$115m Lucky Bay Port Development Breakthrough

News

South Australia’s first farmer and private equity partnership port will be built at Lucky Bay on Eyre Peninsula, providing an alternative grain storage and export option which will be fully operational for the 2018-19 grain harvest.

Funding for the $115 million port infrastructure and supply chain development project was finalised last week, which involved securing $96 million in private investor equity and debt. As a result, on-ground work is due to commence immediately.

After an expression of interest phase last year, 120 EP grain growers indicated their support for the project with 377,000 tonnes of estimated throughput. These growers will acquire equity in the port for ongoing throughput over the next seven years.

Key features of the development include:

- The Lucky Bay Port Facility, a shallow harbour port located in the upper Eyre Peninsula grain catchment zone.

- A state-of-the-art shallow draft transhipment vessel with a 3500-tonne capacity, allowing Panamax vessels to be loaded within the usual five-day industry standard. The transhipment vessel is currently under construction in China.

- Grain storage facilities at the port, with the capacity to hold 387,000 tonnes.

- Up-country storage at Lock with the capacity to hold 150,000 tonnes.

In addition to the increased competition in the EP supply chain, grain growers are expected to save from $5-$20 per tonne in transporting grain from farm to port, depending on their proximity to Lucky Bay.

Future diversification at the port into fertiliser importation will generate further freight savings of $25-$40/t for growers currently importing fertiliser from Port Lincoln and Port Adelaide. Over time, growers could avoid upland storage fees by building on-farm storage to deliver directly to Lucky Bay.

The port’s development has been a joint venture between Inheritance Capital Asset Management (ICAM), Duxton Asset Management and Sea Transport Corporation, a world leader in transhipment vessels. From these three partners, a new company has been formed as the port operating entity following settlement. The new company is named T-Ports, an abbreviation of transhipment ports.

T-Ports Chairman Rob Chapman says the company’s ports infrastructure strategy centres on developing a more financially feasible ports model. This includes shallow water ports with a lower build cost and smaller environmental footprint requiring modest throughput, providing sound financial returns to investors.

The ports will be multi-user and multi-commodity transhipment ports, with the first at Lucky Bay and a second under investigation for Yorke Peninsula.

“South Australia is in need of new export infrastructure in order to improve agricultural economics and allow development of its mining assets in an increasingly competitive world environment,” Mr Chapman said.

“While this port development is based on agricultural product, it can readily expand to allow exports of local minerals and T-Ports will be pursuing opportunities to further diversify and grow the commodity base.”

T-Ports CEO Kieran Carvill says the clear direction from growers has been to increase supply chain efficiency which will be achieved through Lucky Bay as a low capital expenditure and flexible port close to the product origin.

“This investment innovates upon the traditional port model and almost monopolistic grain supply chain in South Australia through proven transhipping technology that has been utilised in other industries for the past 20 years,” Mr Carvill said.

“The lower build cost and lower environmental footprint compared with traditional export port facilities in South Australia has made the financial feasibility of the investment easier to attain with a lower throughput requirement from growers.

“This model means growers can access multiple small ports that can load vessels up to and including cape size, allowing product to be exported profitably, which will prove a great benefit to EP growers and South Australia.”

Lock grain grower and T-Ports Board Member Andrew Polkinghorne says the Lucky Bay project had been the breakthrough that many EP growers were waiting for in supply chain competition.

“While there have been a number of projects flagged for EP, Lucky Bay is a reality, it is funded and work is starting. The benefits of this project will flow through to farming families, and their local communities, as they secure equity in T-Ports and, as a result, a share of the profits of storing and shipping their grain.

“EP growers who did not respond during the EOI period can still be involved. A retail fund will be set-up before June 2018 that gives growers the opportunity to have some cash ownership in the development and either become involved or further increase their support.

“It’s a great outcome for EP growers, the investors who supported it and the state as a whole.”