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March 23, 2016

Darwin Port lease: Australia has 'nothing to fear' says Chinese Government

Darwin Port Operations Pty Ltd is the appointed Port Operator for the purposes of a 99 year lease of the Port of Darwin. The Northern Territory Utilities Commission is the regulator in regards port access and pricing in accordance with the Ports Management Act and regulates services prescribed in the regulations by Darwin Port. To further understand the Commission's role, click here

The Ports Management Act provides a framework for the private port operator to prepare and submit an access policy to the Northern Territory Utilities Commission for approval. As the private port operator, Darwin Port is required to comply with its access policy.
To this end, the Draft Access Policy, in accordance with the Act, is now available for review by interested stakeholders via the Northern Territory Utilities Commission website and the attachment link below.  The consultation period is open, with a closing date for submissions by Thursday 7 April 2016, with submissions to be directed to

Chinese company Landbridge to operate Darwin port under $506m 99-year lease deal

No jobs loss guarantee until 2018

Landbridge's Mike Hughes said the company planned on making a "considerable financial investment" in the port.A Chinese company has won the bid to operate the Port of Darwin under a 99-year lease deal worth $506 million, NT Chief Minister Adam Giles has announced.
Mr Giles announced the Port of Darwin will have a new operator under an agreement signed today with the Landbridge Group worth $506 million, in a deal he described as "a fantastic outcome for the Territory".
Under the terms of the agreement, Mr Giles said the Territory would lease the Darwin Port land and facilities of East Arm Wharf, including the Darwin Marine Supply Base, and Fort Hill Wharf to the Chinese-owned Landbridge Group for 99 years.
The Territory will retain Stokes Hill Wharf, Fisherman's and Hornibrook's Wharves and Frances Bay facilities.

As part of the deal Landbridge have paid the full price for the lease, but only taken an 80 per cent ownership stake, Mr Giles said.
Within five years the Chinese company must find an Australian investor to purchase the other 20 per cent, and until that time that stake will remain with the NT Government.
Mr Giles said this kept a promise he had made for a large element of the port to remain in Australian hands.

He said in Landbridge, the NT had "a partner that has demonstrated an outstanding track record of investment and innovation that has underpinned remarkable growth, and with it new trade and jobs".
"The lease process has delivered on many levels and we have ensured that employees, port users and the Government's interests are well protected. This is a fantastic outcome for the Territory," he said.
Before the deal's announcement the NT Government attempted to address environmental concerns about an expansion of operations in the area, which included Aboriginal cultural sites and World War II historic sites.
"We understand the need to protect our natural environment. Any lease of the port, and ongoing operation by a private investor, would need to comply with NT and Federal environment regulations," the Government said on a department website.
In a statement, the Government said it would continue to maintain safety standards at the port:
The Government has implemented safeguards to retain full oversight of safety regulation and operations, including the role of Regional Harbourmaster transferring to the Department of Transport.
The Government retains powers in relation to the licensing of stevedores and the prevention of localised monopolies or vertically integrated activities at the port.
The Territory has step-in rights to correct breaches of key operating standards. The planning and environmental regulations remain unchanged.
 "Landbridge intends to grow two-way trade between Australia and Asia, leveraging Landbridge's existing port and logistics businesses and firmly putting Darwin on the map for Chinese business," he said.
"We plan on making considerable financial investment in the Port of Darwin.
"In addition to committing an initial $35 million of new growth investment expenditure over the first five years, we anticipate in excess of $200 million of capital expenditure over the next 25 years. Given the scope of development opportunities in the Territory, we hope to invest a lot more."
Landbridge said it intends to "maintain the established workforce at the Port of Darwin" at least until 2018.
"There will be no forced redundancies during the term of the current enterprise agreement (which terminates in June 2018)," Mr Hughes said in a statement.
"Landbridge also intends to implement a stable and competitive pricing regime for port services with no more than CPI indexed pricing adjustments for the use of current port facilities.
Landbridge Group is owned by Chinese billionaire Ye Cheng.
Forbes lists 53-year-old Mr Cheng as chair of the privately-held Shandong Landbridge Group, which it said is "active in petrochemicals, logistics, real estate and international trade" as well as port operations.
Forbes lists Mr Cheng as having a 2015 net worth of $1.37 billion
 Growing Darwin Port through a lease

Growing Darwin Port through a lease Darwin port What it means The Northern Territory Government has entered into a 99 year lease of the Darwin Port to the Landbridge Group. This means a private company would help pay for the infrastructure that's needed to grow and develop the port. The government will then have more money for other infrastructure such as schools and health facilities. The port will not be sold. The government will still own the port. It will still belong to Territorians.

What it means

The Northern Territory Government has entered into a 99 year lease of the Darwin Port to the Landbridge Group.
This means a private company would help pay for the infrastructure that's needed to grow and develop the port.
The government will then have more money for other infrastructure such as schools and health facilities.
The port will not be sold. The government will still own the port. It will still belong to Territorians.

DARWIN, Australia — The port in this remote northern Australian outpost is little more than a graying old wharf jutting into crocodile-infested waters. On a recent day, there was stifling heat but not a ship in sight. “Our pissy little port,” as John Robinson, a flamboyant local tycoon, calls it.

The lease to the Chinese company, a shipping and energy conglomerate called Landbridge Group,Landbridge, which is based in Rizhao, Shandong Province, has worked with state-owned companies like China National Petroleum Corporation, which supplies oil to Landbridge and allows it to sell fuel at retail gasoline pumps under the corporation’s name. 

"There is no need for the Australian public to have such concerns over the lease of the Darwin port to a Chinese company," Mr Hong told a daily news briefing in China on Wednesday.

The financially hurting government of the Northern Territory was happy to lease it to a Chinese company in October for the bargain price of $361 million, raising money for local infrastructure projects.
“We are the last frontier; you take what you can get,” said Mr. Robinson, who is known as Foxy. “The Northern Territory doesn’t have the money for development. Australia doesn’t have it. We need the major players like China.”
But the decision has catapulted the port of Darwin into a geopolitical tussle pulling in the United States, China and Australia.
This month, the United States said it was concerned that China’s “port access could facilitate intelligence collection on U.S. and Australian military forces stationed nearby.”

It may not look like much, but the scruffy port is a strategic gateway to the South China Sea, where China is challenging the United States, and it serves as a host base for the United States Marines, who train here six months a year.
Critics contend that the Chinese bought a front-row seat to spy on American and Australian naval operations.

“There is a deep Chinese interest, driving interest, in understanding how Western military forces operate, right down to the fine details associated with how a ship operates, how it is loaded and unloaded, the types of signals a ship will emit through a variety of sensors and systems,” Peter Jennings, a former Australian defense official who is now the executive director of the Australian Strategic Policy Institute, told a parliamentary inquiry.
China has invested in more than two dozen foreign ports around the world, including a port in Djibouti adjacent to an American military base. But the 99-year Darwin lease was the first time the Chinese had bought into a port of a close American ally hosting American troops.
The Australian government did not consult with Washington, and the parliamentary inquiry showed that the corruption-plagued and unpopular government of the Northern Territory, of which Darwin is the capital, had rushed to lease the port to raise money for new projects before an election.

Australia’s defense secretary, Dennis Richardson, rejected the criticism, saying the Chinese could find out what they wanted by “sitting on a stool at the fish-and-chip shop on the wharf” and noting the vessels that entered the harbor.
The lease to the Chinese company, a shipping and energy conglomerate called Landbridge Group, highlighted the competing pressures in Australia between its more than 70-year alliance with the United States and its flourishing trade ties with China.
Australia’s attitude to China swings between greed and fear, people here say. On one hand, huge sales of minerals, property and food to China have kept the country recession proof, and have proved lucrative for the powerful Australian business community and the government.
On the other, the government relies on its deep defense ties with Washington, including close intelligence cooperation, to keep the sparsely populated country safe.
Despite its unimpressive real estate, the port here, which was hit with more Japanese bombs in 1942 than Pearl Harbor, has long had strategic value.


Australia is considering running freedom-of-navigation patrols of the South China Sea from here, according to the American State Department. And this month, the Pentagon asked the national government to base B-1 bombers in the Northern Territory.
American officials say they believe the lease by Landbridge was a strategic deal, not a commercial one. They cited the length of the lease and the fact that Landbridge paid 20 percent more than the two closest bidders.
Among the specific worries, Mr. Jennings said, is that fuel storage tanks used by the American military are inside the area leased to Landbridge. Future construction by the Australian navy for new facilities would be limited to parts of the harbor not under the company’s management, he said.
Australians appear to be worried as well. In an illustration of its pique, the United States commissioned a poll of Australians that found nearly half believed the lease posed “a lot of risk” to national security, and nine in 10 said it involved at least some risk.
The lease was reviewed by midlevel Defense Department officials, who found no problem, the department said. But the review is less stringent for private companies like Landbridge than for state-owned companies, a distinction that means little in China, where private companies often work hand in glove with the government.

 The Australian government changed that policy on Friday, saying that from now on, the Federal Investment Review Board would assess all sales of state-owned critical infrastructure to private companies.
The Landbridge website cites the company’s close ties to the government. Its chairman and founder, Ye Cheng, was honored as one of the top “10 individuals caring about the development of national defense” by the Shandong provincial government in 2013.
Landbridge, which is based in Rizhao, Shandong Province, has worked with state-owned companies like China National Petroleum Corporation, which supplies oil to Landbridge and allows it to sell fuel at retail gasoline pumps under the corporation’s name.
“A strong enterprise does not forget to repay the country, while a profitable enterprise does not forget national defense,” the company says on its website.
In an interview in Beijing, Mr. Ye said the investment fit into the company’s strategy to expand its shipping and energy interests and served China’s foreign policy goal known as One Belt, One Road.
That policy is President Xi Jinping’s signature measure to encourage Chinese investment across Asia into Europe. Participating companies are honored as doing the right thing for China.
“Australia needs China, China needs Australia,” said Mr. Ye, who was in Beijing as a delegate to the annual Chinese People’s Political Consultative Conference, an advisory body to the government.
He dismissed security concerns about his company’s running the port as “paranoia.”
“You Americans think too much,” he said. “You can think what you want, but this is about port-to-port business.”
The port manager, Terry O’Connor, said Australians would continue to run the port. He said there were no plans to bring in Chinese employees.
Mr. O’Connor said shipping movements in and out of the harbor, including of the 100 or so naval vessels each year, mostly Australian and American, would be kept in the company’s Australian computer systems, which are not linked to the Chinese headquarters.
Despite these assurances, American officials say they are keeping a close eye on Darwin. They are also watching to see if Chinese companies buy other important infrastructure in Australia.
A strategic port in Fremantle, Western Australia, where United States warships frequently tie up has been put out for bids.
When President Obama met the Australian prime minister, Malcolm Turnbull, in Manila in November, he registered his displeasure at not being informed about the Darwin lease.
According to a senior American official, Mr. Obama said, “Next time, please let us know ahead of time.”
Yufan Huang contributed research from Beijing.


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