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.
The Port of Melbourne will forego tens of millions of dollars in annual revenue after abandoning a 750 per cent rent increase for DP World Australia and accepting price rises a tiny fraction of that amount.
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.
The agreement clears uncertainty surrounding the $6 billion privatisation of the port and enables bidders to put a more accurate value on the port, which handles more than one third of Australia's container trade.
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.
The Port of Melbourne Corporation, which is owned by the Victorian Government, wanted to increase DP World's annual rent to as much as $60 million annually from about $8 million ahead of its privatisation, which will fund a large part of the state Labor's election promises.
Sources said DP World will now pay about $20 a square metre under the new deal, which has been the source of a bitter dispute between the stevedoring industry and the port, and threatened to drive up the cost of sea-born trade.
Most Tasmanian exporters have been spared a big increase in freight costs after global stevedoring company DP World secured a new deal with the Port of Melbourne.
“With a longer period between rental reviews, the new lease takes uncertainty out of the container market,” said Scurrah.
"Agreed escalations" will continue until 2028, after which five-yearly market rental reviews will take place.
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.
