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Port of Newcastle tiffs with Gardior over potential Macquarie role TIF stake

Tuesday, 19 June 2018 | 16:00

The trustee overseeing a change of manager for The Infrastructure Fund’s 50 per cent stake in the Port of Newcastle has told shareholders that it is taking “appropriate measures” to protect the port despite concerns over a potential conflict of interest if a Macquarie fund is appointed.

TIF, which shares ownership of the port in a 50-50 joint venture with China Merchants and owns stakes in Perth and Queensland airports as well as the Sydney Desalination Plant and the New Royal Adelaide Hospital, has been in upheaval since mid-2017, when Hastings Funds Management was sacked as its manager.

Gardior, TIF’s trustee, has been considering other funds to look after TIF’s assets, including Macquarie Infrastructure and Real Assets (MIRA), which manages infrastructure assets around the world.

A memo sent to Gardior’s minority shareholders this month from chairman Jon Addison said the board planned to hold a strategy meeting on July 17, when it would discuss how TIF should be managed.

“Following this meeting, the board will be in a position to confirm the future management of TIF,” Mr Addison said. “In the meantime, discussions will continue with MIRA to determine its capacity and potential role as part of a future TIF operating model.”

However, the possibility of MIRA overseeing TIF’s stake in the Port of Newcastle has raised red flags with the port, which is worried about conflicts of interest with MIRA’s 49 per cent stake in rail freight group Genesee & Wyoming Australia.

G&W owns coal haulage group Grail, whose biggest customer is its former owner, mining group Glencore.

The Port of Newcastle and Glencore have been engaged in bitter legal fights for years over port fees, with the Australian Competition and Consumer Commission now in charge of arbitrating disputes.

Conflict concerns
The port is worried that if MIRA ends up managing TIF’s 50 per cent stake, it will be tempted to favour Glencore in any future disputes.

The port is also trying to establish itself as an alternative container terminal to Port Botany, and wants new chief executive Craig Carmody to lobby its cause with state and federal politicians.

It is concerned that any association with MIRA may undermine public and political support for the container terminal due to Macquarie’s role advising companies such as Transurban, which is trying to buy a 51 per cent stake in the WestConnex tollroad designed to take trucks to and from Port Botany.

Macquarie declined to comment on the alleged conflicts of interest.

Port of Newcastle chairman Roy Green expressed his concerns to former Gardior chairman Bob Lette in a letter in late April.

However, Mr Lette – who represented one of Gardior’s shareholders, building and construction industry super fund BUSSQ – was removed the board the same month after questioning the potential appointment of MIRA. Two other Gardior directors, Ian Gillings and Nick Basile, stepped down following Mr Lette’s departure.

Mr Lette was replaced as BUSSQ’s representative by BUSSQ’s chief investment officer and former CEO, David O’Sullivan, who supported MIRA as TIF’s sole investment manager.

Mr O’Sullivan subsequently confirmed to the ABC that he sat on the advisory board of a fund managed by MIRA, the Macquarie Pastoral Fund, raising questions whether he had conflicts of interest.

Considering all options
Mr Addison, who succeeded Mr Lette as chairman, told The Australian Financial Review on Friday that he could not comment on the reasons for the three directors’ departures.

Gardior is undertaking a “comprehensive, lengthy and multi-stage due diligence process” to decide TIF’s future operating model and the potential selection of a new TIF asset manager, Mr Addison said.

“The Gardior board intends to consider all options meticulously and we will not speculate on the outcome of this process.”

Gardior has hired consulting group JANA to advise it on the selection process so that “there could be no question that strong governance and due diligence procedures were followed,” Mr Addison said.

JANA was initially hired last year and initially suggested that TIF’s management be internalised, but this year switched to recommending MIRA, according to people familiar with the advisory process.

Mr Addison’s June memo stated JANA had been “re-engaged” by Gardior to provide “independent guidance”.

Gardior’s board has five directors, including Mr Addis

on, who has been a director since 2005. Gardior’s shareholders include the Australian Catholic Schools & Retirement Fund, Energy Super, Sun Super, and Suncorp as well as BUSSQ.

Mr Addison has told TIF investors that two new directors will be appointed to the board by June 27.
Source: Australian Financial Review

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