A 99-year Melbourne port lease could garner at least $5 billion for infrastructure recycling purposes and perhaps more, a law firm analysis estimates.
In an initial review of the proposal for potential bidders, Norton Rose Fulbright Australia Partner Dr Martyn Taylor measures 98- and 99-year leases for ports in other states to come up with a very rough figure but acknowledges that differing attributes make meaningful comparisons difficult.
However, in the interests of an approximation and on state government figures, Port Botany and Port Kembla aggregated $5.07 billion at 25 times the annual earnings before interest, tax, depreciation and amortisation (EBITDA).
Also last year, the Canadian pension fund CDPQ bought 26.67 per cent of the Port of Brisbane for about $1.4 billion, implying an enterprise value including debt of $6.2 billion and a multiple of roughly 27 times EBITDA.
This year, the Port of Newcastle went for $1.75 billion under a 98-year lease at 27 times annual earnings.
On this basis, with EBITDA at about $200 million and on a multiple of 25 times, Melbourne’s possible figure comes to $5 billion for a 99-year lease.
But Taylor points out that this may well be quite conservative, given its significant growth and strategic significance as the nation’s largest container port, noting the Victorian Labor Party expects $6 billion from such a lease.
At a time when commentators are raising the possibility of a buyer exploiting its purchase heavily and thereby adding burdens to supply chain cost structures, Taylor highlights certain State and Federal impediments.
Prospective buyers would need to be aware of a range of other issues, some of which are unique, including the:
- current expansion of the port and development of a second port at Hastings or, possibly Bay West
- extent to which regulatory clearances may be required by bidders
- extent to which Victorian regulation of port charges will be maintained
- extent of any Commonwealth regulation of port charges.
– Article: fullyloaded.com.au Date: 30.05.2014