The Australian Competition and Consumer Commission will not oppose two separate proposals by consortia to acquire the 50-year lease of the Port of Melbourne, following careful consideration of potential cross-ownership interests and vertical relationships.
The ACCC’s review of both the IFM Consortium and QIC Consortium proposals focused primarily on the cross-ownership interests in the Port of Melbourne, NSW Ports, and the Port of Brisbane, and vertical relationships with port services providers operating at the Port of Melbourne.
“The ACCC conducted extensive inquiries with a large number of port users and stakeholders at various levels of the supply chain. The ACCC has formed the view that neither acquisition would result in a substantial lessening of competition,” ACCC chairman Rod Sims said.
“While there are a small group of exporters in southern NSW, particularly in the Riverina region, who have the option of using Port Botany or the Port of Melbourne, the vast majority of port users have no choice, for them the Port of Melbourne is a monopoly asset.”
The ACCC also explored a number of potential vertical issues arising from some consortium members having interests, or managing interests on behalf of clients, in port users, including DP World Australia (a stevedore and container terminal operator) and ANZ Terminals (a bulk liquids storage provider), in relation to the IFM Consortium; and DP World Australia and Pacific National (a rail freight provider), in relation to the QIC Consortium.
“The ACCC identified several constraints on the consortium members’ ability to discriminate in favour of these downstream port services providers or to share commercially sensitive information regarding rivals of these providers,” Mr Sims said.
“Further, no single consortium member will control the Port, or has a controlling stake in other ports or vertically related businesses. The existence of other significant shareholders in each business limits any potential competitive detriment.”
The proposed regulatory regime is largely a separate matter to this competition assessment. The regime to apply at the Port of Melbourne will be overseen by the Victorian Essential Services Commission and will cap many fees and prices for port users at CPI for the first 15 years of the lease.
“The regulation of monopoly infrastructure assets raises a whole range of separate issues that can’t be dealt with under the section 50 test applied to merger reviews,” Mr Sims said.
“However, the ACCC did note that the proposed regulatory regime at the Port of Melbourne provides for stronger pricing oversight than applies at most other ports following privatisation.”
The ACCC also considered whether the potential cross-ownership issues would give the ports an increased ability to raise rents further than would otherwise be the case, due to knowledge of rents being charged at other ports and information about a port user’s willingness to pay.
The ACCC determined that benchmarking already occurs, rents and other charges are typically known to an extent across the industry and that, even if the port operator gained some additional knowledge about rents or willingness to pay, this is unlikely to significantly increase their bargaining power in rent negotiations with tenants.
The IFM Consortium comprises:
IFM Investors Pty Ltd (IFM), a fund manager based in Australia with over AUD 60 billion in assets under management. Proposed 50-55 per cent interest in Port of Melbourne. APG Asset Management N.V. (APG), a Dutch pension fund manager with approximately AUD 618 billion in assets. Proposed 25-30 per cent interest in Port of Melbourne. Macquarie Infrastructure and Real Assets (MIRA), a business division of Macquarie Group Limited, which manages infrastructure assets of AUD 130 billion. Proposed interest in Port of Melbourne of 20 per cent.
The QIC Consortium comprises:
QIC Private Capital Pty Ltd (QPC), on behalf of a number of managed or advised funds and clients. QPC undertakes private capital investment on behalf of its parent company QIC Limited, which is an Australian fund manager owned by the Queensland Government. Proposed interest in Port of Melbourne of 40 per cent. GIM Advisory Services, LLC (GIMAS), on behalf of its affiliates and managed or advised funds and clients. GIMAS is part of the Global Infrastructure Partners group, a global infrastructure investment manager. Proposed interest in Port of Melbourne of 20 per cent. Borealis Infrastructure Management Inc., on behalf of the Ontario Municipal Employees’ Retirement System (a jointly sponsored multi-employer pension plan representing various employees in Ontario), and potentially certain members of the contractual co-investment arrangement known as Global Strategic Investment Alliance. Proposed interest in Port of Melbourne of 20 per cent.
Consortium interests in other ports and port users:
IFM has a 35 per cent interest in NSW Ports and a 26.7 per cent interest in Port of Brisbane. APG has a 4.4 per cent indirect interest in DP World Australia. A related entity of MIRA has an indirect interest of less than 12 per cent in ANZ Terminals. QPC manages a 26.7 per cent interest in Port of Brisbane on behalf of its managed clients (who are not participating in the proposed acquisition). GIMAS manages a 15 per cent interest in NSW Ports on behalf of a managed client (who is not participating in the proposed acquisition). A participant in the member group managed by QPC holds a 24.4 per cent indirect interest in DP World Australia. QPC is managing that member’s 20 per cent interest in the Port of Melbourne. Global Infrastructure Management Australia Pty Ltd (GIMA), as a trustee for a GIM managed fund, and a participant in the member group managed by GIMAS, will manage a total of 43 per cent of interests held in Pacific National upon implementation of the Asciano transactions.
