DP World and the Port of Melbourne Corporation have reached an agreement on a new 50-year lease, ending months of negotiation over rental increases at Australia’s biggest port.
DP World Australia, in which the Dubai-based ports operator has a 25 per cent stake, will run the West Swanson Terminal in the Port of Melbourne up to 2065, with known fixed increments over 13 years, DP World Australia and Port of Melbourne said yesterday.
The new agreement “will provide long-term certainty to port users, including modern lease terms and acceptable rent levels to both parties,” said the DP World Australia chief executive Paul Scurrah. He did not disclose what the new rent would be.
The government of Victoria had proposed a 767 per cent rental increase at the terminal, a move that DP World warned would have an effect on the competitiveness of the port.
Under the previous plans, rental costs on the West Swanson Terminal would have soared from A$15 (Dh40) per square metre to A$120 per square metre.
“With a longer period between rental reviews, the new lease takes uncertainty out of the container market,” said Mr Scurrah.
Under the new rent structure, there will be incremental rent increases over the 50-year period, starting with inflation-linked rises this year and next year to nominally A$45 in 2023, with further agreed increases to 2028.
The first market rent review will occur in 2028, and one will take place every five years after that.
“The new lease will grant 50-year tenure to DP World Australia to 2065 under a lease with key performance indicators, efficiency incentives, and most importantly, known fixed escalations for the next 13 years,” the Port of Melbourne chief executive Nick Easy said.
DP World Australia, which also has operations in Brisbane, Fremantle and Sydney, handles almost 60 per cent of all container traffic in to and out of Victoria.
DP World, one of the world’s biggest port operators, entered the Australian market in Adelaide (subsequently sold off) and Brisbane through its takeover of CSX World Terminals in 2004, followed by its acquisition of P&O in 2006, giving it a presence in Sydney, Fremantle and Melbourne.
The company sold a 75 per cent stake in its operations in the country to Citigroup’s Citi Infrastructure Investors for A$1.5 billion in December 2010, as part of its efforts to reduce its debt following the financial crisis of 2008.
DP World throughput rose 4.1 per cent to 30.6 million containers in the first half of this year compared with the same period last year, thanks to volume growth in Europe and its UAE terminals.
At its local terminals, DP World handled 7.9 million containers in the first half, up 6 per cent from a year earlier.
The original lease was signed by P&O in 1992. DP World acquired P&O in 2006.
dalsaadia@thenational.ae
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