Auckland Mayor Wayne Brown is clearing the way to sell Ports of Auckland’s operating business while keeping the prime waterfront land in public hands.
Two weeks after Brown achieved a partial sale of the council’s shareholding in Auckland airport, the Herald can reveal that plans are well advanced to offload the city’s port business by selling an operating lease as early as next year.
“The beauty of it is Auckland Council is not selling anything,” one source told the Herald.
Secret plans to sell the port business got underway by former Mayor Phil Goff and senior council staff when global port operator DP World made an unsolicited $1 billion bid for the port in 2021.
A mayoral spokesperson said the future of the port’s waterfront land and its operations is one of the mayor’s highest priorities.
To help inform the council’s options for Ports of Auckland, said the spokesperson, the council has canvassed the views of port operators and investors but has not received final advice.
Brown met with representatives of DP World on a tour of the Port of Busan during a visit to the World Climate Industry Expo in South Korea last month, the spokesperson said.
A three-pronged review into future options for the port is nearing completion and due to land on Brown’s desk within the next fortnight before being presented to councillors at one or more confidential workshops ahead of a confidential governing body meeting next month.
The plan is likely to be included in the new 10-year budget process starting later this year and a request for proposals could go to the market next year.
The council’s development agency, Eke Panuku, is putting together conceptual plans outlining opportunities and options, possibly including a stadium, for the port land to be considered at a confidential workshop on June 28.
The Auckland Museum view shaft to Rangitoto places height limits on the port land, restricting apartment and other buildings to between four and six stories.
The other parts of the review are being carried out by the engineering firm GHD into how the port could operate on a smaller footprint while maintaining its value and by the Australian consultancy Flagstaff assessing the process for seeking expressions of interest.
Port chief executive Roger Gray said the business is participating with Flagstaff, GHD, and Eke Panuku by providing them with information.
He said the port had given Flagstaff financial information to allow them to assess the value of a possible long-term operating lease, GHD infrastructure information such as the condition of the wharves, trade flows, and ship calls; and attended sessions with Eke Panuku to explain things like what is reclaimed land and boundaries to allow it to envision the future correctly.
“We have commented on the draft reports and a couple of assumptions that might have not been correct,” said Gray.
Gray said when it comes to any decisions on the operating model and ownership options for the port, they are a matter for the council, which owns 100 per cent of the company.
Asked about the potential benefits of selling an operating lease, he said there is the opportunity for global best practice, digital integration, and potentially a linked-up network with Australian ports.
A new port operator could run the port with the existing management, he said, saying the board and management were comfortable with the process and possible outcomes.
“Every business I have ever worked in has been up for sale,” said the former Australian Army Lieutenant Colonel, whose last job was running the Port of Lyttelton and senior jobs at Air New Zealand before that.
A lease sale could involve a lump sum payment, annual rental, and profit share, or a combination of these. The biggest negotiating issue will be the term of a lease with port operators expected to want a long-term lease.
A source said Brown is “willing to compromise and do deals” on the lease but would not be interested in a long-term lease resulting in Aucklanders losing control of the land for decades.
This morning a spokesperson for the mayor reconfirmed his position - that the port land was not for sale.
“He has allowed a process to continue that will enable the governing body to consider all other options including an operating lease before they make any decision.
“The Mayor himself says he is open-minded about the best solution and is generally interested in reading the advice and seeing what councillors think about it.”
The spokesperson said this would involve engaging multiple stakeholders including the maritime union, users of the port and Aucklanders.
“Any process to consider operating lease would invite participation from all interest parties through a competitive process.”
It’s an open secret that DP World, based in Dubai and which operates terminals in 40 countries, made an unsolicited to the council in early 2021 to buy the port outright or the “opco/propco” model for a long-term lease to operate the business with the land remaining in public ownership.
Goff was understood to be keen, as were senior council officers, but the mayor recognised problems with the Overseas Investment Office and the sale of a strategic asset, and took soundings with senior ministers in the Beehive, a source said.
Ministers told Goff a full sale would be hard to get across the line, said the source, saying the operator company/property company - “opco/propco” - model was pursued with a sweetener in the form of the NZ Super Fund becoming a local investment partner along with a Canadian pension fund, CDPQ.
Flagstaff was hired to provide advice on the possible sale, but the process stalled in the lead-up to the 2022 local body elections when Goff got cold feet about the issue becoming a political football, according to a source close to the council.
Enter Wayne Brown, an advocate for moving the port to Northport and elected as Mayor of Auckland last year, promising to free up port land for public use and improve financial returns to ratepayers.
After the Herald broke a story that senior executives from DP World could be in Auckland for secret talks on securing a lease to run Ports of Auckland two weeks into his mayoralty, Brown said there was no way the council would ever agree to a lease locking the port into used cars and containers for decades.
He instructed council chief executive Jim Stabback to hand over all the papers and advice from the Goff era, believed to run to hundreds of pages, including decisions taken at secret meetings.
When the Herald sought the documents, including a list of the documents, under the Local Government Official Information and Meetings Act, the council refused to release a single page, citing commercial activities and negotiations.
DP World, whose Asian Pacific & Australian chief executive and managing director Glen Hilton has been central to talks with the council, is not saying anything about its interest in Ports of Auckland.
But a source said DP World is prepared to free up Marsden, Captain Cook and the bulk cargo Bledisloe Wharf for the public over time in exchange for a lease on the port business with the NZ Super Fund and CDPQ as partners.
DP World is confident it can downsize the port operations and free up the three wharves by making better use of the existing car park building for imports and moving freight off the roads and onto rail to a bigger inland port in South Auckland, which will require significant new investment in rail infrastructure.
Ports of Auckland currently has a 15ha inland port at Wiri, including the land it owns and some leased from KiwiRail. Currently, 12 per cent of freight is moved off the port by rail and the goal is to increase that to 20 per cent, which is as much as KiwiRail can handle on the network and a new third line being built between Westfield and Wiri.
Some bulk cargo at the Auckland port could also go to the Ports of Tauranga or Northport, the source said.
At least one other international port company is believed to be sniffing around the sale and a spokeswoman from the NZX-listed Port of Tauranga said it is keen to be part of any conversation, saying the broader Upper North Island supply chain will be impacted by any decisions regarding Ports of Auckland.
“We believe that there’s potential in the three ports – Northport, Auckland and Tauranga – collaborating to deliver an efficient supply chain, avoid the need to build a new port for at least three decades, and free up port land to return to Auckland ratepayers.
“It will take some investment in transport connections - and we need our planned berth extension to get the go-ahead - but it’s definitely doable,” she said.
Ngati Whatua Orakei Trust deputy chairman Ngarimu Blair said the iwi is very interested in purchasing the port land, and the operations if that is all there is for sale.
He said Ngati Whatua had expressed its interest in the port to Brown and previous Auckland mayors.
The NZ Super Fund had no comment to make about any possible involvement in a possible port sale.
Bernard Orsman is an Auckland-based reporter who has been covering local government and transport since 1998. He joined the Herald in 1990 and worked in the parliamentary press gallery for six years.
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