Frequently asked questions

Overview

Frequently asked questions about leasing the Port of Melbourne


What is the Port of Melbourne?

The Port of Melbourne, like other major ports in Australia, operates as a landlord port. The Port of Melbourne Corporation is responsible for developing and maintaining port infrastructure, property management, maintaining the shipping channels, and ensuring safety in Port Phillip Bay.

Stevedore and logistics operator tenants are responsible for the day‑to‑day operation of their facilities. The container terminals at Swanson Dock East and Swanson Dock West are operated by Patrick Stevedores and DP World. At the Port of Melbourne, around 2.5 million containers are handled annually.

Further information on the Port of Melbourne is available at www.portofmelbourne.com.au.

How long is the lease?

50 years.

A 50‑year lease will allow the leaseholder to plan for the investment needed to expand capacity at the port. Importantly, these costs will be met by the leaseholder.

A 50‑year lease also provides the Government with flexibility about developing port land in the future, after the lease term ends.

The port will return to the State's control when the lease term ends.

When will the Port of Melbourne be leased?

The market process will commence after the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 passes both Houses of Victorian Parliament.

What is the Government leasing?

The 50‑year lease is only for the Port of Melbourne Corporation’s commercial operations:

  • Approximately 500 hectares of land owned by the Port of Melbourne Corporation predominantly used for commercial purposes, but also including certain community assets, buffer land such as Perce White Reserve and other land/assets;
  • All wharves owned by Port of Melbourne Corporation, except for Station Pier and West Finger Pier;
  • The rights to charge port users for the use of the channel by commercial vessels and the associated requirements to maintain the channel;
  • Port infrastructure functions within the Port of Melbourne boundary;
  • The $1.6 billion Port Capacity Project to develop a third international container terminal and expanded automotive facilities; and
  • The transfer of Port of Melbourne Corporation staff identified in roles that support the leased commercial operations and business.

What will remain with the State?

Port land will continue to be owned by the State.

The Victorian Government will retain responsibility for:

  • The Harbour Master (and Vessel Traffic Service) to ensure safe navigation in Port Phillip Bay;
  • Station Pier and West Finger Pier;
  • Relevant safety and environmental regulation (dangerous goods oversight), waterside emergency management;
  • Marine pollution response; and
  • Towage regulation.

Retaining these functions by Government will help ensure safety of the Bay for all users, recreational and commercial.

Future dredging of the shipping channels in Port Phillip Bay will continue to require the relevant environmental conditions and approvals.

What are Port of Melbourne’s charges?

Port of Melbourne’s current tariff schedule is available at www.portofmelbourne.com.au/port‑operations/port‑pricing.

The Port of Melbourne Corporation has frozen prices on loaded international container export charges in 2015‑16 and will progressively reduce export charges, by 2.5 per cent price annually for the four years thereafter.

How much of the port revenue is rent from port tenants?

In the 2014 financial year, rents comprised 14 per cent of total Port of Melbourne Corporation revenues.

This amount will fluctuate from year to year depending on land rents and trade revenues. The vast majority of Port of Melbourne Corporation revenues (excluding rents) are subject to Essential Services Commission price monitoring.

What are the costs of the port to users and end‑customers?

Port landlord costs are generally the smallest contributor to total supply chain costs for the import and export of goods.

Commonwealth Bureau of Infrastructure, Transport and Regional Economics data indicates port costs contribute less than 10 per cent of the domestic supply chain costs of imported and exported containerised goods.

Some examples of Port of Melbourne landlord costs per unit of imported goods include:

  • less than 90 cents per 50 inch television;
  • less than 4 cents per pair of shoes; and
  • less than 2 cents per bottle of wine.

How will port pricing be set by the leaseholder?

The existing Essential Services Commission regulatory arrangements will be strengthened such that the leaseholder will set prices in accordance with clear and transparent pricing principles contained in a Pricing Order.

The scope of regulated charges will be expanded to cover all trade charges for cargo and shipping movements. Property rents will continue to be set by contract.

A CPI price cap for at least 15 years will be monitored by the Essential Services Commission.

How does the regulatory regime differ from other price regulated assets, for example, businesses regulated under the federal regulatory regime?

The principles of the regulatory regime, which provides for the recovery of efficient costs on a defined asset base, reflect a conventional regulatory approach which is substantially similar to other price regulated assets.

In addition, the CPI price cap provides further certainty for port users.

Does the Delivering Victorian Infrastructure (Port of Melbourne Lease) Act 2016 exempt the port from the potential application of the federal regulatory regime?

No, the Act does not exempt the port from the potential application of federal regulation.

However, the Port of Melbourne is a competitive, open‑access port. The Essential Services Commission provides effective oversight of pricing of regulated services, and the leaseholder will be required to comply with the strengthened regulatory arrangements.

How large will the Port of Melbourne become?

The Port of Melbourne has the potential to grow trade volumes within its existing footprint and accommodate trade growth for many years.

Future development will depend on investment and productivity of stevedores and other tenants, investment by the leaseholder in incremental capacity and overall trade growth.

Any future development by the leaseholder will be subject to the relevant planning and environmental approvals.

Will ‘big ships’ bypass the Port of Melbourne?

The Government has received technical advice that it is highly unlikely that a significant number of ‘big ships’ will seek to call on the Port of Melbourne within the lease term.

However, the State will have an unfettered ability to respond to any changes in demand by developing a second container port in line with demand.

When will a second port be needed?

The Port of Melbourne is capable of supporting Victoria’s economy, trade and jobs well into the future.

A 50‑year lease will allow the leaseholder to plan for the investment needed to expand capacity at the port. Importantly, these costs will be met by the leaseholder.

A 50‑year lease provides a sufficient horizon to promote this investment and ensure the maximum opportunity for the port to be efficiently utilised.

It gives the Victorian Government the ability to plan for the future and consider options for a second container port.

The State will retain the unfettered flexibility to build a second container port.

Infrastructure Victoria will provide independent advice to Government on the most appropriate site for a second container port, including assessing locations at Hastings and Bay West.

Will the Port of Melbourne leaseholder have rights in relation to a second port?

No, the transaction does not include rights in respect of a new port.

Has the State promised not to build a second port during the lease?

No, a second container port will be developed in line with demand.

Does the legislation prevent the State from developing a second port?

No, the legislation in no way prevents the State from developing a second port.

Will the State need to compensate the Port of Melbourne leaseholder if a second port is developed during the lease?

The legislation restricts compensation to 15 years from the lease's commencement.

The second port, if state-sponsored, will be subject to competitive neutrality pricing applying to a state-sponsored second port. This ensures a level playing field to allow ports to compete head to head without the distortion of state subsidies and will provide investors with confidence on likely outcomes.

What happens to the Port Capacity Project?

Completion of the remaining stages of the $1.6 billion Port Capacity Project (Webb Dock) will become the responsibility of the new leaseholder.

Will employees be affected by the long‑term lease?

Most people working at the port are employed by port tenants and will be unaffected by the lease.

The majority of the Port of Melbourne Corporation’s current employees will transfer to the leaseholder to ensure continuity of the business. Employees performing roles relevant to the Port of Melbourne Corporation’s ongoing business will be given the opportunity to remain employed by the Port of Melbourne Corporation.

The Government will ensure that all employees of the Port of Melbourne Corporation are treated fairly and equitably.

Can stevedores bid to lease the Port of Melbourne?

Prospective bidders with a controlling interest in stevedores at an Australian capital city port will be restricted from participating in the transaction. 

The Expression of Interest document, when it is released, will provide further details.