28/08/2014 - 13:59

Markets, port assets first to be sold

28/08/2014 - 13:59

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Markets, port assets first to be sold
FOR SALE: The Kwinana Bulk Terminal south of Perth is one of the first three state-owned projects to be sold to reduce debts.

Perth's investment banking sector is jockeying for position to sell Canning Vale Market City, Utah Point in Port Hedland and the Kwinana Bulk Terminal, the first assets to be sold off to reduce the state government’s spiralling debts.

The state government is expected to appoint an adviser to sell the assets in coming weeks, with the much anticipated privatisation push expected to generate between $1 billion and $2 billion.

Details of the first round of land sales will also be announced in coming weeks, with Premier Colin Barnett to oversee the sell-off.

Treasurer Mike Nahan, Finance Minister Dean Nalder and Lands Minister Terry Redman will also play major roles in the ongoing process. 

The move was announced after EY completed its work for the asset sale taskforce, which was set up to report to the Barnett government on its options.

The Utah Point iron ore port at Port Hedland and the Kwinana Bulk Terminal were already thought to be two of the least politically sensitive of the potential privatisation targets, which include Kaleeya Hospital in East Fremantle, the TAB, and waste water treatment plants.

The Utah Point bulk handling facility generated $86.5 million in revenue in 2012-13, and comprises a shiploader, two stockyard storage facilities and supporting infrastructure.

Its capital expenditure for 2012-13 was $44.1 million.

The Kwinana Bulk Terminal, operated by Fremantle Ports, has a total throughput of 5.2 million tonnes, with commodities such as coal, iron ore, liquefied petroleum gas, cement clinker, gypsum, nut coke and slag passing through the port.

Its revenue for 2012-13 was $61.6 million, with total operating costs of $36 million.

Mr Barnett said the port assets were likely to be sold as a long-term lease.

Canning Vale Market City, which is operated by the Perth Market Authority, has around 155 tenants and undertakes the marketing and distribution of WA’s fresh fruits and vegetables.

The state government said a condition of any sale would be the ongoing operation of the markets.

Dr Nahan said the port facilities and Market City were the most market-ready of the state’s assets, with a due diligence process set to begin.

But despite mounting pressure on the government to reduce debt and restore the state’s credit rating, the government has already ruled out the sale of the Fremantle and Albany ports.

However, any excitement over the fees up for grabs in these asset sales is tempered by concerns political considerations will stall the sale of bigger targets such as the TAB.

ASX-listed Tabcorp paid $105.5 million for the ACT government’s gaming business in July, leaving WA with the only state-owned gaming business in the country.

Following today's announcement, the Chamber of Commerce and Industry said the asset sales was an important first step towards reeling in state debts.

Chamber of Commerce and Industry WA chief executive Deidre Willmott, however, said selling off assets was only part of the solution for WA's fiscal issues.

"The task to regain the AAA credit rating will require a focus on controlling government spending, which has grown on average 8.8 per cent over the last six years - well above population and inflation growth," she said.

"Capping expenditure growth has been a challenge for successive governments and is not isolated to one portfolio."

Ms Willmott said one example of the government's spending blowouts was the increasing subsidies paid to energy operators and consumers, which were now in excess of $600 million a year.

She said increasing the efficiency of energy delivery through greater competition was becoming more important than ever.

 

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