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Town of Port Hedland accepts $205m airport deal in Australia

Town of Port Hedland accepts $205m airport deal in Australia

CANBERRA: The Town of Port Hedland has accepted an offer by a private consortium to take control of its airport. Under the deal the 50-year lease, worth $205 million, has gone to AMP Capital and Infrastructure Capital Group which will make a $165 million one-off payment to the Town and commit to spend $40 million over the next five years on airport upgrades.

Mayor Kelly Howlett said the offer was considerably higher than fair-value estimates by its consultants, which ranged from $137 million to $157 million. She said the Town would now look to use the payment to create a wealth fund, which under one proposed model could deliver $388.5 million to the community. “This illustrates the enormous value of the deal,” she said.

Hailed as the biggest transaction in the Town of Port Hedland’s history and one of the State’s bigger privatisations, the deal is likely to capture the attention of the aviation industry and local governments across Australia.

The State Government in its recent State Aviation Strategy outlined its preference to help local governments privately lease their airports.

AMP Capital head of Australian and New Zealand funds Michael Cummings said management of Port Hedland airport added to the group’s portfolio, which included Melbourne and Launceston airports in Australia and Newcastle Airport in Britain.

He said Hedland airport was attractive because of its role in supporting the Pilbara town’s resources industry.

“We and our investors like the fact Port Hedland International Airport is a strategically located asset servicing one of the world’s largest commodity export ports,” he said.

“It has stable cash flows from both the airport’s aeronautical and non-aeronautical businesses, and there is significant scope for the consortium to add value through investment in the terminal and improving the airport’s retail offering.” ICG managing director Tom Laidlaw said Hedland airport was a critical piece of infrastructure for the mining industry.

“As such, (it) has characteristics that make it a great fit for our investors, such as stable cash flows and the fact the nearest airport is some 250km away,” he said. Debate among the Port Hedland community will now turn to how best to spend the proceeds of the deal. Under one model, the Town claimed it could generate a $388.5 million total return from the deal through a series of annual payments stretching over 50 years.

This involved investing $160 million into a stabilisation fund with a 5 per cent interest rate return. The Town argued the model was based on a conservative investment profile recommended by the WA Treasury Corporation. “This will give us a once-in-a-generation opportunity to fund a whole range of benefits for our community,” Ms Howlett said.

She said the consortium would also bring the financial muscle and know-how to improve infrastructure and services at the airport and even lobby airlines to reduce airfares and create new flights routes to international destinations.