Leasing of the Port Hedland International Airport has the potential to deliver nearly $400 million in community investment over the next fifty years.
Mayor Kelly Howlett said council would consider the potential lease of the Port Hedland International Airport at a special meeting on Tuesday evening.
“After two years of discussions, we are now at the decision point,” Mayor Kelly Howlett said.
“Council will consider a bid of $205 million for the 50 year lease of the Port Hedland International Airport - that is $50 million more than the highest value assessment by independent experts.
"This illustrates the enormous value of the deal that is now on the table for consideration and affirms the benefits of pursuing a potential leasing arrangement.
“We really have a unique opportunity to create a fund for the future of our town – it means significant investment into our community and for future generations.
“It’s proposed that a future fund is established to provide for future development and community grants.
“Based on the illustrative model of investing $160 million into the fund and earning a conservative/balanced 5% interest rate, there would be $388.5 million available for our community.
“Every five years we are proposing $10 million is taken out for development projects and this figure, in accordance with the model, can increase by $1 million every five years.
“This will give us a once-in-a-generation opportunity to fund a whole range of benefits for our community - anything from new cultural centres, facilities, roads and footpaths, parks and gardens, community services – and the final choices of where to invest will be driven by our community.
“On top of this, it is proposed that each year $150,000 (indexed at 3%) is provided for community grants and projects.
“The Town would also receive a recurrent return to replace the current income streams from the airport and associated leases (currently $8.2 million) noting that this would deplete as the Town continues to drive further efficiencies across its business.
Mayor Howlett said that most critically it would be up to the community to determine where the money is ultimately spent.
“It really is in your hands as to what is possible – if endorsed by Council, we will be undertaking a significant engagement program to determine the best model and investment structure for our community.
“The final lease premium management framework will be developed through robust consultation process with community and the new council post October’s local government elections.
“It’s not just the $388.5 million that we will benefit from – entering a lease will provide a number of indirect upsides including:
- all sale and lease premiums from Kingsford Smith Business Park to be given straight to the Town (currently it is quarantined for airport redevelopment)
- removing any financial obligation associated with the transient worker accommodation leases
- removing construction, operation and commodity risks from the Town of Port Hedland
- guarantees significant dividends
- achieves rates from airport premises (the Town doesn’t rate itself currently)
- provides capacity to grow the asset
“There is also the potential to share in revenue should passenger numbers significant increase, the potential to access the Federal Government Asset Recycling Scheme and of course the potential additional investment into surrounding areas and business opportunities.
Mayor Howlett said that the bid for the Port Hedland International Airport lease was from a consortium of AMP Capital Investors Limited and Infrastructure Capital Group Limited.
“A new operator will bring expertise, experience and economic opportunities.
“The bid comprises of an upfront $165 million payment and a requirement to invest $40 million into the airport’s redevelopment in the next five years.
“The consortium are extremely experienced in running, managing and investing into airports.
“They have a successful track record of completing infrastructure investment transactions with staff having previously been board members of Perth Airport, Northern Territory Airports, Queensland Airports Corporation and Federal Airports Corporation.
“They are experienced in overseeing the successful delivery of large scale capital works programs, including the recent $100 million new entry road to Melbourne Airport, and Newcastle Coal Infrastructure Group's major terminal development works at the Port of Newcastle.
“The consortium have commitment to stakeholder engagement and working with local communities –in their first few months they will focus on transition, integration, planning and stakeholder engagement and delivering an updated master plan that will outline the long term vision for the airport’s development and operation.
“They will also establish a community consultation group for ongoing engagement.”
Key features of the bid:
- The consortium has demonstrated a robust structure; and is supported by key organisations. They are experienced airport and infrastructure investors with over $160 billion in funds under management globally including airport and other infrastructure investments.
- The total transaction value ($205 million) demonstrates value for money for the Town – it is well in excess of the Fair Value assessment of the airport provided by Western Australia Treasury Corporation ($115 million); the Fair Value assessment undertaken by the Town’s advisors ($137- $157 million); and the Fair Value assessment of the aggregation of the land, infrastructure, plant and equipment, and building assets undertaken by registered valuers, Asset Val ($106 million). The transaction value is approximately $50 million more than the highest fair value assessment
- The consortium have provided evidence their bid is fully funded including the funding for the mandatory capital works expenditure to be undertaken in the first five years of the lease.
- The consortium have deep experience in owning and managing airports and other infrastructure assets in Australia and around the world and have experience in gaining all necessary approvals associated with these assets. The Consortium have confirmed they have the requisite internal approvals to undertake the transaction.
- The consortium has demonstrated a robust structure, suitable to operate the airport and undertake the future development of the Airport. The Consortium Airport governance structure includes an independent board, sub committees, and asset management support provided to the Port Hedland International Airport management team from its own in-house highly experienced airport, construction, property, and infrastructure management teams.
A Special Council Meeting will be held on Tuesday 25 August at 7.30pm in Council Chambers. The consortium will also attend the meeting. All community members are invited to access the agenda item online at http://www.porthedland.wa.gov.au/documents/?categoryId=292 and encouraged to attend the meeting on Tuesday.