Rating fear on delay to port privatisation
The State’s under-treasurer has warned credit ratings agencies may take a dim view of delays to the privatisation of WA ports, saying the sale of Port Hedland’s Utah Point facility may now not be possible until late next year.
Michael Barnes warned a Legislative Council committee examining legislation to enable the sale that ongoing delays meant the State Government was unlikely to find a buyer ahead of the March 2017 election.
He said Treasury had hoped to finalise a transaction by the end of the year, but that timetable was based on the passage of legislation before June 30.
The committee will not report back until August 25, meaning that, even if all goes well, the legislation is unlikely to pass Parliament’s Upper House until at least mid-to-late September.
Failure to get a sale away this year could expose the Government to “substantial additional advisory costs” associated with updating financial, economic, environmental engineering and legal reports necessary for the privatisation.
Treasury is flagging costs of $9.9 million associated with the sale to the end of June, including $7.8 million in payments to corporate, legal and other advisers.
The Government hopes to realise at least $500 million for a 50-year lease of Utah Point.
Mr Barnes warned the delay could lead to a lower price being offered by potential buyers, and a “negative impact on other asset sales”, such as the mooted sale of Fremantle Port.
He said the failure of the sale in this term of Parliament could lead to the “perception from external parties (including credit ratings agencies) that the State is not able to deliver on its fiscal reform program”.
Mr Barnes’ responses also risk inflaming tensions with the mid-tier miners that use the facility, which are opposed to the sale unless they receive guarantees that prices will not rise substantially and that Pilbara iron ore majors are permanently barred from using the terminal.
Treasury responses also include an admission that analysis of export volumes predicts throughput at Utah Point will fall from about 23 million tonnes this year, to 13.2 million tonnes in 2017-18.
Current volumes could only be maintained if existing users — including Atlas, Mineral Resources and Consolidated Minerals — bring new mines online, or new customers are signed up at the facility, Treasury said.