❓ WA Parliament Question on Notice regarding the proposed privatisation of Fremantle Port, specifically focusing on debt related to the Inner Harbour Deepening Project and the introduction of a new Port Improvement Rate for the Outer Harbour development.
AnsweredQoN 5633Legislative Assembly
QuestionView source ↗
I refer to the proposed privatisation of the Fremantle Port, and I ask: (a) how much debt is currently held by the Fremantle Port Authority in relation to the Inner Harbour Deepening Project; (b) how much longer is required for the current Port Improvement Rate to fully pay down this debt at the current collection rate; (c) is it the intention of the Government to bring this debt back onto the General Government sector balance sheet at the time of the proposed sale, as advised to the Opposition during the Treasury briefing; (d) is it the intention of the Government to cancel this Port Improvement Rate on port users at the time of the proposed sale, as advised to the Opposition during the Treasury briefing; (e) is it the intention of the Government to introduce a new Port Improvement Rate, at the same level of the exisitng Port Improvement Rate, to be held in trust by the State (through the residual Fremantle Port Authority) for the exclusive use of developing the Outer Harbour Container Terminal as the natural capacity for the Inner Harbour is reached, as advised to the Opposition during the Treasury briefing; and (f) is it the policy of the Government that users of the Fremantle Inner Harbour should be making a financial contribution to the construction of the future Outer Harbour Container Terminal: (i) if yes, has this regulatory mechanism been discussed with the Economic Regualtion Authority?
AnswerView source ↗
Answered
16 August 2016
Response time
47 days
With regard to the proposed long-term lease of Fremantle Port:
(a) The Fremantle Port Authority (FPA) did not enter into a specific loan for the Inner Harbour Deepening Project; rather, FPA increased its general corporate borrowings. During the project period total corporate borrowings increased by $189 million, of which most related to the Inner Harbour Deepening Project. FPA does not report separately on the debt associated with this project, as it is included within total corporate borrowings. FPA’s total outstanding debt as at June 2016 was approximately $208 million. (b) The charge in question is referred to as the Port Improvement Fee (PIF). The PIF is collected on a per Twenty Foot Equivalent Unit (TEU) basis and PIF revenue is therefore subject to TEU growth assumptions. The notional ‘payback period’ for debt associated with the Inner Harbour Deepening Project is also subject to assumptions on inflation, interest rate and tax rate applicable to the revenues. High level estimation by the Department of Treasury (Treasury) indicates that debt associated with the Inner Harbour Deepening Project could be fully paid down within 25 to 30 years. (c) It is typical for transactions to be on a cash and debt free basis and in this regard, the State Government has stated that it is aiming to use part of the proceeds to lower General Government sector debt. As a result, the Government will either use the sale proceeds to repay the FPA loan directly or bring the loan on to the General Government sector balance sheet and repay General Government sector debt, based on the lowest cost of transacting. (d) As advised by Treasury at the Opposition briefing, the Government proposes to redesignate the existing PIF (as described in answer b. above) as a new Port Improvement Rate (PIR) applied to containers, with revenues collected to be dedicated to the development of an Outer Harbour Container Terminal (OHCT). (e) Yes. (f) The Government’s policy objectives are to ensure that:
· current and future users will have future port capacity available at reasonable costs, to ensure users (and ultimately consumers) are not exposed to unreasonable price increases; and · the State has appropriate mechanisms in place to facilitate trade for the long term.
The proposed PIR on Inner Harbour users (at the current level of the PIF) for the purpose of creating a capital reserve fund dedicated to the OHCT is designed to:
· allow prudent planning to reduce the likely step change or ‘price shock’ that would otherwise have to be passed on to port users (and consumers); · assure current and future users that port capacity will be available when it is needed and at competitive costs as between the Inner Harbour and Outer Harbour. This mitigates the risks to Inner Harbour users that they will be faced with a congested Inner Harbour with longer waiting times, displacement to less competitive ports and an overall increase in cargo transport costs; and · minimise the need for taxpayers to fund a significant portion of the OHCT when it is developed, and provide the Government with commercial levers in any future negotiation with a port developer.
Noting the above, current Inner Harbour users are making a financial contribution to ensuring there is trade capacity to accommodate port capacity needs into the future. (i) Yes; Treasury has discussed the proposed PIR approach with the Economic Regulation Authority.
(a) The Fremantle Port Authority (FPA) did not enter into a specific loan for the Inner Harbour Deepening Project; rather, FPA increased its general corporate borrowings. During the project period total corporate borrowings increased by $189 million, of which most related to the Inner Harbour Deepening Project. FPA does not report separately on the debt associated with this project, as it is included within total corporate borrowings. FPA’s total outstanding debt as at June 2016 was approximately $208 million. (b) The charge in question is referred to as the Port Improvement Fee (PIF). The PIF is collected on a per Twenty Foot Equivalent Unit (TEU) basis and PIF revenue is therefore subject to TEU growth assumptions. The notional ‘payback period’ for debt associated with the Inner Harbour Deepening Project is also subject to assumptions on inflation, interest rate and tax rate applicable to the revenues. High level estimation by the Department of Treasury (Treasury) indicates that debt associated with the Inner Harbour Deepening Project could be fully paid down within 25 to 30 years. (c) It is typical for transactions to be on a cash and debt free basis and in this regard, the State Government has stated that it is aiming to use part of the proceeds to lower General Government sector debt. As a result, the Government will either use the sale proceeds to repay the FPA loan directly or bring the loan on to the General Government sector balance sheet and repay General Government sector debt, based on the lowest cost of transacting. (d) As advised by Treasury at the Opposition briefing, the Government proposes to redesignate the existing PIF (as described in answer b. above) as a new Port Improvement Rate (PIR) applied to containers, with revenues collected to be dedicated to the development of an Outer Harbour Container Terminal (OHCT). (e) Yes. (f) The Government’s policy objectives are to ensure that:
· current and future users will have future port capacity available at reasonable costs, to ensure users (and ultimately consumers) are not exposed to unreasonable price increases; and · the State has appropriate mechanisms in place to facilitate trade for the long term.
The proposed PIR on Inner Harbour users (at the current level of the PIF) for the purpose of creating a capital reserve fund dedicated to the OHCT is designed to:
· allow prudent planning to reduce the likely step change or ‘price shock’ that would otherwise have to be passed on to port users (and consumers); · assure current and future users that port capacity will be available when it is needed and at competitive costs as between the Inner Harbour and Outer Harbour. This mitigates the risks to Inner Harbour users that they will be faced with a congested Inner Harbour with longer waiting times, displacement to less competitive ports and an overall increase in cargo transport costs; and · minimise the need for taxpayers to fund a significant portion of the OHCT when it is developed, and provide the Government with commercial levers in any future negotiation with a port developer.
Noting the above, current Inner Harbour users are making a financial contribution to ensuring there is trade capacity to accommodate port capacity needs into the future. (i) Yes; Treasury has discussed the proposed PIR approach with the Economic Regulation Authority.
Explore WA Government Data
Search the full archive in the free dashboard, or query programmatically via API.
Explore more
Government Gazette
Appointments, regulatory notices, planning changes.
Hansard
Debates, questions, speeches and sentiment.
Tabled Papers
Reports and documents tabled in Parliament.
Committees
Committee profiles and recent reports.
Regulations
Subsidiary legislation with filters and summaries.
Bills
Proposed laws and parliamentary progress.
Acts
Current WA legislation and summaries.
Explanatory Memoranda
Bills with EMs (text/PDF) available.
Members
MP profiles, party breakdown and rankings.
Pollie Rankings
Data-driven rankings across 19 categories.
Amendment Chains
Track how schemes and regulations evolve over time.