty Ltd.

In April 2013, NSW Ports leased Port Botany and Port Kembla from the NSW government. The NSW government is contractually committed to paying NSW Ports $100 million a year until 2063, if a container terminal is built at the Port of Newcastle and handles 1 million containers per year (payable at $100 per TEU container).

The NSW government’s source of funds for this payment is Port of Newcastle Investments Pty Ltd, which is not developing a container terminal because the government’s charge makes the venture commercially unviable.

It will be a different story if the charge is legally unenforceable.

Normally, Australia’s competition law would prevent the NSW government making its anti-competitive charge. To circumvent the “Commonwealth Competition and Consumer Act 2010” (CCA), the NSW government privatised the port. The CCA does not apply to a government in respect of an asset that is being privatised.

Between 2009 and November 2013, the NSW government was not privatising the Port of Newcastle. Over this period, Newcastle Port Corporation (NPC) had government approval to invite the private sector to fund, build and operate a container terminal with capacity of at least 1 million per year. NPC chose Newcastle Stevedores Consortium Pty Ltd (NSC) to be its “Master Developer” for this project.

But in 2012, the NSW government secretly decided to pay the future leaseholder of Port Botany if a container terminal was developed at the Port of Newcastle. In August 2012, the government ordered NSC not to develop a container terminal.

Since the NSW government’s separate negotiations with both NSC and NSW Ports were confidential, the government did not disclose it had no source of funds for paying compensation to NSW Ports. So the government decided to reverse the order it had given to NSC. The NSW government permitted NSC to develop a container terminal on condition that NSC meet the government’s costs for paying NSW Ports.

Charging NSC under contract for a container terminal developed by NSC potentially contravened the anti-competition provisions of the CCA. If a Court held the charge to be unlawful, and a container terminal was developed because the impediment was removed, this would expose the NSW government to compensating NSW Ports without having a source of funds.

The NSW government’s solution was to terminate negotiations with NSC in November 2013 and privatise the port.

The ACCC refuses to disclose its position. The question for the ACCC to answer is:

Does the ACCC claim that the NSW government was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” in 2013 when it required Newcastle Stevedores Consortium to make the NSW government whole for any cost the NSW government incurred in paying NSW Ports in respect of any container terminal developed and operated by Newcastle Stevedores Consortium at the Port of Newcastle?

Perhaps you might ask the ACCC to answer this question?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW MPs; ACCC; NSW Auditor-General; Media

March 27 2017

The Hon Dominic Perrottet MP
Treasurer of NSW
Minister for Industrial Relations

Dear Mr Perrottet,

I refer to lease conditions for Port Botany, Port Kembla and the Port of Newcastle.

A condition of the Port Botany and Port Kembla leases is that the NSW government will make certain payments to the lessee, NSW Ports, in respect of future container capacity development at the Port of Newcastle. At current Port Botany prices, the government will pay NSW Ports $100 per TEU container for TEU containers handled at the Port of Newcastle, until 2063. For example, if a container terminal is developed at the Port of Newcastle and handles over one million TEU containers per year, the government will pay NSW Ports over $100 million per year.

A condition of the Port of Newcastle lease is that the lessee, Port of Newcastle Investments, is required to make the NSW government whole for any cost the NSW government incurs to NSW Ports in respect of future container capacity development at the Port of Newcastle. Is this lease condition legally enforceable?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW Ports; Port of Newcastle Investments; Hutchison Ports; DP World; Qube; NSW Auditor-General; NSW MPs; Media

March 28 2017

 

To NSW Members Of Parliament

A container terminal at the Port of Newcastle, handling one million containers per year, will cost the NSW government $100 million per year in payments to NSW Ports, the Port Botany leaseholder, until 2063. Why is the NSW government contractually committed to paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

The government’s source of funds for paying NSW Ports is consolidated revenue. Any cost the government incurs to NSW Ports is intended to be recovered from Port of Newcastle Investments Pty Ltd (PON), the port’s leaseholder.

This charge may be legally unenforceable. It is straightforward to establish whether charging PON contravenes the anti-competition provisions of the “Commonwealth Competition and Consumer Act 2010” (CCA).

All that is required is for the ACCC to acknowledge the existence of a contract between Newcastle Port Corporation (NPC) and Newcastle Stevedores Consortium (NSC) called “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP). This contract was in force between 2010 and November 2013. It contained terms and conditions by which NSC would build a new cargo terminal for containers and other cargo on the Mayfield Site of the former BHP Newcastle Steelworks. The container terminal component was required to have capacity of at least one million TEU containers per year.

In 2013, the NSW government amended the ITSDP contract by requiring NSC to make the government whole for any cost the government incurred to NSW Ports in paying NSW Ports in respect of NSC developing a container terminal. NPC could not contravene the CCA unless it was carrying on a business for the purposes of the CCA. It defies reality that commercial negotiations pursuant to the ITSDP contract were outside the scope of the CCA.

However, the ACCC, which enforces the CCA, refuses to acknowledge that the ITSDP contract even existed. This enables the ACCC to avoid examining whether negotiations conducted pursuant to the ITSDP contract were within the scope of the CCA. The ACCC argues that agreement was not reached between NPC and NSC to lease the Mayfield Site. The ACCC’s argument is misleading because an agreement which potentially contravened the CCA could never be approved by the NSW Cabinet.

The reason why the NSW government terminated the ITSDP contract was because the requirement for NSC to make the government whole potentially contravened the CCA. The government decided to privatise the Port of Newcastle because this allowed the government to act outside the operation of the CCA when requiring the lessee to make the government whole for any cost the government incurred to NSW Ports.

If a Court determines that the government contravened the CCA by requiring NSC to make the government whole for any cost the government incurred to NSW Ports, this would prove that the port was leased for the purpose of evading the CCA, and not for the purpose claimed by the government.

By failing to acknowledge the purpose and function of the ITSDP contract, the ACCC is covering-up a potential breach of the CCA by the NSW government.

Why is this failure acceptable to NSW members of the NSW and Australian Parliaments?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, Chairman, ACCC; NSW Auditor-General; Media

April 6 2017

 

 

 

To NSW Members of Parliament:

A container terminal operator (CTO) at the Port of Newcastle would lease the port’s container terminal site from Port of Newcastle Investments Pty Ltd (PON).

A vital consideration is whether the Full Bench of the Federal Court upholds the decision of the Australian Competition Tribunal to declare the Port of Newcastle shipping channel service, operated by PON. Declaring the service enables a port user, such as a coal exporter or a CTO, to request the ACCC to arbitrate PON’s charges.

PON accepted a NSW government lease condition requiring the government be made whole for any cost the government incurred to NSW Ports, the Port Botany leaseholder, in respect of future container capacity development at the Port of Newcastle. PON would charge a CTO handling one million containers a year $100 million a year, with which to pay the NSW government’s charge.

The CTO would appeal PON’s charge to the ACCC. Should the ACCC determine that PON’s charge was unlawful, it would be struck down. PON could then challenge the NSW government’s charge, on the same terms.

The NSW government refuses to explain the purpose of its contractual commitment to pay NSW Ports. In comparison, the government’s purpose in charging PON is abundantly clear. It is to make it commercially unviable for a CTO to develop and operate a container terminal.

The government would not have anticipated the shipping channel service being declared.

The NSW parliament has an obligation to understand the extent of the risk to the state’s finances should the Federal Court uphold the decision to declare the shipping channel service.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, ACCC; Mr Peter Harris, Productivity Commission; Mr Mark Birrell, Infrastructure Australia; NSW Auditor-General; Media

April 8 2017

Ms Rene de Gruchy
Chief Operating Officer
Australian Competition and Consumer Commission

Dear Ms de Gruchy,

I refer to your letter dated February 23 2017.

Does the ACCC accept that:

(a) the NSW government, as Newcastle Port Corporation (NPC), signed a contract with Newcastle Stevedores Consortium Pty Ltd (NSC) in 2010 entitled “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) and that this contract was not terminated until November 2013;

(b) all dealings between NPC and NSC were subject to the terms and conditions of the ITSDP contract; and,

(c) Term Sheets prepared pursuant to the ITSDP contract included a requirement that NSC make the NSW government whole for any cost the NSW government incurred to NSW Ports Pty Ltd in respect of future container capacity development at the Port of Newcastle?

Does the ACCC claim that dealings between NPC and NSC fell outside the operation of the “Competition and Consumer Act 2010”?

Did the ACCC investigate dealings between NPC and NSC conducted pursuant to the ITSDP contract?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, ACCC; The Hon Scott Morrison MP; The Hon Chris Bowen MP; The Hon Anthony Albanese MP; The Hon Darren Chester MP; Senator The Hon Fiona Nash; The Hon Paul Fletcher MP; The Hon Gladys Berejiklian MP; Mr Tim Crakanthorp MP; The Hon Adam Searle MLC; Media

April 12 2017

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

In 2009, the NSW government formally decided to invite the private sector to develop a container terminal at the Port of Newcastle. Acting as Newcastle Port Corporation (NPC), the government contractually committed to the terms and conditions of NPC’s “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP). In 2010, NPC accepted a proposal from Newcastle Stevedores Consortium (NSC). All dealings between NPC and NSC were governed by the ITSDP contract. While the ITSDP contract was in force, NPC was contractually committed not to develop a container terminal in its own right. NPC terminated the ITSDP contract in November 2013.

The ACCC does not acknowledge the existence of the ITSDP contract between NPC and NSC. Consequently, the ACCC has not investigated any dealings between NPC and NSC.

Before terminating the ITSDP contract, NPC required NSC to make the NSW government whole for any cost the government incurred to NSW Ports in respect of future container capacity development at the Port of Newcastle. NSC was contractually required to accept any change to the ITSDP contract made by NPC, or withdraw from the contract.

NPC’s change was potentially unlawful if the “Commonwealth Competition and Consumer Act 2010” (CCA) applied to the dealings between NPC and NSC pursuant to the ITSDP contract. Should a Court determine that the CCA was breached, this would prove that the NSW government terminated the ITSDP contract because the change was unlawful. It would also prove that the government’s decision to privatise the Port of Newcastle was for the purpose of charging the leaseholder a fee outside the operation of the CCA.

Does the ACCC claim that NPC was not carrying on a business for the purposes of the CCA in respect of its dealings with NSC pursuant to the ITSDP contract?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: The Hon Gladys Berejiklian MP, Premier of NSW; NSW Auditor-General; NSW MPs; Media

April 17 2017

 

 

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

On which date did the NSW government inform the ACCC of the government’s formal decision to invite Newcastle Stevedores Consortium (NSC) to develop a container terminal at the Port of Newcastle, subject to NSC making the government whole for any cost the government incurred to NSW Ports in respect of this development?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: The Hon Gladys Berejiklian MP, Premier of NSW; NSW Auditor-General; Mr Tim Crakanthorp MP; The Hon Adam Searle MLC; Media

April 18 2017

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

Does the ACCC claim the NSW government was not negotiating under contract with Newcastle Stevedores Consortium between 2010 and November 2013 for Newcastle Stevedores Consortium to develop a container terminal at the Port of Newcastle?

Does the ACCC claim the NSW government document entitled “Port Commitment – Port Botany and Port Kembla” does not contain NSW government changes to the contract between the government and Newcastle Stevedores Consortium in respect of Newcastle Stevedores Consortium developing a container terminal at the Port of Newcastle?

Why does the ACCC claim that from at least July 27 2012, the NSW government had decided not to develop a container terminal at the Port of Newcastle?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: The Hon Gladys Berejiklian MP, Premier of NSW; NSW Auditor-General; The Hon Adam Searle MLC; Mr Tim Crakanthorp MP; Media

April 20 2017

Ms R de Gruchy
Chief Operating Officer
Australian Competition and Consumer Commission

Dear Ms de Gruchy,

Thank you for your letter dated April 27 2017 in which you advise the ACCC investigated the contractual arrangements for the long-term leases of Port Botany, Kembla and Newcastle in 2014. However, the questions for which I seek answers concern the NSW government’s negotiations with Newcastle Stevedores Consortium (NSC) between 2010 and November 1 2013 for developing a new cargo terminal for containers and other cargo at the Port of Newcastle.

As you may know, the NSW government, acting as Newcastle Port Corporation (NPC), a statutory state-owned corporation, signed a contract with NSC in 2010 entitled “Invitation to Submit Detailed Proposal, Mayfield Site” (ITSDP). The negotiations between the NSW government and NSC were conducted entirely according to the terms and conditions of this ITSDP contract. Given the ACCC claims to have investigated the negotiations between the government and NSC, did the ACCC investigate the ITSDP contract?

If so, does the ACCC claim the NSW government was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (CCA) while negotiating with NSC pursuant to the ITSDP contract until it was terminated in November 1 2013?

If the ACCC did not investigate the ITSDP contract, on what basis does the ACCC claim to have investigated negotiations between the NSW government and NSC between 2010 and November 1 2013?

The NSW government’s decision to lease the Port of Newcastle was announced on November 5 2013. The government had announced, on June 18 2013, its decision to conduct a scoping study into the possibility of leasing the Port of Newcastle. Does the ACCC claim the NSW government’s decision to conduct a scoping study into leasing the Port of Newcastle constituted a decision to lease the Port of Newcastle?

The ACCC claims the NSW government decided, on June 27 2012, not to develop a container terminal at the Port of Newcastle. The ACCC’s claim literally means the government had previously decided to develop a container terminal at the port. However, the government had not previously decided to develop a container terminal. In 2009, the NSW government had formally decided to approve NPC inviting the private sector to develop a cargo terminal for containers and other cargo at the Port of Newcastle.

However, the ACCC claims the NSW government’s alleged decision not to develop a container terminal at the Port of Newcastle meant the government was not carrying on a business for the purposes of the CCA by negotiating with NSC until November 1 2013.

The ACCC provides no evidence to support its claim that the NSW government decided not to develop a container terminal at the Port of Newcastle from at least June 27 2012. The decision the NSW government took on this date was to conduct a scoping study into including Port Kembla in the lease offering for Port Botany. The company conducting this scoping study was instructed by the government that the government would require NSC to make the government whole for any cost the government incurred to a future leaseholder of Port Botany/Port Kembla in respect of a container terminal developed by NSC at the Port of Newcastle.

These instructions were disclosed by The Hon Duncan Gay MLC, Minister for Roads and Ports, on October 17 2013 in the NSW Parliament. However, all of the details remained confidential until July 28 2016 when “The Newcastle Herald” published a government document entitled “Port Commitment – Port Botany and Port Kembla”.

Does the ACCC claim that conducting a scoping study into leasing Port Kembla meant the government ceased carrying on a business for the purposes of the CCA in respect of its ongoing negotiations with NSC pursuant to the ITSDP contract?

The NSW government, in November 2013, formally confirmed its 2012 policy decision in respect of Port Kembla. Page 117 of the “NSW Freight and Ports Strategy” states: “Port Kembla has been identified as the location for the development of a future container terminal to augment the capacity of Port Botany when required.”

Does the ACCC construe formal NSW government policy in respect of Port Kembla as meaning the government decided not to develop a container terminal at the Port of Newcastle in 2012?

The NSW government did decide, on November 1 2013, that NSC would not develop a container terminal at the Port of Newcastle, by concluding the ITSDP contract with NSC. Until that date, the government was negotiating, under contract, with NSC over terms and conditions for NSC developing a container terminal. Does the ACCC deny these negotiations were being conducted for this purpose?

The ACCC claims the NSW government did not conclude a contract with NSC and, therefore, could not have breached the CCA by requiring NSC to make the government whole for any cost the government incurred to NSW Ports in respect of NSC developing a container terminal at the Port of Newcastle. The ACCC makes this claim on the grounds that the NSW government was not carrying on a business for the purposes of the CCA by negotiating with NSC until November 1 2013.

As previously indicated, it was impossible for the NSW government to conclude a contract with NSC when that contract breached the CCA

It is therefore appropriate to request the ACCC, again, to indicate whether it claims the NSW government was not carrying on a business for the purposes of the CCA by negotiating with Newcastle Stevedores Consortium pursuant to the ITSDP contract between 2010 and November 1 2013.

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW MPs; NSW Auditor-General; Media

April 27 2017

Mr Tim Crakanthorp MP
Member for Newcastle
Parliamentary Secretary to Shadow Cabinet

Dear Mr Crakanthorp,

Thank you for forwarding today a letter you received from Ms R de Gruchy, Chief Operating Officer, ACCC, dated April 27 2017. Please note my question remains unanswered.

Does the ACCC claim Newcastle Port Corporation (NPC) was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (CCA) by negotiating with Newcastle Stevedores Consortium (NSC) pursuant to a contract entitled “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) between 2010 and November 1 2013?

Ms de Gruchy states: “NPC may have been carrying on a business within the scope of the CCA in some capacity, however that is not necessarily sufficient for the purposes of the CCA.”

The matter specifically concerns NPC conducting a commercial negotiation with NSC pursuant to a signed contract – the ITSDP contract. This ITSDP contract sets out in complete detail NPC’s commercial dealings with NSC. However, the ACCC does not even acknowledge the existence of this ITSDP contract. Until the ACCC acknowledges this ITSDP contract, the relevance of any advice the ACCC provides is highly questionable.

The ACCC is obliged to acknowledge that NPC amended Term Sheets of this ITSDP contract by requiring NSC to make the NSW government whole for any cost the government incurred to the leaseholder of Port Botany and Port Kembla in respect of NSC developing a container terminal at the Port of Newcastle.

Ms de Gruchy further states: “In any event, the conduct outlined during this period [to November 2013] did not lead to any contract, arrangement or understanding for the purposes of the CCA.”

The ACCC is obliged to establish whether NPC potentially contravened the CCA by amending the Term Sheets because it is obvious that a “contract, arrangement or understanding” could never be reached where this involved contravening the CCA.

Ms de Gruchy states that the period to November 2013 was not the focus of the ACCC’s investigations. This is the case, obviously, because the ACCC does not acknowledge the existence of the ITSDP contract.

Current NSW government policy in respect of the Port of Newcastle derives from its “Ports Growth Plan, 2003”, which nominated the Port of Newcastle as the state’s next major container port when Port Botany reached capacity. This policy was formally changed in 2009 when NPC received approval to invite the private sector to develop a cargo terminal for containers and other cargo at the Port of Newcastle. The container terminal component was to have capacity for at least 1 million TEUs per year.

NPC received formal NSW government approval to issue its ITSDP to selected parties. In so doing, NPC was required to comply with the “NSW Public Private Partnerships Guidelines”. In 2010, a proposal from NSC was selected and negotiations commenced. Agreement was reached in December 2010 and the Term Sheets were developed for government approval, as required by the

“NSW PPP Guidelines” Approval was not given before the March 2011 state election. Negotiations between NPC and NSC resumed after the election in accordance with the ITSDP contract.

Under the ITSDP contract, NPC had to comply with all relevant laws. One such law was the CCA. Under the “NSW PPP Guidelines”, NPC was required to demonstrate to the satisfaction of the NSW Treasury – before proceeding to Cabinet approval – that NPC’s requirement to make the government whole for any cost the government incurred to the Port Botany/Port Kembla leaseholder in respect of NSC developing a container terminal, complied with the CCA.

Please note this amendment to the Term Sheets was an instruction given by the NSW Treasury to NPC. In other words, NSW Treasury was investigating its own requirement for compliance with the CCA.

Presumably, NPC terminated the ITSDP contract on November 1 2013 because the government considered the amended Term Sheets contravened the CCA. If the CCA was contravened, this proves the Port of Newcastle was leased for the purpose of evading the CCA. In that event, future NSW governments will be left without a source of funds, other than consolidated revenue, for compensating the leaseholder of Port Botany/Port Kembla.

The ACCC claims the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. However, this claim is contradicted by the formal public record, including NPC’s requirement to make the NSW government whole for any cost the government incurred in respect of NSC developing a container terminal at the Port of Newcastle.

On June 27 2012, the NSW government announced its intention to conduct a scoping study into leasing Port Kembla. Port Kembla had been identified by the government in 2012 as the location for the development of a future container terminal. Formal NSW government policy in respect of Port Kembla was confirmed by the government’s “NSW Freight and Ports Strategy, November 2013”, which says: “Port Kembla has been identified as the location for the development of a future container terminal to augment the capacity of Port Botany when required.”

Formal NSW government policy in relation to Port Kembla did not change formal NSW government policy in relation to the Port of Newcastle, as established by the ITSDP contract. The Port of Newcastle remained the location for the development of a container terminal by NSC, until November 1 2013.

The NSW government also decided in 2012 to require NSC to make the government whole for any cost the government incurred to a future leaseholder of Port Botany/Port Kembla in respect of NSC developing a container terminal. This decision was disclosed by The Hon Duncan Gay MLC, then Minister for Roads and Ports, in State Parliament on October 17 2013. However, details remained secret until July 28 2016, when “The Newcastle Herald” published a document entitled “Port Commitment – Port Botany and Port Kembla”.

Port Botany and Port Kembla were both leased to NSW Ports Pty Ltd on April 12 2013.

The NSW government announced, on June 18 2013, its decision to conduct a scoping study for leasing the Port of Newcastle. The ITSDP contract was terminated on November 1 2013 before a decision was taken to lease the port. A decision to lease the port was announced on November 5 2013. Therefore, the NSW government was not leasing the Port of Newcastle when it was negotiating with NSC pursuant to the ITSDP contract. Accordingly, the ACCC’s investigation of the Port of Newcastle lease was of no consequence to the negotiations between NPC and NSC.

When the government accepted the recommendation of the scoping study into leasing the Port of Newcastle, it also decided that a lessee could develop a container terminal if it wished to do so. This decision was consistent with the government’s decision in 2010 to allow NSC to develop a container terminal, subject to NPC completing negotiations with NSC to the government’s satisfaction.

Finally, NPC’s negotiations with NSC were terminated by NPC. Under the terms of the ITSDP contract, NPC could terminate the contract at any time and for any reason. However, the ITSDP contract required terms and conditions to be lawful.

Do you consider the ACCC is obliged to answer the question in my second paragraph?

Yours faithfully,

Greg Cameron

 

www.containerterminalpolicyinnsw.com.au

May 2 2017

Copy: The Hon Adam Searle MLC

A four-year negotiation between Newcastle Port Corporation (NPC) and Newcastle Stevedores Consortium (NSC) over a container terminal at the Port of Newcastle was investigated by the ACCC for compliance with the “Commonwealth Competition and Consumer Act 2010” (CCA), the ACCC said.

In 2010, NPC signed a contract with NSC called “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP). This contract contained terms and conditions NPC required for NSC to develop a cargo terminal for containers and other cargo. The container terminal component was to include capacity for handling at least one million TEUs per year.

It would be a stiff competitor for Port Botany in the NSW container shipping market.

“In the period to November 2013, the ACCC understands that NPC (a NSW government owned entity) and NSC were engaged in negotiations in relation to the Port of Newcastle,” the ACCC said.

“However, these negotiations did not result in any concluded agreement.

“During this period, NPC may have been carrying on business within the scope of the CCA in some capacity but that is not necessarily sufficient for the purposes of the CCA,” the ACCC said.

The ACCC said it had access to “relevant information” about negotiations between NPC and NSC.

However, the ACCC refuses to acknowledge the ITSDP contract. Unless the ACCC investigated the negotiations pursuant to the ITSDP contract, it did not conduct a relevant investigation.

NPC was required to comply with the “NSW Public Private Partnerships Guidelines” (PPP Guidelines). These required NPC to obtain NSW Cabinet approval for concluding a contract with NSC.

By December 2010, NPC and NSC had reached agreement. Term Sheets had been prepared. NPC requested government approval to proceed to contract. Approval was not given before the March 2011 NSW state election intervened.

Negotiations pursuant to the ITSDP contract resumed after the election.

In July 2012, the NSW government decided to conduct a scoping study for leasing Port Kembla as well as Port Botany. The government decided it would require NSC to make the government whole for any cost the government incurred to a leaseholder of Port Botany/Port Kembla in respect of NSC developing a container terminal.

NSW Ports Pty Ltd was the successful bidder for the Botany/Kembla leases in April 2013, paying $5.1 billion. The lease agreement included a contractual commitment for the NSW government to pay NSW Ports in respect of future container capacity development at the Port of Newcastle.

The NSW government has never explained why NSW Ports is paid compensation for losing business to a competitor at Newcastle.

The ITSDP contract allowed NPC to make any change. NSC was required to accept any change, or withdraw from the contract.

The ITSDP contract also allowed NPC to terminate at any time and for any reason. However, it did not allow NPC to contravene the CCA.

NPC amended the Term Sheets agreed in December 2010 by adding a requirement for NSC to make the government whole for any cost the government incurred to NSW Ports in respect of NSC developing a container terminal.

PPP Guidelines required NPC to secure approval from NSW Treasury to request Cabinet approval. The NSW Auditor-General also had to be consulted over the accounting treatment.

The Auditor-General had to be satisfied the government had a secure source of funds for paying NSW Ports in respect of future container capacity development at the Port of Newcastle.

NPC terminated the ITSDP contract on November 1 2013 presumably because it contravened the CCA for NSC to make the government whole for any cost the government incurred to NSW Ports in respect of NSC developing a container terminal.

The NSW government announced, on June 18 2013, its decision to conduct a scoping study for leasing the Port of Newcastle. A decision to lease the port was announced on November 5 2013. Therefore, the NSW government was not leasing the Port of Newcastle when it was negotiating with NSC.

The NSW government formally decided the Port of Newcastle lessee could develop a container terminal if it wished to do so. This decision was consistent with the government’s formal policy decision in 2010 to allow NSC to develop a container terminal, subject to government approval of terms and conditions negotiated by NPC.

Leasing the Port of Newcastle placed the government outside the scope of the CCA, which was the government’s purpose in leasing the port. But the immediate question for the ACCC is:

Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium pursuant to a contract entitled “Invitation To Submit Detailed Proposal, Mayfield Site” between 2010 and November 1 2013?

Greg Cameron

www.containerterminalpolicyinnsw.com.au

May 4 2017

 

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

I refer to the “Port Commitment – Port Botany and Port Kembla” (Port Commitment) as published by “The Newcastle Herald” on July 28 2016. The Hon Duncan Gay MLC, (former) Minister for Roads, Maritime and Freight, confirmed the authenticity of the Port Commitment on August 10 2016 (see attached). The Port Commitment concerns “Term Sheets” with Newcastle Stevedores Consortium (NSC).

NSC was negotiating with Newcastle Port Corporation (NPC) between 2010 and November 1 2013. These negotiations were conducted subsequent to a formal NSW government decision in 2009 not to develop a new cargo terminal for containers and other cargo at the Port of Newcastle. Instead, the government formally decided to invite the private sector to develop a new cargo terminal for containers and other cargo, with a requirement for the TEU component to have capacity for at least one million TEUs per year.

The government approved NPC issuing an “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) setting out, in a contract, NPC’s terms and conditions for the new cargo terminal. The proposal submitted by NSC was selected, negotiations commenced and “Term Sheets” were developed in December 2010.

The Port Commitment provides details of an addition to these “Term Sheets” subsequent to the leasing of Port Botany and Port Kembla to NSW Ports in April 2013.

On October 17 2013, The Hon Duncan Gay MLC, (former) Minister for Roads and Ports, informed the parliament that in 2012 the government had instructed its financial adviser that a future leaseholder of Port Botany/Kembla would be paid by the government in respect of future container capacity development at the Port of Newcastle. However, Mr Gay did not disclose the government’s decision to require NSC to make the government whole for any cost the government incurred to that leaseholder. Despite nearly 200 “Questions On Notice” in the parliament, details of the government’s instructions did not become known until the Port Commitment was published in July 2016.

There are more “Questions On Notice” to be answered about the operation of the “Commonwealth Competition and Consumer Act 2010” to the negotiations between NPC and NSC.

The Port Commitment proves there was no change in the government’s formal decision in 2009 of inviting the private sector to develop a new cargo terminal for containers and other cargo at the Port of Newcastle. When the government decided to lease the port, on November 5 2013, it was government policy, that “the lessee could develop a container terminal at the Port of Newcastle if it wished to do so”, as subsequently confirmed by The Hon Gladys Berejiklian MP, (former) Treasurer, on September 29 2015, (see attached).

The ACCC acknowledges that NPC was negotiating with NSC until November 2013, however, the ACCC refuses to acknowledge what these negotiations were about. The ACCC’s position is wholly untenable.

Does the ACCC deny Newcastle Port Corporation was negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?

Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW MPs; NSW Auditor-General; Media

May 9 2017

Attachment

LEGISLATIVE COUNCIL 17 OCTOBER 2013

 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.

 LEGISLATIVE COUNCIL – 10 August 2016 –

NEWCASTLE PORT PRIVATISATION

 The Hon. ADAM SEARLE ( 14:30 ): My question without notice is directed to the Minister for Roads, Maritime and Freight. Following the release of the confidential Newcastle port commitment documents revealing the details of caps and penalties applying to container movements, will the Minister now admit that his Government’s port privatisation will restrict Newcastle’s economic development for the next 100 years?

The Hon. DUNCAN GAY (Minister for Roads, Maritime and Freight, and Vice-President of the Executive Council) ( 14:30 ): Will I admit that the Government’s port privatisation will restrict Newcastle’s economic development for the next 100 years? No, absolutely not—never ever. We have done more for Newcastle than any other government has in the last several decades. Gone is the day when the Labor Party got the votes out of Newcastle but left it to become a rust belt. We are working to encourage and fix up Newcastle. As the Government has consistently said, the leasing terms of Botany and Port Kembla do not prohibit the development of a container terminal at the Port of Newcastle. In fact, there is ample opportunity for increased container trade at the port.

This is the important thing that the Labor Party does not understand. The port transaction deeds do not trigger any cross-payments until a threshold container throughput is reached. That threshold is based on 30,000 containers each year, plus an extra 6 per cent growth in volume each year—and that 6 per cent compounds. Based on current growth rates, it is highly unlikely current container trade in Newcastle will reach the applicable threshold before such time as Newcastle is required to establish high-intensity container terminals to meet the forecast population and business needs of the Hunter.

Yearly trade at Newcastle is currently at a steady 9,000 containers. In other words, it would take a massive 230 per cent increase in container trade volume just to reach the 30,000 TEU threshold. That is where it is now. It is at 9,000 and it can go to 30,000. That is a 230 per cent increase to get to that threshold—and that still does not take into account the compounding 6 per cent growth allowed for each year. Labor Party members have had their Cuisenaire rods out, but they have not been adding up properly.

The Hon. Greg Donnelly: What rods?

The Hon. DUNCAN GAY: Cuisenaire rods. It is what our grandfathers would have used to do arithmetic in days gone by. Applying the formula to the outer years gives the result that by 2030 the threshold at Newcastle will be approximately 80,000 boxes, by 2040 it will be 144,000 boxes, and by 2050 it will be almost 260,000 boxes. The Port of Newcastle will continue to be the primary coal export facility for New South Wales and will continue to diversify into bulk grain and other commodities, including fuel. The New South Wales Government engaged closely with the Australian Competition and Consumer Commission and other regulatory bodies as part of these transactions. Port Botany remains the key container facility for New South Wales for a range of logistical and commercial reasons. [Time expired.]

The Hon. ADAM SEARLE ( 14:34 ): I ask a supplementary question. Given his answer, can the Minister elucidate on why the port commitment documents have a container terminal cap in the first place?

The Hon. DUNCAN GAY (Minister for Roads, Maritime and Freight, and Vice-President of the Executive Council) ( 14:34 ): I really appreciate that supplementary question—it is good to work together—because I had not reached the key part of my answer. About 85 per cent of the imported containers landing at Port Botany are distributed within 40 or 50 kilometres of the terminal gates, to warehouses, distribution centres and freight hubs in western and south-western Sydney. This is key. We are not running a cargo cult in New South Wales. If the stuff is intended to go into Sydney, it should come to Sydney. We are not going to pay people to clog up the M1 and the rail infrastructure between Newcastle and Sydney. We are not going to pay them, as some sort of inverse cargo cult, to send things up to Newcastle just for them to come back again.

That is something the Labor Party did. People will remember when it decided that shipments of cars would go to Port Kembla rather than Sydney. I was the shadow Minister at the time and—as a diligent shadow Minister—I found that there was a parking lot on Glebe Island. Those black BMWs that were shipped down to Port Kembla were then put on a truck and brought back to Sydney, because that is where they were going to be sold—to those rich Labor supporters in the eastern suburbs. That was the wrong thing to do.

What we need to do is develop Newcastle, and there is huge scope for development in niche areas, so that it can provide for the Hunter region. It is a great port and it will be even better—and it will become even better because we are making sensible, grown-up decisions in this State. We are not running cargo cults as the Labor Party did.

Budget Estimates 2015

Supplementary Questions

September 29 2015

The Hon Gladys Berejiklian MP, Treasurer and Minister for Industrial Relations

Question 29: Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?

Answer: I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.

Mr Rod Sims
Chairman
ACCC

Dear Mr Sims,

I refer to NSW government container terminal policy in relation to the Port of Newcastle.

NSW government policy is to develop a container terminal at the Port of Newcastle at any time (as confirmed on September 29 2015), subject to: (a) the developer of a container terminal is a private company and not the government (decision taken in 2009); and, (b) the developer will “make the NSW government whole” for any cost the NSW government incurs in paying compensation to the private operator of Port Botany/Port Kembla, in respect of container capacity development at the Port of Newcastle (decision taken in 2012).

NSW government policy was confirmed by The Hon Gladys Berejiklian MP, then-NSW Treasurer, in answer to Budget Estimates Supplementary Questions 29 and 30, on September 29 2015:

Question 29-

Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?

Answer-

I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.

Question 30-

Has the NSW Government entered into any agreements that create a disincentive or obstacle to increase the number of containers that pass through Newcastle?

 Answer-

There is no legislated cap on the number of containers that can travel through the Port of Newcastle.

In 2012, the NSW government promised bidders for the Port Botany and Port Kembla leases that the successful bidder would be paid compensation in respect of future container capacity development at the Port of Newcastle. This promise was possible only because a developer of a container terminal at the Port of Newcastle would be required to provide the NSW government with the requisite funds. Without this source of funds, the NSW government did not have authority to promise compensation because the purpose of leasing the ports was for adding to NSW government funds.

In 2012, Newcastle Port Corporation (NPC) was negotiating with a private company, Newcastle Stevedores Consortium (NSC), to develop a container terminal at the Port of Newcastle, pursuant to a contract called  “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP). These contract negotiations started in 2010.

On August 30 2012 and July 26 2013, the NSW government instructed NSC not to develop a container terminal, but the ITSDP contract was not changed to incorporate the 2012 policy decision (the developer will “make the NSW government whole” for any cost the NSW government incurs in paying compensation to the private operator of Port Botany/Port Kembla, in respect of container capacity development at the Port of Newcastle) until sometime after July 26 2013. NPC’s failure to amend the ITSDP contract at the time the policy decision was taken was a potential breach of contract and also contravened the “NSW Public Private Partnerships Guidelines”, because NSC was not exempt from NSW government policy.

Might the ACCC have been informed by the government of the decisions of August 30 2012 and July 26 2013 and confused these decisions with government policy? If not, what is the basis of the ACCC’s claim that NSW government policy as from 2012 is not to develop a container terminal at the Port of Newcastle?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: The Hon Scott Morrison MP; The Hon Gladys Berejiklian MP; The Hon Dominic Perrottet MP; Mr Tim Crakanthorp MP; The Hon Adam Searle MLC; Senator Jenny McAllister; Ms Margaret Crawford, NSW Auditor-General

May 25 2017

 

 

Distribution: NSW MPs, Media

Australia’s competition watchdog claims the NSW government made a policy decision in 2012 not to develop a container terminal at the Port of Newcastle with the effect of removing container terminal policy in NSW from the operation of the “Commonwealth Competition and Consumer Act 2010” (CCA), which the ACCC administers.

 There was no such policy decision by the NSW government.

Formal NSW government policy since 2009 is to develop a container terminal at the Port of Newcastle on condition the developer is a private company. In 2012, this policy was expanded by requiring any such developer to pay the NSW government whatever it costs the NSW government for paying compensation to the operator of Port Botany and Port Kembla, in respect of future container capacity development at the Port of Newcastle.

In 2012, the NSW Treasury promised to pay compensation to bidders for long-term leases to Port Botany and Port Kembla, as an inducement. NSW Treasury was able to make this promise because of NSW government policy to recover any cost from the developer of a container terminal at the Port of Newcastle. Without this additional source of revenue in place, the NSW Treasury had no authority to make the promise to bidders.

The NSW government’s 2012 policy decision was confirmed by The Hon Gladys Berejiklian MP, then Treasurer, on September 29 2015.

NSW Budget Estimates, Supplementary Questions, September 29 2015

Question 29-

Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?

Answer-

I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.

Question 30-

Has the NSW Government entered into any agreements that create a disincentive or obstacle to increase the number of containers that pass through Newcastle?

 Answer-

There is no legislated cap on the number of containers that can travel through the Port of Newcastle.

In 2010, the NSW government, acting as Newcastle Port Corporation (NPC), invited Newcastle Stevedores Consortium (NSC) to be the developer of a container terminal at the Port of Newcastle. NPC’s “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) contained the NSW government’s requirements, in the form of a contract. The NSW Cabinet approved the ITSDP contract in compliance with the NSW government’s guidelines for conducting “Public Private Partnerships”.

The ITSDP contract was not amended in 2012 to include the 2012 policy decision (requiring the developer of a container terminal to pay the NSW government whatever it costs the NSW government for paying compensation to the operator of Port Botany and Port Kembla, in respect of future container capacity development at the Port of Newcastle).

Instead, on August 30 2012, the NSW Treasury instructed NSC not to develop a container terminal and repeated this instruction on July 26 2013. These instructions by NSW Treasury were contrary to NSW government policy.

Term Sheets had been agreed between NPC and NSC in 2010. These Term Sheets were expanded by NPC after July 26 2013 to include the NSW government’s 2012 policy decision. NSC was free to develop a container terminal until the ITSDP contract was terminated on November 1 2013.

If NPC was carrying on a business for the purposes of the CCA during the ITSDP contract negotiations with NSC, this means the 2012 policy decision potentially contravened the CCA. Only a Court can ultimately determine a contravention of the CCA.

The Minister responsible for the CCA is The Hon Scott Morrison MP, Commonwealth Treasurer.

Mr Morrison is being asked to answer this question, because the ACCC refuses to answer it: “Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?”

There is no doubt that a container terminal will be built at the Port of Newcastle if the NSW government’s charge is shown to be unlawful or unenforceable.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

May 27 2017

 

 

June 5 2017

Members of the NSW Parliament

Re: State’s financial risk of contravening the Competition Act

Dear Parliamentarians,

Evidence on the public record points to the NSW government contravening the “Commonwealth Competition and Consumer Act 2010” (CCA) by its decision in the first-half of 2012 to apply a charge on Newcastle Stevedores Consortium (NSC) during contract negotiations for developing a container terminal at the Port of Newcastle. NSC was charged so that the NSW government could recover its cost of paying compensation to a lessee of Port Botany/Port Kembla in respect of NSC developing a container terminal. This charge probably contravened the CCA, which ultimately can only be determined by a Court. Without having a source of funds for recovering the cost of paying compensation, the NSW government did not have the right in 2012 to offer compensation to the bidders for the Port Botany/Port Kembla leases.

However, the ACCC claims the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle, with the effect of removing the NSW government from the operation of the CCA in respect of container terminal policy in NSW. The ACCC’s claim is incorrect. It has been NSW government policy since 2009 to develop a container terminal at the Port of Newcastle.

The NSW government decided in 2009 to develop a container terminal at the Port of Newcastle provided the private sector, not the government, was the developer. Proof of this decision is a contract called “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP). This contract contains the NSW government’s terms and conditions for a private company to develop a container terminal. Acting as Newcastle Port Corporation, a statutory state-owned corporation, the NSW government invited proposals in 2009 pursuant to the ITSDP contract. NSC’s proposal was selected in 2010 and negotiations commenced.

The NSW government amended the ITSDP contract with NSC by charging NSC to recover the cost of paying compensation to the Port Botany/Port Kembla lessee. NPC terminated the ITSDP contract on November 1 2013.

The ITSDP contract was terminated without the lawfulness of the charge having been determined. The NSW parliament has a responsibility to investigate whether the charge was lawful. To start with, the NSW parliament is obliged to ask the ACCC to formally acknowledge the existence of the ITSDP contract, which the ACCC has not yet done.

If a Court determines the charge to have been unlawful, the government’s source of funds for paying compensation will be consolidated revenue. Throughput of 1 million TEU containers per year at the Port of Newcastle, will require $100 million per year in compensation payments until 2063. The NSW Parliament has a responsibility to investigate this significant financial risk.

Any future developer of a container terminal at the Port of Newcastle has the right to challenge the lawfulness of the NSW government’s charge for recovering the cost of paying compensation to the Port Botany/Port Kembla lessee. A container terminal will be developed if the developer is confident the charge is unlawful or unenforceable. By then, it will be too late for NSW taxpayers.

The NSW parliament has a responsibility to ask the ACCC whether it claims the Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract.

So far, the ACCC declines to declare its position.

Yours faithfully,

Greg Cameron

Copy: Mr R Sims, Chairman, ACCC; NSW Members of the Australian Parliament; Media

June 19 2017

Media

Re: Scene set for Newcastle container terminal announcement

Minister Pavey’s reported announcement (see below) about ditching the Maldon-Dombarton rail line is another indicator of an impending announcement about a container terminal at Newcastle.

A Newcastle container terminal with capacity for at least 1 million TEUs per year can service northern NSW using the Inland Rail Line. This enables the NSW government abandoning stages 2 and 3 of the Northern Sydney Freight Corridor, costing $5 billion.

But a Newcastle container terminal requires the NSW government dispensing with its charge for containers, which is preventing a terminal. This will require agreement with NSW Ports to waive its contractual right to receive compensation for losing business to Newcastle. Duplicating the rail freight line to Mascot would be an inducement. Committing to build the $1 billion Western Sydney Freight Line giving Port Botany access to the Inland Freight Line, would be a major inducement.

However, the question remains as to whether the charge for containers at Newcastle contravenes the “Commonwealth Competition and Consumer Act 2010” (CCA). This question must be sorted first.

A Newcastle container terminal would provide the cargo to pay for a rail freight bypass of Sydney to outcompete Port Botany. A rail freight bypass would remove all container trucks from Sydney’s roads while enabling 100 per cent of Sydney’s rail capacity being used for passengers. A bypass line would replace the need for NSFC stages 2 and 3 and the Western Sydney Freight Line. Total saving: $6 billion. The Port of Newcastle’s future is with containers, not coal.

But contrary to the ACCC’s claim, the CCA does enable competition in the privatised NSW container port market. At issue is the ACCC claiming the NSW government decided in 2012 not to develop a container terminal at Newcastle, with the effect of removing negotiations for developing a Newcastle terminal from the operation of the CCA. In fact, the NSW government’s pivotal 2012 decision was for a private company to develop a Newcastle container terminal subject to paying the government a special charge. This charge enables the government to recover its cost of paying compensation to Port Botany for container business lost to Newcastle. It was exposed by the “The Newcastle Herald” only in July 2016.

The NSW government was negotiating under contract with a private company between 2010 and November 2013 for a Newcastle container terminal. Once the ACCC accepts this as a fact, a Court may find the NSW government’s charge contravened the CCA. If the charge is invalidated, the NSW “Ports Assets (Authorised Transactions) Act 2012” prevents compensation payment to Port Botany being funded from government consolidated revenue. Consumers will benefit by the ACCC removing anti-competitive NSW ports leasing arrangements.

NSW needs an optimal freight strategy. A rail freight bypass of Sydney, fully funded by the private sector for railing containers for the Sydney and regional NSW markets using the Newcastle port, is a “no-brainer”.

Rejecting more sweetheart deals is another “no-brainer”.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

 

Lloyd’s List Australia

https://www.lloydslistaustralia.com.au/lla/market-sectors/ports/NSW-ports-need-rail-connections-557692.html

NSW ports need rail connections

Ian Ackerman – Sydney

Ian.Ackerman@informa.com.au @@lloydslistau More by Ian Ackerman

June 16 2017 – 16:04:04

RAIL connectivity to ports was a major issue discussed at Shipping Australia New South Wales Parliamentary Luncheon this week.

Minister for roads, maritime and freight Melinda Pavey was scheduled to speak at the function, but due to a scheduling conflict she was unable to attend and Port Authority of NSW CEO and director Grant Gilfillan was on hand to deliver her speech.

The minister said in her speech that it was critical that the rail line between Mascot and Port Botany was duplicated.

“A single track in and out of Australia’s second-largest container port is ineffective and its impact is felt in Dubbo and beyond,” she said in her speech (as read by Mr Gilfillan).

“Unless addressed, this 3km single line section will act as a constraint in meeting the forecast growth in containerised rail.

“[The rail duplication] will help shift more freight, principally cargo containers from road to rail, easing pressure on the M5 corridor.”

Continuing, Ms Pavey’s speech turned south to Port Kembla’s rail connections, and an infamous half built railway line made an appearance.

“Another infrastructure project that is often talked about is the Maldon – Dombarton line the NSW government agrees with the Infrastructure Australia assessment that the line is not needed in the short term,” she said in her speech (again, read by Mr Gilfillan).

“However, we know this line will be critical to expanding port capacity in Port Kembla in the medium to long term.”

Mr Gilfillan then stepped in with a comment of his own, saying the message from the minister was quite clear.

“It’s not that it won’t be built, it’s a question of when it will be built,” he said.

“The most logical way to determine the time that should happen is to have NSW Ports, who run the ports in Botany and Port Kembla, to use their own planning processes to guide government as to when that rail line will be needed.”

Mr Gilfillan went on to say the railway line was a “no-brainer”.

“Sooner or later, that connection to south west Sydney is going to be needed and it will do a huge amount to take truck traffic away from lines or roads that run straight through the middle of suburban Sydney,” he said.

 

June 22 2017
Members of Parliament
Subject: Lawfulness of ports leases

The ACCC claims the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. According to the ACCC, this alleged decision placed container terminal policy in NSW outside the operation of the “Commonwealth Competition and Consumer Act 2010” (CCA).

The ACCC is incorrect, because it was impossible for the NSW government to take a policy decision in 2012 not to develop a container terminal at the Port of Newcastle.

In 2012, the NSW government decided to pay compensation to the future lessee of Port Botany/Port Kembla (PB/PK) for losing container business to the Port of Newcastle. Paying this compensation was permitted under Section 30 of the “Ports Assets (Authorised Transactions) Act 2012” (PAA).

The PB/PK lessee is compensated when container movements at Newcastle exceed a “cap on numbers”. A “cap on numbers” was disclosed to the NSW Parliament on October 17 2013 by The Hon Duncan Gay MLC, (former) Minister for Roads and Ports. “Cap on numbers” means the number of container movements at the Port of Newcastle for which there is no compensation payable to the PB/PK lessee. The NSW government decided in 2012 not to extend this “cap on numbers” before container capacity was reached at PB/PK.

Paying compensation to the PB/PK lessee using consolidated revenue was not authorised by the PAA. It defeated the purpose of leasing PB/PK, which was to release funds. For this reason, the NSW government decided in 2012 to charge the developer of container capacity at Newcastle, after the developer exceeded the “cap on numbers”. The subsequent decision to lease the Port of Newcastle includes the NSW government’s charge for exceeding the “cap on numbers”, if the lessee exercises their contractual right to develop a container terminal.

In 2009, the NSW government decided to invite a private developer to develop a new cargo terminal at the Port of Newcastle. Acting as Newcastle Port Corporation (NPC), the NSW government issued an “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) contract, selecting Newcastle Stevedores Consortium (NSC) in 2010 as “preferred developer”.

A condition of this ITSDP contract was that the cargo terminal included a container terminal with minimum capacity for 1 million TEUs per year. In December 2010, Term Sheets were agreed between NPC and NSC pursuant to this ITSDP contract.

In August 2012, the NSW government changed these Term Sheets by requiring NSC not to develop the container terminal component. In August 2013, the NSW government again changed the Term Sheets by requiring NSC to pay the NSW government’s charge in respect of developing additional container capacity, above the “cap on numbers”, which allowed for developing a container terminal.

The NSW government’s decisions in 2012 were not disclosed to the NSW Parliament. However, the NSW government claimed on June 15 2017 its decisions were disclosed to the ACCC. There should be no secret about the date on which this disclosure occurred.

Failing to disclose these decisions to the Parliament, obviously, prevented them from being debated when the PAA was before the Parliament in 2012. Regardless, the proper place to discuss them now remains the NSW Parliament. But the NSW government is unwilling to disclose its reason for charging the developer of a Newcastle container terminal for exceeding the “cap on numbers”, as conclusively demonstrated by the extensive record of Parliamentary “Questions On Notice”.

Negotiations between the NSW government and NSC were confidential. The ACCC was given some information by the NSW government but the NSW Parliament received none. The ACCC declines to reveal the information it received. It is unfortunate if the ACCC acts on unverified information as appears to be the case

However, the ACCC does even not acknowledge the ITSDP contract. This disqualifies the ACCC from taking decisions in respect of negotiations conducted pursuant to the ITSDP contract.

The ACCC claims the NSW government could not have contravened the CCA in respect of its negotiations with NSC because no agreement was concluded. This claim is of no consequence because the NSW government was required to observe Commonwealth laws while conducting negotiations pursuant to the ITSDP contract.

In 2012, the NSW government’s decision to charge the developer of container capacity at the Port of Newcastle was a prima facie contravention of the CCA. The decision had the effect of substantially lessening competition between NSW ports in the NSW container port market.

If the CCA was contravened by this decision, it left the government without a source of funds for paying compensation to the lessee of PB/PK, other than consolidated revenue. This in turn would be a prima facie contravention of the PAA.

As disclosed by Mr Gay on October 17 2013, no provision is being made in NSW state budgets for paying compensation because the government considers compensation will not become payable. On August 22 2014, the NSW Treasury told a NSW Budget Estimates Committee: “Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption. As the container port did not proceed, there is no decision to review.”

These Treasury claims are incorrect. By charging NSC, the NSW government’s objective was to make a container terminal commercially unviable. The other claims were rejected by NSC.

A Newcastle container terminal will take business away from Port Botany initially by servicing the northern NSW market.

Servicing northern NSW from Port Botany is irrational.

The ACCC has been asked to answer the following question.

Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?

The ACCC declines to answer.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Distribution: NSW MPs; ACCC; Media; Port of Newcastle Investments; NSW Ports

 

 

 

 

 

 

 

July 4 2017

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

Is the ACCC aware that in 2010 Newcastle Port Corporation and Newcastle Stevedores Consortium signed a contract entitled “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP)? If the ACCC is unaware of this contract, it contained Newcastle Port Corporation’s terms and conditions for leasing its “Mayfield Site” to Newcastle Stevedores Consortium.

As revealed by the NSW “Independent Commission Against Corruption” in August 2016, Newcastle Port Corporation was required by the NSW government to comply with the NSW government’s “Working With Government Guidelines” in respect of its negotiations with Newcastle Stevedores Consortium. These Guidelines required Newcastle Port Corporation to obtain NSW government approval prior to amending its ITSDP contract.

Newcastle Port Corporation terminated its ITSDP contract in November 2013.

May I ask:

(1) Is the ACCC aware that in the period to November 2013, Newcastle Port Corporation amended its ITSDP contract by requiring Newcastle Stevedores Consortium to comply with the “Port Commitment – Port Botany and Port Kembla”, as published by “The Newcastle Herald” on July 28 2016?

(2) Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to its ITSDP contract?

(3) Did NSW government officials provide the ACCC with information about Newcastle Port Corporation’s negotiations with Newcastle Stevedores Consortium?

(4) If yes, did the ACCC verify that information with Newcastle Stevedores Consortium?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Tim Crakanthorp MP; The Hon Adam Searle MLC; The Hon Melinda Pavey MP; The Hon Jodi McKay MP; Dr The Hon Mehreen Faruqi MLC; The Hon Scott Morrison MP; The Hon Chris Bowen MP; The Hon Dominic Perrottet MP; The Hon Michael Daley MP; The Hon Angus Taylor MP; The Hon Anthony Albanese MP; Senator Jenny McAllister; The Newcastle Herald

 

 

Reply from Mr Rod Sims, July 4 2017

 

July 7 2017

Media

 Moorebank madness

Severe road congestion is most of the time at Moorebank, where containers will be railed between a new intermodal terminal and Port Botany. There is traffic gridlock in peak periods. It will cost several billions of dollars to upgrade the local road network. But according to Deloitte Access Economics, intermodal traffic “would only contribute a relatively small increase to this overall demand”. In other words, a major intermodal terminal is being built when the local road network cannot cope. It is planning madness when a transport project is unsupported by local transport infrastructure.

Seventy-three per cent of all project benefits of the Moorebank intermodal terminal, now under construction, are attributable to railing containers in replacement of trucks. A further 17 per cent is attributable to interstate rail, but these benefits decline after 2030 due to Sydney’s insufficient rail capacity.

The economic study by Deloitte Access Economics proves that railing 100 per cent of containers using the Port of Newcastle will generate four times more economic benefits than Port Botany, leaving ample flexibility for project financing.

Key additional benefits of a privately-funded rail freight bypass of Sydney, between Newcastle’s port and Glenfield, in south western Sydney, include:

1. Using all of Sydney’s current rail freight capacity for passengers, thereby conferring a significant economic benefit by reducing growth in road transport demand.

 

2. Replacing the need for building stages 2 and 3 of the Northern Sydney Freight Corridor, saving $5 billion.

 

3. Using current rail freight capacity between Newcastle and Sydney for passengers.

 

4. Replacing the need for building the Western Sydney Freight Line, saving $1 billion.

 

5. Providing direct rail access to a container port at Newcastle to northern and southern NSW, providing a massive boost for regional economic development and decentralisation.

The financial interests of the lessees of Port Botany/Port Kembla and Port of Newcastle can be enhanced by smart allocation of costs and benefits from building the rail freight bypass. This initiative will transform the NSW economy.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Source: Deloitte Access Economics, “Moorebank Intermodal Terminal Project – Economic Evaluation Final Report – Moorebank Intermodal Company Limited”, April 12 2017

https://static1.squarespace.com/static/57721a5af7e0ab564bcfc84d/t/591e38f3cd0f68922ecf6b4d/1495152912466/MIT+Economic+Evaluation+Final+120417+Final+Updated.pdf

Page 16

“No cost allowances have been made for any potential upgrades to the broader supply chain transport network. The main justification for this is that the broader network already experiences congestion during peak periods and the addition of additional Moorebank heavy vehicle traffic would only contribute a relatively small increase to this overall demand. Any upgrades to the broader transport network would need to be considered in the light of more general traffic issues, and not purely based on commercial vehicle traffic, and more specifically Moorebank project impacts.”

Page 8

“Nearly 73% of all project benefits are attributable to the IMEX terminal. This is because of the significant travel time savings and service quality improvements that IMEX users will enjoy when the MIT IMEX terminal is operational. Nearly 17% of benefits are in turn attributable to interstate freight, with the remainder made up of producer surplus, avoided road damage costs and the residual values of assets.

 

“Cost savings for interstate cargos increase to begin with as trains utilise the terminal, but gradually decline after 2030 due to rail network capacity constraints on the SSFL.”

 

July 9 2017

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

I refer to the ACCC’s refusal to acknowledge the existence of a contract between Newcastle Port Corporation (NPC) and Newcastle Stevedores Consortium (NSC) from 2010 to November 2013. The ACCC could not have investigated negotiations that took place between NPC and NSC over this period without reference to the contract governing these negotiations. Therefore, the ACCC’s advice in respect of its investigations is of no consequence.

NPC issued its “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) in 2009, selecting NSC’s proposal in 2010. This ITSDP was a legally binding contract between NPC and NSC which set out NPC’s requirements for leasing the Mayfield Site to NSC. NPC’s main requirement was for NSC to develop a new cargo terminal, which included a container terminal with minimum capacity for 1 million TEUs per year.

NPC amended its requirements on several occasions, as it was able to do under the ITSDP contract. In the period to November 2013, NPC required NSC to comply with the “Port Commitment – Port Botany and Port Kembla” (Port Commitment). This Port Commitment set out the conditions by which NSC was to be charged when the NSW government paid compensation to NSW Ports, the lessee of Port Botany/Port Kembla, in respect of a container terminal developed by NSC at the Port of Newcastle.

The ACCC claims that NSC was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (CCA) by negotiating with NSC. The ACCC also claims that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. Both of these claims are disproven by NPC amending the ITSDP contract by requiring NSC to comply with the Port Commitment.

The ACCC also claims that NPC could not have contravened the CCA because no contract was made with NSC to lease the Mayfield site. This claim is disproven by NSC amending the ITSDP contract to require NSC to comply with the Port Commitment. NPC’s requirement for NSC to comply with the Port Commitment is prima facie evidence of a breach of the CCA. Under these circumstances, a contract could never have been approved by the NSW Cabinet, as required by the NSW Public Private Partnership’s Guidelines, 2012.

It may assist the ACCC to consider the responses provided by The Hon Dominic Perrottet MP, NSW Treasurer, to Question On Notice 5764 asked by Mr Tim Crakanthorp MP, Member for Newcastle. Answers were provided on June 29 2017.

Mr Perrottet’s answers should be viewed in the context of answers to previous questions by The Hon Gladys Berejiklian MP, in her (former) capacity as NSW Treasurer. At the NSW Budget Estimates hearing on September 1 2016 , Ms Berejiklian was queried about answers given to previous questions about the NSW government’s “cap on numbers” at the Port of Newcastle. Ms Berejiklian responded to questions about the “cap on numbers” at the Budget Estimates hearing on September 3 2015 and, in response to supplementary questions on September 29 2015.

“Cap on numbers” was a term employed by The Hon Duncan Gay MLC, (former) Minister for Roads and Ports, on October 17 2013 to describe the number of container movements at the Port of Newcastle for which no compensation is payable by the NSW government to the lessee of Port Botany/Port Kembla. When the “cap on numbers” is exceeded, the NSW government charges the operator of a container terminal at the Port of Newcastle to recover the cost of paying compensation to NSW Ports.

The charge makes it uneconomic to develop a container terminal at Newcastle, however, Ms Berejiklian considers there is no impediment to developing a container terminal.

Until August 10 2016, the NSW government denied charging any container terminal operator at the Port of Newcastle for exceeding the government’s “cap on numbers”.

Mr Crakanthorp’s QON 5764 contained six questions.

1. Did the government decide in 2009 to develop a container terminal at the Port of Newcastle?

A: This government was not in office in 2009.

Comment: The current government proceeded to implement its predecessor’s decision to develop a container terminal at the Port of Newcastle, until NPC terminated the ITSDP contract in November 2013.

The NSW “Independent Commission Against Corruption” revealed in August 2016 (“Operation Spicer Report”) that the NSW government required NPC in 2009 to comply with the NSW government’s “Working With Government Guidelines” for conducting “public private partnerships” (PPP) in respect of its plans for developing a new cargo terminal at the Port of Newcastle. The ICAC disclosed that Term Sheets were agreed in December 2010 between NPC and NSC. These Term Sheets, agreed pursuant to the Cabinet-approved ITSDP contract, are further proof of the NSW government’s decision in 2009 to develop a container terminal at the Port of Newcastle. NPC added the requirement to comply with the Port Commitment to these Term Sheets in the period to November 2013. Under the PPP guidelines, NPC was required to obtain formal Cabinet approval to amend the ITSDP contract.

2. Was a decision made in 2012 to require any future operator of a container terminal at the Port of Newcastle to make the government whole for any cost the government incurred from paying the operator of Port Botany in respect of future container capacity development at the Port of Newcastle?

A: No.

Comment: In December 2011, the NSW government engaged Morgan Stanley to conduct a scoping study into leasing Port Botany. As confirmed by The Hon Duncan Gay on October 17 2013, the government instructed Morgan Stanley to include a “cap on numbers” at the Port of Newcastle.

The NSW government concealed the “cap on numbers” from the parliament when passing the “Ports Assets (Authorised Transactions) Act 2012” in late 2012. This information was concealed because the government’s source of funds for paying compensation was consolidated revenue. Using consolidated revenue to fund compensation is prima facie evidence of a breach of the Act.

3. Was Newcastle Stevedores Consortium required in 2013 to make the government whole for any cost the government incurred from paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

A: Newcastle Ports [sic] Corporation did not conclude a contract to build a container terminal with Newcastle Stevedores Consortium in 2013.

Comment: NPC was negotiating with NSC in the period to November 2013 to build a container terminal at the Port of Newcastle. NPC’s requirement for NSC to comply with the Port Commitment is prima facie evidence of a breach of the CCA. The NSW government’s PPP guidelines required NPC to obtain Cabinet approval to amend the ITSDP contract’s terms and conditions. Under these circumstances, Cabinet could not have approved a contract.

In March 2012, the NSW government approved NPC’s planning application for development of a container terminal with capacity of 1 million TEUs per year. In April 2013, the NSW government contractually committed to pay NSW Ports when container movements at the Port of Newcastle exceeded the “cap on numbers”.

The Port Commitment allowed NSC to develop a container terminal providing payment was made for exceeding the “cap on numbers”. NSC was able to develop a container terminal with capacity of 1 million TEUs per year in accordance with NPC’s March 2012 planning approval.

4. Was a decision made in 2013 to require any future lessee of the Port of Newcastle to make the government whole for any cost the government incurred from paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

A: Any decision regarding NSW ports is consistent with the government’s policy that Port Kembla will be the State’s next major container terminal after Port Botany has reached capacity.

Comment: The answer to the question is “yes” as confirmed by The Hon Duncan Gay on August 10 2016. As confirmed by the NSW government on multiple occasions, including by Ms Berejiklian on September 29 2015, a container terminal may be developed at the Port of Newcastle at any time without reference to Port Botany or Port Kembla.

Mr Perrottet’s answer refers to the state’s next “major” container terminal. This answer reflects the Port Commitment, which permits development of a container terminal at the Port of Newcastle with capacity in excess of the “cap on numbers” in line with planning approval for a 1 million TEUs per year-capacity container terminal.

5. Was the lessee of the Port of Newcastle required in 2014 to make the government whole for any cost the government incurred from paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

A: No compensation payments to NSW Ports were incurred in 2014.

Comment: The answer to this question is “yes” as confirmed by The Hon Duncan Gay on August 10 2016. No compensation is payable unless and until the “cap on numbers” is exceeded. Under the Port Commitment, the “cap on numbers” is 30,000 containers per year as from July 1 2013, increasing by six per cent per year until 2063. The term “container” means “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”. The “cap on numbers”, obviously, is exceeded every year, but only TEU containers are counted.

6. Did the government inform the Australian Competition and Consumer Commission in 2012 that the government decided not to develop a container terminal at the Port of Newcastle?

A: The government’s transaction team engaged extensively with the Australian Competition and Consumer Commission regarding the competition and regulatory framework supporting the port transactions.

Comment: According to the ACCC, the government’s decision to develop a container terminal at Port Kembla after Port Botany reaches capacity is evidence of a decision not to develop a container terminal at the Port of Newcastle. This claim is incorrect. Mr Perrottet’s answer is consistent with government policy that a container terminal may be developed at the Port of Newcastle, at any time, without reference to Port Botany or Port Kembla.

Will the ACCC please acknowledge the ITSDP contract between NPC and NSC between 2010 and November 2013?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW MPs; Media

 

July 13 2017

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Re: ACCC fails to act in the public interest

Dear Mr Morrison,

I refer to the ACCC’s claim that Newcastle Port Corporation (NPC) was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (CCA) by negotiating with Newcastle Stevedores Consortium (NSC) between 2010 and November 2013, to lease land known as the “Mayfield Site” at the Port of Newcastle, for developing a new cargo terminal.

By refusing to provide evidence in support of this claim, the ACCC is not serving the public interest. The ACCC refuses to acknowledge that NPC and NSC were negotiating under contract. NPC contractually requiring NSC to comply with the “Port Commitment – Port Botany and Port Kembla” (Port Commitment) is prima facie evidence that NPC contravened the CCA.

NSW government officials supplied the ACCC with information about the negotiations between NPC and NSC on the basis that the ACCC would keep that information confidential. The ACCC failed to act impartially if it did not refer such commercial-in-confidence information to NSC.

As you may be aware, NPC issued its “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) contract to a number of companies in 2009, selecting a proposal from NSC in 2010. This contract contained NPC’s terms and conditions for leasing the “Mayfield Site”. NPC’s objective was to expand its commercial operations by adding container shipping. NPC’s requirement was for NSC to develop a new cargo terminal, which included a container terminal with minimum capacity for 1 million TEUs per year.

As disclosed by the “NSW Independent Commission Against Corruption” in August 2016, NPC reached agreement with NSC in December 2010 in respect of “Term Sheets”. State Cabinet approval for this agreement was withheld pending the outcome of community consultation in relation to NPC’s development application for the “Mayfield Site”. This development application was approved by the NSW government in March 2012.

In the first-half of 2012, the NSW government decided to pay compensation to a future lessee of Port Botany/Port Kembla in respect of future container capacity development at the Port of Newcastle. The amount of compensation payable was the amount charged for a TEU container at Port Botany multiplied by the number of container movements at the Port of Newcastle in excess of the NSW government’s “cap on numbers”.

“Cap on numbers” means the number of container movements at the Port of Newcastle for which compensation is not payable to the lessee of Port Botany/Port Kembla. The “cap on numbers” is 30,000 containers per year as from July 1 2013, increasing by six per cent per year until 2063. The term “container” means “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”. The “cap on numbers”, obviously, is exceeded every year, but only TEU containers are counted.

The NSW parliament was not informed about the NSW government’s decision to pay compensation to the Port Botany/Port Kembla lessee when the parliament passed the “Ports Assets (Authorised Transactions) Act 2012” in the final months of 2012. The object of this Act was to enable Port Botany/Port Kembla to be leased for the purpose of raising revenue for investment in public infrastructure. The NSW government’s source of funds for paying compensation was consolidated revenue. The NSW government does not set aside funds for paying compensation because of its view that the “cap on numbers” at the Port of Newcastle will not be exceeded.

The “cap on numbers” was not legislated. The NSW government denies making a decision in 2012 to recover the cost of paying compensation by charging the operator of a container terminal at the Port of Newcastle. The NSW government’s decision to use consolidated revenue for paying compensation is prima facie evidence of a breach of the “Ports Assets (Authorised Transactions) Act 2012”.

Port Botany/Port Kembla were leased to NSW Ports in April 2013. The NSW government decided that NPC would charge NSC to recover any compensation cost the NSW government incurred to NSW Ports in the event of NSC developing a container terminal. Accordingly, NPC amended the “Term Sheets” with NSC by requiring NSC to comply with the Port Commitment. NSC’s options were to comply with this requirement or to withdraw its proposal. NSC did not withdraw its proposal.

The ACCC points out that NPC terminated negotiations with NSC in November 2013 without concluding an agreement. NPC, obviously, could not conclude an agreement with NSC which contained a breach of the CCA. NPC contractually requiring NSC to comply with the Port Commitment is prima facie evidence of a breach of the CCA.

In the public interest, will you satisfy yourself that the ITSDP contract between NPC and NSC was signed in 2010; that this contract was terminated by NPC in November 2013; and, will you ascertain the reason why NPC terminated the ITSDP contract?

In the event that the ACCC does not provide you with this information, it may, obviously, be furnished by The Hon Dominic Perrottet MP, Treasurer of NSW.

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, Chairman ACCC; The Hon Dominic Perrottet MP; NSW MPs; Media

 

July 20 2017

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Re: ACCC’s incorrect claims re Port of Newcastle

Dear Mr Morrison,

Further to my email dated July 13 2017, may I respectfully point out that the ACCC makes two incorrect claims about the Port of Newcastle, which prevent the “Commonwealth Competition and Consumer Act 2010” (CCA) from being enforced?

First, the ACCC claims that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. Second, the ACCC claims “it was unlikely that the NSW government was carrying on a business [for the purposes of the CCA] when it decided not to develop a container terminal at the Port of Newcastle”. The ACCC made these claims to me on June 7 2013 and February 23 2017.

The public record disproves both claims. It is likely that Newcastle Port Corporation (NPC) breached the CCA by contractually requiring Newcastle Stevedores Consortium (NSC) in 2013 to comply with the “Port Commitment – Port Botany and Port Kembla” (Port Commitment). To be clear, this is the Port Commitment published by “The Newcastle Herald” on July 28 2016, as authenticated by the NSW government on August 10 2016 and September 13 2016.

The NSW government did not make a decision in 2012 not to develop a container terminal at the Port of Newcastle. The decision the NSW government made in 2012 was that Port Kembla will be the state’s next major container terminal after Port Botany has reached capacity. NSW government policy that a container terminal may be developed at the Port of Newcastle is confirmed in the NSW Parliamentary Hansard. NPC’s “Concept Plan” for a new cargo terminal, which includes a container terminal, was approved by the NSW Minister for Planning and Infrastructure on July 16 2012. This “Concept Plan” remains NSW government policy.

The ACCC’s second claim is disproven by the fact that NPC was negotiating under contract with NSC from 2010 until November 2013 to develop a cargo terminal including a container terminal. There can be no doubt that NPC was carrying on a business for the purposes of the CCA in 2009, when it issued an “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) to a number of private companies. This ITSDP set out NPC’s terms and conditions for leasing the Mayfield Site at the Port of Newcastle. NPC’s primary requirement was development of a new cargo terminal, which included a container terminal. NPC was obliged to comply with the NSW government’s guidelines for conducting “Public Private Partnerships” in respect of these contractual negotiations (Source: NSW Independent Commission Against Corruption, “Investigation into NSW Liberal Party electoral funding for the 2011 State election campaign and other matters”, August 30 2016, page 48).

NPC selected the proposal from NSC in 2010. Term Sheets were agreed. In February 2011, the NSW Treasurer withheld approval to proceed to contract until the outcome of the community consultation for the “Concept Plan” had been considered by Cabinet (Source: ICAC, page 51). When the “Concept Plan” was approved on July 16 2012, the NSW government met the conditions for allowing NPC to proceed to contract with NSC.

In early 2012, the NSW government decided to pay compensation to a future lessee of Port Botany/Port Kembla if a container terminal operator at the Port of Newcastle exceeded a designated number of container movements per year, for 50 years. In late 2012, the NSW parliament passed the “Ports Assets (Authorised Transactions) Act 2012” (the Act). The purpose of the Act was to raise revenue. However, in 2012, the NSW government’s source of funds for paying compensation was consolidated revenue, which likely breached the Act.

To remedy this likely breach of the Act, the NSW government, in 2013, instructed NPC to require NSC to comply with the Port Commitment. NPC duly amended the contract with NSC by adding the Port Commitment to the Term Sheets. The Port Commitment required NSC to pay the NSW government for exceeding the prescribed number of container movements per year.

The Port Commitment provided the lessee of Port Botany/Port Kembla with compensation until June 30 2063 in respect of any container terminal developed at the Port of Newcastle, while replacing consolidated revenue as the source of funds for paying any compensation.

The NSW government announced its decision to lease the Port of Newcastle in November 2013 when NPC terminated the contract with NSC.

NSC did not withdraw its proposal.

The ACCC states that it “had access to relevant information about the prior negotiations between NPC and NSC, which ultimately did not proceed”. This statement is not credible because the ACCC does not acknowledge that NPC was negotiating under contract with NSC from 2010 until November 2013 to develop a cargo terminal including a container terminal.

Accordingly, will you ask the ACCC to acknowledge that NPC was negotiating under contract with NSC from 2010 to November 2013 to develop a cargo terminal including a container terminal?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, Chairman, ACCC; NSW MPs; Media

 

 

 

July 30 2017

Media and MPS

ACCC ignores likely breach of Competition Act

The ACCC is ignoring a likely breach of the “Commonwealth Competition and Consumer Act 2010” (CCA) by Newcastle Port Corporation (NPC), a statutory state-owned corporation.

NPC likely breached the CCA in 2013 by contractually requiring Newcastle Stevedores Consortium (NSC), a private company, to comply with the NSW government’s “Port Commitment – Port Botany and Port Kembla” (Port Commitment). This confidential Port Commitment was published by “The Newcastle Herald” only on July 28 2016.

The Port Commitment required NSC to pay the NSW government a fee for developing a container terminal and exceeding a small number of container movements per year. The NSW government leased the Port of Newcastle in April 2014 so that a fee could be charged for container movements outside the operation of the CCA.

In 2012, the NSW government likely breached the “Ports Assets (Authorised Transactions) Act 2012” by using consolidated revenue as its source of funds for paying compensation to a future lessee of Port Botany/Port Kembla in respect of a container terminal at the Port of Newcastle. NPC terminated its contract with NSC in November 2013 after NSC did not withdraw its proposal. Timely action by the ACCC to determine the likelihood of NPC breaching the CCA would have prevented the NSW government from leasing the Port of Newcastle for the purpose of acting outside the operation of the CCA.

Possibly no port would have been leased had the NSW government disclosed its intentions in 2012. The NSW government concealed its decision to pay compensation to the lessee of Port Botany/Port Kembla until The Hon Adam Searle MLC asked this Question Without Notice on October 17 2013:

“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?”

Mr Searle “belled the cat” because NPC terminated its contract with NSC within weeks of his asking the question.

Shortly after the Port Commitment was published, Mr Searle asked Mr Gay on August 10 2016:

The Hon. ADAM SEARLE:  My question without notice is directed to the Minister for Roads, Maritime and Freight. Following the release of the confidential Newcastle port commitment documents revealing the details of caps and penalties applying to container movements, will the Minister now admit that his Government’s port privatisation will restrict Newcastle’s economic development for the next 100 years?

In his answer, Mr Gay confirmed the compensation payment arrangements. The NSW government had previously refused to provide details of these arrangements despite nearly 200 Questions On Notice in the NSW Parliament since October 2013.

NPC had been negotiating under contract with NSC since 2010 to lease NSC part of the former Newcastle steelworks site at the Port of Newcastle, known as the “Mayfield Site”. NPC’s objectives for the “Mayfield site” formed part of the contract. One of NPC’s objectives was “a best practice container operation capable of handling in excess of 1 million TEU per annum”.

The ACCC claimed to me on June 7 2013 that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. According to the ACCC, this alleged decision meant it was unlikely that NPC was carrying on a business for the purposes of the CCA in 2012.

The Port Commitment proves the ACCC’s claim is wrong.

NPC was likely carrying on a business for the purposes of the CCA by signing a contract with NSC in 2010 and negotiating with NSC under this contract until November 2013. NPC’s comprehensive objectives (see below) were contained in its “Invitation To Submit Detailed Proposal, Mayfield Site” contract with NSC. These objectives did not change while negotiations were being conducted.

The ACCC does not acknowledge that NPC and NSC were negotiating under contract.

On July 16 2012, the NSW Minister for Planning and Infrastructure approved NPC’s “Concept Plan” for the “Mayfield Site” under Section 750 of the “Environmental Planning and Assessment Act 1979”. This “Concept Plan” included a container terminal. In 2013, NPC’s contract with NSC required the development of a container terminal in compliance with the Port Commitment subject to the “Concept Plan” approval conditions.

It was NSW government policy between 2010 and November 2013 to develop a container terminal at the Port of Newcastle subject to NPC’s contractual negotiations with NSC. After the Port of Newcastle was leased in April 2014, it remained NSW government policy to develop a container terminal, subject to the lessee paying a fee for container movements and complying with the “Concept Plan” approval conditions. When The Hon Gladys Berejiklian MP was Treasurer, she said, on September 29 2015: “I am advised the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.”

The ACCC investigated the negotiations between NPC and NSC using “relevant information” supplied by the NSW government under confidentiality agreement. The ACCC does not disclose whether this confidential information included the contract between NPC and NSC; Term Sheets that had been agreed between NPC and NSC in 2010; and, the Port Commitment. NPC contractually required NSC in 2013 to comply with the agreed Term Sheets plus the Port Commitment.

Despite the ACCC ignoring a likely breach of the CCA, the questionable lawfulness of the ports’ leasing arrangements remains.

NPC’s objectives for the “”Mayfield Site”, were:

(a) have cargo handling terminal activity for containers and other cargo which may include bulk, break bulk, roll on roll off, etc., consistent with the characteristics, assets and capabilities of the Site;

(b) include a best practice container operation capable of handling in excess of 1 million TEU per annum;

(c) select a Proponent that is committed and has the capacity, resources and expertise to successfully deliver and grow their development proposal;

(d) increase the proportion of northern NSW trade for NSW ports;

(e) generate employment opportunities in the Hunter region;

(f) provide environmental, safety and community amenity benefits through reduced road traffic congestion in Sydney, thereby reducing greenhouse gas, vehicle emissions and noise;

(g) optimise public value for money by maximising land use intensity and engaging the private sector in the development of the State’s port and transport infrastructure for handling container and general cargo trades;

(h) ensure investment and development is delivered in a timely manner;

(i) recognise relationships between parties who may use the existing facilities and access points to and from the Site; and

(j) secure an appropriate commercial return to Newcastle Port Corporation.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

August 8 2017

Media

Ports leases breached Act

The NSW “Ports Assets (Authorised Transactions) Act 2012” (the Act) does not authorise the NSW government to pay NSW Ports for container movements at the Port of Newcastle. Consequently, the leasing arrangements for Port Botany and Port Kembla breach the Act.

Before the Port of Newcastle was leased in April 2014, the government was committed to using consolidated revenue for paying NSW Ports for container movements at the Port of Newcastle. The Act does not authorise the use of consolidated revenue for this purpose. Consequently, the Port of Newcastle was leased for the purpose of providing the government with a source of funds, other than consolidated revenue, with which to pay NSW Ports for container movements at the Port of Newcastle.

Before the Port of Newcastle was leased, the government required Newcastle Stevedores Consortium (NSC), a private company, to pay the government for any cost the government incurred to NSW Ports for container (TEU) movements by NSC. The government, acting as Newcastle Port Corporation (NPC), a statutory state-owned corporation, was negotiating with NSC between 2010 and November 2013 to lease land known as the “Mayfield Site” at the Port of Newcastle.

In 2009, the government, under an ALP administration, approved NPC developing a new cargo terminal, including a container terminal, on the “Mayfield Site”. In 2010, NPC sought formal planning approval from the Labor government for its “Concept Plan”. On July 16 2012, the Minister for Planning and Infrastructure, under a Coalition government, approved NPC’s “Concept Plan” under Section 750 of the “Environmental Planning and Assessment Act 1979”. The approved “Concept Plan” is Coalition government policy as well as Labor policy.

Government policy that Port Kembla will be the State’s next major container terminal after Port Botany has reached capacity is consistent with government policy that a container terminal may be developed at the Port of Newcastle in accordance with the approved “Concept Plan”.

The ACCC claims the government decided in 2012 not to develop a container terminal at the Port of Newcastle. This claim is incorrect. If it is government policy not to develop a container terminal at the Port of Newcastle, the government’s source of funds for paying NSW Ports for container movements at the Port of Newcastle would be consolidated revenue, which is not authorised by the Act.

The ACCC also claims it was unlikely the government was carrying on a business for the purposes of the CCA in 2012. This claim is incorrect. Presumably, the ACCC accepts it was likely NPC was carrying on a business for the purposes of the CCA in 2010 when NPC entered into a contract with NSC for negotiating to lease the “Mayfield Site” to NSC. The ACCC does not provide evidence of any event in 2012 which changed NPC’s legal status in relation to NPC’s negotiations with NSC.

NPC contractually required NSC to comply with the “Port Commitment – Port Botany and Port Kembla” in 2013. The Port Commitment made NSC the government’s source of funds for paying NSW Ports for container movements by NSC. When NSC did not withdraw its proposal, NPC terminated negotiations with NSC in November 2013 because NPC was likely carrying on a business for the purposes of the CCA.

Under the “NSW Public Private Partnership Guidelines”, State Cabinet was required to approve a contract between NPC and NSC. State Cabinet would not approve a contract which contained a likely breach of the CCA. The ACCC stated that NPC and NSC did not conclude an agreement when NPC terminated negotiations in November 2013. The ACCC does not disclose the reason why NPC terminated its negotiations with NSC. NPC terminated negotiations with NSC because it was likely a Court would determine that requiring NSC to comply with the Port Commitment was a breach of the CCA. In this event, the government would still be reliant on using consolidated revenue for paying NSW Ports for container movements at the Port of Newcastle.

The ACCC investigated negotiations between NPC and NSC using “relevant information” confidentially supplied by the government. The government supplied information to the ACCC in order to benefit the government, and, presumably, the ACCC required NSC to corroborate that information.

The Port of Newcastle was leased for the purpose of providing the government with a source of funds, other than consolidated revenue, with which to pay NSW Ports for container movements at the Port of Newcastle, outside the operation of the CCA.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

August 14 2017

Mr Luke Foley MP
Leader of the Opposition

Dear Mr Foley,

Re: Ports leasing arrangements unlawful

May I respectfully submit that the leasing arrangements for Port Botany and Port Kembla are not authorised by the “Ports Assets (Authorised Transactions) Act 2012” (the Act)? The NSW government has no authority to pay compensation to NSW Ports, the ports’ lessee, for containers shipped through the Port of Newcastle.

Before the Act was passed in 2012, the government had already decided to pay a future lessee for containers shipped through the Port of Newcastle. This decision was concealed from the NSW Parliament because the cost of paying compensation would lower the sale price of the leases to less than the retention values of the ports. Since the object of the Act was to realise a leasing price more than the retention values, the decision to pay compensation before the ports were leased, breached the Act.

The government decided in 2012 to limit the number of containers shipped through the Port of Newcastle for which the Port Botany/Port Kembla lessee would not be paid. Payment was to be made for each TEU container above 30,000 “containers” per year, increasing by 6 per cent per year, where “container” means “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”.

Also in 2012, the government approved a 2010 application by Newcastle Port Corporation (the Corporation) for planning approval to develop a new cargo terminal, including a container terminal with capacity of 1 million TEUs per year, on the Mayfield Site at the Port of Newcastle. The Corporation’s objective was for its “Concept Plan” to be implemented as a profit-making project at no cost to the Corporation.

Between 2010 and November 2013, the Corporation was negotiating under contract to lease the Mayfield Site to Newcastle Stevedores Consortium (the Consortium). The government required the Corporation to comply with the “NSW Public Private Partnerships Guidelines” for conducting negotiations with the Consortium.

It is likely that the Corporation was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (the Competition Act) while negotiating with the Consortium. It is also likely that requiring the Consortium to pay the government for each TEU container above the government’s “container” limit, breached the Competition Act. When the Consortium did not withdraw from the negotiations, the Corporation terminated the contract in November 2013. This action was taken before the lawfulness of charging the Consortium could be determined by a Court. The NSW PPP Guidelines required Cabinet to approve a contract. However, Cabinet would not have approved a contract which contained a likely breach of the Competition Act.

The Australian Competition and Consumer Commission (ACCC) is responsible for enforcing the Competition Act. In 2013, the ACCC claimed it was unlikely the Corporation was carrying on a business for the purposes of the Competition Act in 2012. The ACCC claimed that the government decided in 2012 not to develop a container terminal at the Port of Newcastle. However, this claim is now disproven. The government’s decision in 2012 was for Port Kembla to be the location of the state’s next major container terminal. Since 2010, it has been the policy of successive NSW governments to allow the private sector to develop a container terminal subject to the “Concept Plan” approval conditions.

 

The ACCC is unable to identify an event which removed the Corporation from the operation of the Competition Act while negotiating under contract with the Consortium. The ACCC investigated negotiations between the Corporation and the Consortium using confidential information supplied by the NSW government. The government supplied this information to advance its own commercial interests but the confidentiality agreement with the ACCC prevents this information for being publicly examined. The ACCC improperly intervened in a commercial negotiation by conducting an investigation based solely on confidential information supplied the government.

It would be extraordinary if the NSW PPP Guidelines allowed the NSW government to remove itself from the Competition Act during the conduct of a commercial negotiation by the expedient of providing the ACCC with secret information. This is why the former ALP government of NSW required the Corporation to comply with the NSW PPP Guidelines.

The Port of Newcastle was leased in April 2014 to provide the NSW government with a source of funds for paying NSW Ports. The lease is unlawful if a Court determines that the NSW government had no authority under the Act to pay NSW Ports for containers shipped through the Port of Newcastle.

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW ALP MPs

August 16 2017

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Dear Mr Morrison,

Re: Port of Newcastle container terminal policy

Your Ref: MC17-000292

I refer to the ACCC’s claim that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. Actual NSW government policy, as confirmed by The Hon Dominic Perrottet MP, NSW Treasurer, on June 29 2017, is that “Port Kembla will be the State’s next major container terminal after Port Botany has reached capacity”. It has been the policy of every NSW government since 2010 to support the private sector developing a container terminal at the Port of Newcastle at no cost to the NSW government.

The NSW government decided in 2012 to pay a future lessee of Port Botany/Port Kembla for containers shipped through the Port of Newcastle, in excess of a specified number of containers each year. That policy became a contractual commitment when NSW Ports became the ports’ lessee in April 2013. NSW government policy to support the private sector developing a container terminal at the Port of Newcastle serves a purpose of establishing a source of funds for the NSW government to recover its cost of paying NSW Ports, as I explained to Mr Rod Sims, ACCC Chairman, on August 14 2017, copy below.

Why is the ACCC still claiming that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle?

Why is the ACCC still refusing to acknowledge it has been the policy of every NSW government since 2010 to support the private sector developing a container terminal at the Port of Newcastle?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims; Ms Heather Ridout AO, Chair, Australian Super; Mr Bob Lette, Chairman, Gardior; The Hon Dominic Perrottet MP; Mr Luke Foley MP; Mr Tim Crakanthorp MP; The Hon Adam Searle MLC; The Hon Dr Mehreen Faruqi MLC; The Rev Hon Fred Nile MLC

September 8 2017

Mr Luke Foley
Leader of the Opposition

Dear Mr Foley,

Re: Unlawful ports leasing arrangements

I refer to the ACCC’s claim that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. Statements by the government prove the ACCC’s claim is  incorrect.

In his statement to the NSW parliament on October 17 2013, The Hon Duncan Gay MLC, (former) Minister for Roads and Ports, confirmed that the government had decided in 2012 to impose a cap on the number of containers that can travel through the Port of Newcastle. The cap identified by Mr Gay did not apply to the number of containers that can physically travel through the port. There is no limit, legislated or unlegislated, on the number of containers that can physically travel through the port. The cap Mr Gay identified was for the number of containers that can travel through the port without incurring a government fine. Mr Gay confirmed on August 10 2016 that the government pays the fine to the operator of Port Botany.

Mr Gay told the parliament that the cap was an instruction given to its financial adviser, Morgan Stanley, for conducting a scoping study into leasing Port Botany and Port Kembla. Morgan Stanley received the government’s instructions after being appointed on December 14 2011. The government accepted Morgan Stanley’s scoping study and proceeded to enact the “Ports Assets (Authorised Transactions) Act 2012”, which authorised leasing Port Botany and Port Kembla.

In 2012, the government advised bidders for the Port Botany/Port Kembla leases that the operator of the Port of Newcastle would be fined for exceeding the government’s cap. Bidders were advised that the government would contractually commit to pay the fine to the lessee. NSW Ports became the lessee in April 2013 and the government contractually committed to fine the operator of the Port of Newcastle for exceeding the cap, and to pay that fine to NSW Ports.

The “Ports Assets (Authorised Transactions) Act 2012” does not authorise the government to fine the operator of the Port of Newcastle for containers shipped through the port, or to pay it to the lessee of Port Botany/Port Kembla.

On June 29 2017, The Hon Dominic Perrottet MP, Treasurer, in answer to Mr Tim Crakanthorp’s Question On Notice 5764, denied the government decided in 2012 “to require any future operator of a container terminal at the Port of Newcastle to make the government whole for any cost the government incurred from paying the operator of Port Botany in respect of future container capacity development at the Port of Newcastle”. Mr Perrottet’s answer reveals that the government breached the “Ports Assets (Authorised Transactions) Act 2012” because that Act does not authorise the government to use government funds for paying the lessee for containers shipped through the Port of Newcastle.

The “Port Assets (Authorised Transactions) Act 2012” and the “Port Assets (Authorised Transactions) Amendment Act 2013” allow the operator of the Port of Newcastle to develop a container terminal in compliance with existing regulations.

Government container terminal policy is that Port Kembla will be the State’s next major container terminal after Port Botany has reached capacity and the operator of the Port of Newcastle may develop a container terminal, with unlimited capacity, if it wishes to do so, in compliance with existing regulations.

In 2009, the government, under a Labor administration, decided to invite the private sector to develop a container terminal at the Port of Newcastle. A competitive tender was undertaken and in 2010 a preferred proponent was selected. In 2013, the current government contractually required the preferred proponent to pay the fine for exceeding the cap. Contractually requiring the proponent to pay the fine proves that government policy supported the development of a container terminal at the Port of Newcastle.

The ACCC claims it was unlikely the government was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (the Competition Act) when it decided in 2012 not to develop a container terminal at the Port of Newcastle. The ACCC’s claim is incorrect because a container terminal at the Port of Newcastle is consistent with government policy.

Government policy supporting the development of a container terminal at the Port of Newcastle is the basis of the government’s contractual leasing arrangements whereby the operator of the Port of Newcastle will be fined for container shipments in excess of the government’s cap and that fine is paid to the operator of Port Botany/Port Kembla.

It is likely that the government was carrying on a business for the purposes of the Competition Act when it required the preferred proponent of a container terminal at the Port of Newcastle, under contract, to pay the fine for exceeding the cap. In addition to breaching the “Ports Assets (Authorised Transactions) Act 2012”, it is also likely the government breached the Competition Act.

The ACCC declines to provide any evidence to support its claim that the government was unlikely to be carrying on a business at the Port of Newcastle in 2012 for the purposes of the Competition Act.

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims