CHINESE energy and infrastructure group Landbridge will consider opportunities to build hotels in the Northern Territory after paying $506 million for a 99-year lease for the Port of Darwin.
As flagged by The Australian Financial Review'sStreet Talk column, the privately held Chinese company - which has a real estate arm that develops hotels - beat local and international consortiums to operate the port after it was privatised by the Northern Territory government.
Landbridge will invest $200 million in the port over the next 25 years to boost trade and tourism links with Asia, including improving cruise ship facilities. The port is an emerging destination for cruise ships, with 65 cruise ship visits in 2014-15, the highest number in six years.
"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," said Landbridge Infrastructure Australia's director, Mike Hughes.
The Chinese group is also understood to be keen on building new hotels in the city. The Northern Territory government is considering a luxury hotel development in Darwin.
Northern Territory chief minister Adam Giles said the Territory would benefit from Landbridge's "position, networks and experience" in Asia.
Nearly half the 3.4 million tonnes of total cargo that passed through the Port of Darwin in 2014-15 was traded with China, mostly bulk mineral exports.
ChAFTA to boost trade
Trade to China is expected to receive a further boost when the China-Australia Free Trade Agreement comes into effect.
Federal Trade and Investment Minister Andrew Robb said Landbridge's investment in the port would be "a huge spur" to the development of Australia's north and encourage additional investment in agriculture, resources and energy and infrastructure.
Landbridge is initially planning to develop warehousing for refrigerated products at the port to expand boxed meat exports. The Australian Agricultural Company started operating a new abattoir near Darwin in October to supply beef to the US and Asia.
Singapore is the Port of Darwin's second-biggest trading partner.
Cargo movements through the port dropped 40 per cent in 2014-15 compared with a year earlier, mostly due to a fall in iron ore exports, but live cattle exports rose 51 per cent to a record 613,473 head of cattle.
Landbridge owns a port at North Haizhou Bay in Shandong province, south of Beijing and is currently expanding the port's capacity to more than 200 million tonnes annually. It also owns a Brisbane-based coal seam gas producer, WestSide Corporation.
The Northern Territory government will retain an initial 20 per cent stake in the port and Landbridge will look for an Australian investment group or company to acquire the stake within the next two years.
But Northern Territory taxpayers will benefit from expected increases in trade flows through the port in the future due to an agreement with Landbridge that allows it to take a percentage of the port's revenues above a certain level, which has not been disclosed.
Landbridge paid a multiple of 25 times the port's 2016 estimated earnings before interest, taxation, depreciation and amortisation to secure the sale. Similar earnings multiples were paid by infrastructure investment group Hastings Funds Management and Chinese conglomerate for New South Wales' Port of Newcastle last year, and by Industry Funds Management, Australian Super and the Abu Dhabi Investment Authority when they acquired the Port of Botany in 2013.
