OPINION: DP WORLD is threatening to derail the Victorian Government's planned $6 billion privatisation of the Port of Melbourne (POM) by seeking a declaration of the infrastructure under the national access regime.
The stevedore's chief executive, Paul Scurrah, confirmed on Wednesday that an application to the National Competition Commission was under construction and the ultimate aim was to introduce the Australian Competition and Consumer Commission as the arbitrator of future disputes over the port's fees and charges.
DP and Melbourne port management are in a furious dispute over a proposed 750 per cent rental increase about to head into the independent review process required by Victorian regulation.
In March, Stock & Land reported concerns that this fee increase would be passed onto farmers, as agricultural products make up five of the top 10 containerised commodities that pass through the port.
The biggest is cereal grains – others in the top ten include fruit and vegetables, dairy products, meat and stockfeed.
At the time, Victorian Farmers Federation (VFF) president Peter Tuohey called for independent oversight of POM fees and charges.
It is understood Scurrah informed the port operator on Wednesday of the risk this dispute might morph into a Part IIIA declaration case and that the state government and opposition have been briefed on the company's proposition.
Scurrah is very obviously attempting to, at very least, introduce price-deflating uncertainty to the government's privatisation process by threatening a process that could take at least two years to settle and could well result in ACCC oversight of future port income.
Port management insist the rent increase being sought reflects a rebasing of the market price in the wake of the terms that secured the new third container terminal for the new operator, the Philippines-based International Container Terminal Services Inc.
DP World rejects that logic outright, noting the fee increase proposed would see the infrastructure charge for its Melbourne terminal rise from about $3.50 a container to about $82 a container.
According to the company, that would make it about three times more costly to put freight through Melbourne's port than it does to use Sydney's recently privatised Port Botany.
With neither side of the argument showing any signs of blinking and with the independent review process about to kick in, Scurrah has decided to up the ante by introducing the risk of routine ACCC oversight to the privatisation process.
At the end of the day, assets such as ports are priced on a multiple of the rents they charge. Port management is patently attempting to use the amazingly high rents agreed to by ICTSI to manufacture a better price on the sale process. But DP World and some of its key customers are not going to let that happen without a fair, old fight.
"We are considering all options for the Port of Melbourne, including regulated access," Scurrah told The Australian Financial Review. "We believe there is a case to justify a declaration application and we have commenced preparations.
"The observation has been made in the past, including by the ACCC, that it is important to get regulatory settings right as part of any privatisation process in order to achieve the best long-term economic outcome for the state and users. And we agree," he said.
ACCC chairman Rod Sims has made clear his concerns about the quality of regulatory oversight over privatised state monopolies in general and the POM's pre-sale repricing in particular.
Sims met with Scurrah three weeks ago and it would seem to be no coincidence DP's man is now working on a plan to introduce the ACCC to the port's pricing equation.
From what we understand, both stevedore and regulator are firmly aligned on absurdity of rebasing rents to match the premium paid by a new user for access to a government-owned monopoly operator.
The POM's proposition that ITCSI represents the new market price is patently dopey. If a new entrant is able to make a crazy offer to secure access in the full expectation that it will be passed on to legacy competitors, then the risk of irrational pricing is obviously very high. And that matters a whole lot because what a terminal operator pays will be passed on in full to its customers, which means imported goods cost Victorian's more and goods exported from Melbourne become less competitive.
Matthew Stevens is a Financial Review columnist.
