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Analysis missing from WA govt's port spend

November 18, 2010 - 7:34PM

The West Australian government leapt into committing millions of dollars to the Oakajee Port development in the state's midwest without properly assessing whether it was a worthy investment, a parliamentary committee says.

The state government in May last year pledged to contribute $339 million to the $4.4 billion Oakajee project, which was swiftly matched by the federal government following lobbying by WA Premier Colin Barnett.

"The decision to fund the common-use infrastructure at the Oakajee Port project was made without a cost-benefit analysis," a report tabled by a parliamentary committee on Thursday said.

Advertisement: Story continues below "Therefore, at the time the decision was made, it was not clear whether this arrangement represented the best value for money for the state.

"The Commonwealth funding for the Oakajee Port common-use infrastructure is contingent on the bankable feasibility study (BFS) demonstrating a positive cost-benefit outcome and commercial rate of return.

"If the positive cost-benefit outcome is not demonstrated in the BFS, and the Commonwealth does not proceed with its equity injection, it is not clear what impact this would have on the state government's contribution to the project."

Murchison Metals Ltd, which is developing the project under its Oakajee Port and Rail joint venture between Japan's Mitsubishi, this month pushed back the target date for completion of the BFS from the December quarter of this year to the second quarter of 2011.

Murchison has also moved to quell speculation that Mitsubishi wants to pull out, with chairman Paul Kopejtka labelling the talk "a concerted campaign of destabilisation based on rumour and misinformation".

"I would like to assure shareholders that we are committed to completing the feasibility studies for the projects and thereafter financing and project go ahead," Mr Kopejtka said at the company's annual general meeting in Perth on Wednesday.

"We plan to complete the financing process, incorporating both debt and equity, in the period following completion of the feasibility studies and prior to project go-ahead.

"We are working with the state government on the issues that arise from the revised schedule, and I am confident of an outcome that will realise our common goal of the development of a deepwater port at Oakajee and the opening up of the midwest region."

Oakajee Port will export iron ore from a swathe of new mines starting up in the midwest region amid congestion issues at the nearby Geraldton Port.



Committee questions Oakajee benefits

18-November-10 by Kym Fuhrmann


A Labor-dominated parliamentary committee has questioned whether the state government's contribution to the Oakajee port project was the best value for money for taxpayers.

The Public Accounts Committee report was table in parliament today.

The Committee, chaired by Balcatta MLA John Kobelke, examined Western Australia's infrastructure planning mechanism, the Strategic Asset Management Framework (SAMF).

It also examined funding options available to government.

The key projects it considered including the Oakajee port project, Perth Police complex, Perth City Link, Ord-East Kimberley Expansion Project and the New Perth-Bunbury Highway.

The inquiry assessed the projects against best-practice asset management, planning and assessment practices.

The committee made 26 finding and 10 recommendations.

In relation to Oakajee the committee said, "The decision to fund the Common Use Infrastructure of the Oakajee Port project was made without a cost-benefit analysis,"

"Therefore, at the time the decision was made, it was not clear whether this arrangement represented the best value for money for the state."

It made three specific recommendations in relation to the project stating that the State Development Agreement for the Port and Rail project be made public.

It also recommended the Minister for State Development publish the difference between the private and public iterations of Oakajee Port Common Use Infrastructure, together with the needs analysis underpinning the decision to provide public funds.

The committee also wants the Minister to publish details of any economic evaluation undertaken as to the benefit derived from the commitment of public funds for the Oakajee Port Common Use Infrastructure project.

"The current government claims that the reason for public funding is to make the port a multi-user, multi-function facility," the report said.

"It is not clear that there is sufficient demand for on-shore value-adding and, therefore, the need for the multi-function Common Use Infrastructure at Oakajee Port.

"If the industry demand does not eventuate, considerable public money will have been expended on a project that had not been supported by rigorous analysis of need."