Exporters cry foul at Gero port charges

Nick EvansThe West Australian

The State Government is facing growing pressure from miners and grain growers over a Geraldton Port levy that makes the facility one of the most expensive export ports in the country.

The levy, a $2.82 a tonne charge on bulk exports, is believed to be one of the major issues raised with the Government by struggling magnetite exporter Karara Mining as it seeks to cut costs and stay in business.

It is seen as a major impost by other users of the port, who accuse the Government of profiting from a levy introduced solely to repay infrastructure borrowings.

The so-called Port Enhancement Project charge was introduced in 2003, with the support of the port’s major exporters.

Letters to port users from senior Geraldton Port executives in 2002, seen byWestBusiness , say the levy, introduced at $2/t, would be used solely to repay $107 million in loans from the WA Treasury, which were used to widen and deepen the channel at the port to increase its export capacity.

A November 2002 letter says the loans were initially for a 30-year period, but the entry of miner Mount Gibson Iron to the port would allow them to be repaid in half that time.

Twelve years later the levy has raised more than $210 million, and it has since risen to $2.82/t.

Transport Minister Dean Nalder confirmed yesterday that $66.8 million was still owed on the original Treasury debt.

WestBusiness calculations show that only about $180 million would need to be collected to repay a $107 million loan in 15 years, at an interest rate of 7.5 per cent.

The port collected $35.7 million from the levy last financial year, 37 per cent of its total income and its largest single source of revenue. Without the PEP Geraldton would likely have booked a $10 million loss for the financial year.

But while Mr Nalder said the charge was applied to all vessels “specifically for the purposes of servicing the loan repayments on this investment”, exporters believe the levy is being used a general revenue source, and say it likely makes up a significant portion of the dividends paid each year to the Government.

In the 2013-14 financial year, Geraldton collected $33.4 million in PEP revenue, about 32 per cent of its total income. That year the port made an after-tax profit of $25.3 million. Based on the profit, it paid a $16.5 million dividend to the Government the following year.

If last year’s 17 million tonne export level is maintained, the port will collect at least another $600 million from the PEP before the loans expire in 2032.

Port users also accuse the Government of a lack of transparency over the terms and rates of the Treasury loans.

In 2013, port correspondence to exporters complaining about a lack of transparency around the debt and levy said the borrowing arrangements were “quite complex”, and included multiple tranches on differing terms.

“The result of this structured finance has meant that PEP funds available for debt servicing have been either charged to meet the port’s significant interest, tax and other payment obligations to the State, or have been accumulated as cash reserves to meet future balloon repayments,” said the reply.

The Government launched a review into charges at Geraldton last May last, partly in response to industry concerns.

Mr Nalder said it would consider its response to the pricing review “in due course”. “The report will not be released as it deals with information that is commercial in confidence to the port’s customers,” he said.

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