NSW government approves Port of Newcastle lease

New South Wales Treasurer Mr Mike Baird has announced that the NSW cabinet has approved the long-term lease (98 years) of the Port of Newcastle. In a statement released on Tuesday, Mr Baird stated that the Port of Newcastle – the world’s largest coal exporting port – had received strong initial interest from investors.

With the bidding process to get underway this month and a final decision aimed for by mid-2014, investors won’t have too long to wait before they can see who will be the successful bidder. Apart from the critically important role the Port of Newcastle plays in exporting coal and other cargo, the treasurer highlighted that “the Port has tremendous ongoing growth and development potential, and has extensive port-side land available for the future growth of general cargo, dry bulk and bulk liquids.”

The Port of Newcastle will appeal to a number of investors, however two of the main users of the port, BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO), won’t be bidding for the port assets, with the NSW treasury stating that they “will restrict parties who have a controlling interest in a Hunter Valley Coal Chain coal producer, coal development or coal terminal from bidding for the long-term lease.”

So while the major miners may be excluded from bidding, with a touted $700 million value there is little doubt investment bank Macquarie Group (ASX: MQG) will be looking to play a role in either an advising capacity to potential bidders or investment management role for one of its funds. Likewise, a number of superannuation funds are expected to take a close look at the port.

The Port of Newcastle announcement comes in the wake of the 99-year leases of Port Botany and Port Kembla, which netted the NSW government around $4 billion and was awarded to a consortium that included a number of domestic superannuation funds.

Foolish takeaway

As the stock market rallies higher, much of the attention and excitement is focussed on the initial public offering (IPO) market, however governments are also looking to capitalise on renewed investor enthusiasm for assets. Given the strategic appeal of many publicly owned assets and recent government changes at both state and federal levels, there is likely to be more publicly owned assets coming on the market in the near future.

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Motley Fool contributor Tim McArthur owns shares in Macquarie Group.

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