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2020/21 Statement of Corporate Intent Ports Authority STATEMENT OF CORPORATE ~ ~ FPILBARA PORTS INTENT 2020/21 ~ AUTHORITY

TABLE OF CONTENTS

1. FOREWORD ...... 3 2. STRATEGIC CONTEXT ...... 4 2.1 Legislative Context ...... 4 2.2 Port Governance Review ...... 4 2.3 Port Services ...... 4 2.4 Assets and Port Facilities ...... 5 2.5 Major Customers ...... 6 2.6 Current and Emerging Markets ...... 6 2.7 Procurement ...... 6 2.8 Certification ...... 7 2.9 Risk Management Framework ...... 7 2.10 Environment and Heritage ...... 7 2.11 Salaries and Wages ...... 8 2.12 Pilbara Ports Authority response to COVI D 19 ...... 8 3. KEY STRATEGIC THEMES AND MAJOR INITIATIVES ...... 10 4. FINANCES AND PERFORMANCE INDICATORS ...... 11 4.1 Trade Forecasts ...... 11 4.1.1 ...... 12 4.1.2 Port of Dampier ...... 12 4.1.3 Port of Ashburton ...... 12 4.2 Performance Indicators ...... 15 4.3 Financial Summary ...... 16 4.3.1 Dividend policy ...... 17 4.3.2 Efficiency Dividend ...... 17 4.3.3 Investment policy ...... 18 4.3.4 Pricing ...... 18 4.3.5 Sustaining Infrastructure Due ...... 19 4.3.6 Rate of return ...... 19 4.3.7 Operating subsidy- Dampier Bulk Liquids Berth ...... 20 4.3.8 Financial Parameters ...... 22 4.4 Capital Expenditure Program ...... 23 4.4.1 Service Delivery Objectives ...... 23 4.4.2 Capital Works Program ...... 23 5. INFORMATION TO BE REPORTED TO THE MINISTER FOR PORTS ...... 25 6. ABBREVIATIONS ...... 26

A848846 Page 1 of 26 STATEMENT OF CORPORATE ~ ./h lLBARA PORTS INTENT 2020/21 ~ AUTHORITY

VERSION PREPARED BY DATE AMENDMENT

1.0 R Sarros 08/11/2019 Initial for Executive approval

2.0 R Sarros 21/11/2019 incorporating feedback from Executive

3.0 R Sarros 10/12/2019 incorporating feedback from Board

4.0 R Sarros 7/09/2020 re-submission incorporating changes for Minister

A848846 Page 2 of 26 STATEMENT OF CORPORATE ~ ./h lLBARA PORTS INTENT 2020/21 ~ AUTHORITY

1. FOREWORD

PPA's primary function is to facilitate trade in the Pilbara. In 2019/20, a total annual throughput of 717.2Mt was achieved through 17,061 safe vessel movements. Profit before income tax for the financial year was $188.1 million, and total payments to the State were $116.2 million, including dividends and income tax.

The forecasts presented in this Statement of Corporate Intent are for continued trade growth. Forecasts indicate a two (2) per cent increase in trade in 2020-21 , to 732.82 million tonnes. Exports of , LNG and salt through privately operated berths are forecast to increase by 12.5 million tonnes (2%), while trade across PPA operated multi­ user berths is estimated to increase by 12.5%, from 25.3 million tonnes in 2019-20 to 28.4 million tonnes in 2020-21 .

The major initiatives presented in this Statement of Corporate Intent has been devised through collaboration with the Executive and Board of PPA whilst also aligning with the priorities of Government. These include delivering the WA Government's Spoilbank Marina development and administering the Port Hedland Voluntary Buy-Back Scheme and Maritime Precinct, growing freight links and capability to service direct shipping into the Pilbara. PPA will continue to work with industry to establish an LNG bunkering Hub in the Pilbara, which will also support the Government's climate policy.

PPA will continue work closely with the Minister for Ports, the Department of Transport, the Department of Jobs, Tourism, Science and Innovation and the Department of Treasury, the Pilbara Development Commission and other Government agencies, port users and the communities in which it operates, to achieve the objectives in this Statement of Corporate Intent.

Brad Geatches

Chair, Pilbara Ports Authority Board of Directors

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2. STRATEGIC CONTEXT 2.1 Legislative Context This Statement of Corporate Intent (SCI) has been prepared by Pilbara Ports Authority (PPA) and is submitted under the provisions of the Port Authorities Act 1999 (YVA) (the Act) .

PPA is a statutory authority established on 1 July 2014 and encompasses the operating ports of Ashburton, Dampier and Port Hedland. In 2017, the Port of Balla Balla was proclaimed and PPA was granted a Management Order over Port of Cape Preston East.

This SCI outlines PPA's planned achievements and proposed major initiatives in the 2020-21 financial year. As per Section 34A of the Act, PPA will comply with approved requirements regarding capital expenditure limits and associated funding, and endeavour to achieve financial outcomes that are consistent with forecasts contained in approved financial statements.

2.2 Port Governance Review The Ports Legislation Amendment Act 2019 (YVA) came into effect in February 2019. The legislation amends seven port-related Acts, enabling transfer of ports currently regulated under the Shipping and Pilotage Act (1967) (WA) (and related Acts) to the Port Authorities Act (1999). This enables regulatory responsibility for the Ports of , Barrow Island, Cape Preston, Onslow and Varanus Island to be transferred from the Department of Transport (DoT) to PPA.

Figure 1 provides a map of PPAs existing and future ports.

2.3 Port Services PPA provides overall port management and coordinates vessel traffic service (VTS) coverage, ship scheduling , berthing allocations for multi user facilities and port communications. PPA also oversees safety and port security and cooperates with Commonwealth Government agencies responsible for customs, quarantine and marine safety.

PPA contracts out or issues licences for pilotage, towage, helicopter and pilot boat transfers, mooring, bunkering, stevedoring, security and waste management. All service provider licences are issued under the provisions of the Act on a non­ exclusive basis.

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2.4 Assets and Port Facilities In total , PPA manages assets with a written down value exceeding $2.3 billion (financial year 2018-19). Additionally, PPA manages a total 10,527 hectares of land (including wharves and inner harbour) at Port Hedland, Dampier, Ashburton and the recently acquired port reserves over the future port of Cape Preston East.

PPA ports provide for private and common user facilities. PPA provides and maintains shipping channels, navigation aids, multi-user cargo berths and leased terminals. Where applicable, PPA also provides wharf laydown areas, bio-security facilities, ship loaders, conveying systems, port road transport infrastructure and other port infrastructure such as storage sheds, offices and amenities.

At the Port of Port Hedland all but four of the 19 berths are private facilities. Private berths are owned and operated by BHP Billiton Iron Ore, and Infrastructure. PPA owns and operates general cargo facilities located on the east side of the harbour and the Utah Point Bulk Handling Facility (BHF) which provides an export outlet for junior miners. PPA also provides and maintains a commercial jetty for use by small craft operators and a public jetty accessible to the general community.

The Port of Dampier comprises private port terminals owned and operated by , North West Shelf Joint Venture and Woodside Energy. Rio Tinto also provides and maintains its own shipping channel. Toll and Qube also operate private facilities in King Bay and adjacent to the Dampier Cargo Wharf (DCW). The DCW and Bulk Liquids Berth (BLB) are owned and operated by PPA.

The Port of Ashburton general cargo facility was transferred to PPA ownership in December 2018. Pilotage, towage, stevedore and bunkering services are now secured with non-exclusive licenses issued to multiple service providers. The Port is now supported by office areas with additional ablutions and office accommodation for contractors and visiting agencies. Development of the port to receive general cargo is ongoing , with planned laydown areas and investigations underway into permanent water and power supply to the port.

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2.5 Major Customers Approximately 98 per cent of Port of Port Hedland exports comprise iron ore, with key exporters including BHP Billiton Iron Ore Pty Ltd, Fortescue Metals Group Ltd and Roy Hill Infrastructure Pty Ltd . Smaller exporters include Consolidated Minerals Limited, Pty Ltd and Mineral Resources Limited (via Utah Point). Key customers at the general cargo berths include Dampier Salt, Pilbara Minerals, Altura Minerals and fuel importers, Caltex and BP.

Approximately 82 per cent of Port of Dampier throughput comprises iron ore from Rio Tinto. The next largest contributor at 15 per cent is gas products. Gas exporters include North West Shelf Joint Venture and Woodside Energy Ltd. Other key customers include Dampier Salt Ltd , Yara Pilbara Fertilisers Pty Ltd and Viva Energy Pty Ltd .

The Port of Ashburton's primary exports comprise gas products from Chevron Australia Pty Ltd and its associated joint venture partner operations. Chevron commenced LNG export in October 2017.

2.6 Current and Emerging Markets PPA continues to work with government and industry on trade growth and diversification opportunities including, but not limited to, container and Ro-Ro services, urea, potash, building and construction materials, livestock and cruise ships.

PPA is assessing opportunities to support the Western Australian Government's Lithium and Energy Materials Industry Strategy and Hydrogen Strategy. This includes, but is not limited to, facilitation of port infrastructure and seeking of licence amendments to support increased mineral concentrate shipping (lithium, copper etc) and potential methanol and hydrogen projects.

2. 7 Procurement PPA is committed to supporting the Pilbara regional and WA State economies by encouraging and supporting local industry and regional business participation. PPA's procurement policies and procedures, apply the State Government's procurement policies and strategies including Regional Price Preference, the WA Industry Participation Strategy (WAIPS), and the Aboriginal Procurement Policy.

Consideration to these policies is given in the context of PPA's broader commitment to achieving value for money, when procuring goods and services. PPA is also cognisant of its obligations regarding Australia's free trade agreements.

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2.8 Certification Since 2011, PPA has maintained a certified Integrated Management System that supports service quality and consistency. In 2019 a successful recertification was conducted. PPA is currently certified to:

• ISO 9001 :2015 Quality Management System. • ISO 14001 :2015 Environmental Management System. • ISO 45001 - Occupational Health and Safety Management Systems. • ISO/ IEC 27001 :2013 Information Security Management System. • AS/NZS 4801 :2001 Occupational Health and Safety Management System. • OHSAS 18001 :2007 Occupational Health and Safety Management System.

Additionally, PPA is represented on the National Vessel Traffic Services (VTS) Working Group chaired by the Australian Maritime Safety Authority (AMSA). PPA operated ports of Ashburton, Dampier and Port Hedland are certified as VTS accredited ports by AMSA.

2.9 Risk Management Framework PPA's Enterprise Risk Management Framework (ERMF) provides a consistent approach to risk management throughout PPA's operational, strategic, commercial, financial and project environments.

PPA manages risk in accordance with the Australian/New Zealand Risk Management Standard ISO31000:2009. Risk identification and assessment is conducted on a regular basis and captured in a register. Significant risks that may impact PPA's ability to achieve objectives set out in this SCI have been assessed and considered in the identification of strategic priorities and key initiatives.

2.10 Environment and Heritage PPA maintains its social licence to operate by ensuring strong environmental and heritage management performance.

PPA has adopted an Environmental Management System compliant with the international standard ISO14001 :2015. This provides a risk-based framework that allows for the assessment of environmental impacts associated with PPA's activities and services. Ongoing management and improvement of processes and activities will remain a key focus to ensure high levels of compliance against regulatory instruments.

Copies of PPA's Environmental Management Plan (EMP) and Cultural Heritage Management Plan (CHMP) are available for download from the Environment and Heritage section of PPA's website. The EMP is reviewed annually and the CHMP is reviewed every two years.

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2.11 Salaries and Wages PPA conducts negotiations, along with planning of wage increases and associated conditions, in accordance with the guidelines contained in the Western Australian Government Public Sector Wages Policy.

2.12 Pilbara Ports Authority response to COVID 19 In response to the COVID-19 pandemic, PPA established a steering committee and adapted operations as the situation evolved. The ports of the Pilbara have continued to operate safely and reliably throughout the pandemic.

PPA has a strong commitment to health, safety and wellbeing that extends to everyone in the port community. One of the issues that has arisen from the COVID- 19 pandemic is the welfare of seafarers, many of whom are fatigued after months at sea. PPA is acting to ensure seafarers receive appropriate care.

PPA has a Business Continuity Plan (BCP) which has been in place for many years. In accordance with the BCP, PPA convened an incident management team to address the impact of the COVID-19 pandemic on the business.

The team has met regularly and reported to the Authority's executive. It has monitored developments in government directives, assessed the effectiveness of current controls and plans, and endorsed actions relating to business continuity, including changes to employment working arrangements. It has addressed all aspects of PPA's response to the pandemic, including managing the risk of contamination and its spread, and other business continuity matters. The team has also been responsible for the communications strategy during the pandemic, dealing with communications to government, staff and the maritime industry.

The BCP has been updated to reflect some of the challenges posed by the pandemic. These have been reflected in a management plan developed specifically for COVID-19.

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3. KEY STRATEGIC THEMES AND MAJOR INITIATIVES Table 1 below identifies PPA's key planned major initiatives for the period of this SCI .

Table 1: Key strategic themes and initiatives KEY STRATEGIC MAJOR INITIATIVES THEMES

Regional Grow direct Pilbara freight links through enhanced business development prosperity and capability development Cause investment in multi-user port infrastructure at Lumsden Point, Dampier and Ashburton

Optimal land use Support Infrastructure WA's preparation of a 20 year State Infrastructure planning and Strategy environmental management in Integrate land use planning, delivering optimal outcomes for Port & Town of Port PPA ports Hedland Administer the WA Government's Port Hedland Voluntary Buy-Back Scheme and Maritime Precinct development

Deliver the Spoilbank Marina initiative through PPA expertise & governance.

Appropriate Review port pricing policies & processes financial returns to the State Engage with industry regarding port development opportunities at Ashburton, Dampier and Lumsden Point

Improve Support regional employment. Continue cadet and graduate programs and to organisation provide training opportunities for youth through its support of the Public Sector capability Commission trainee programs.

Plan for and resource Shipping & Pilotage Act ports integration and greenfield port developments

Port industry Support shipping emissions reduction and environmental sustainability sustainability initiatives including emission studies, promotion of LNG Bunkering and investigation of environmental incentive programs

Manage dust emissions from licenced premises through innovation and planning controls and development of a communication and stakeholder engagement strategy to respond to community concerns regarding dust management in Port Hedland.

Future Battery Industry Strategy and Renewable Hydrogen

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4. FINANCES AND PERFORMANCE INDICATORS 4.1 Trade Forecasts The ports of Dampier and Port Hedland are two of the world's largest bulk export ports, responsible for approximately 80 per cent of Australia's and 42 per cent of the world's seaborne iron ore exports. PPA also facilitates approximately nine per cent of the world's LNG exports and approximately 10 percent of the world's solar salt exports.

PPA uses internal forecasting, combined with industry collaboration, media monitoring and stakeholder consultation, to determine projected resource production and export and import level allocations.

A more detailed port by port throughput breakdown is set out below and in Table 3, Table 4 and Table 5.

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4.1.1 Port of Port Hedland Throughput is anticipated to grow marginally with total throughput in 2020- 21 forecast to be 547.99 Mt. Approximately 95 per cent of the total throughput will comprise iron ore.

Volumes shipped through Utah BHF peaked in 2016-17, when 23.6 Mt of iron ore, manganese, spodumene and direct shipping ore (DSO) was shipped through the facility. With lithium processing plants now operational, spodumene DSO shipments have ceased and Utah BHF volumes will decrease accordingly.

Trade through PPA Berths 1-3 is forecast to increase again in 2020/21 . Port capacity modelling indicates that PPA's general cargo berths could reach full capacity in the near future as new mines and processing facilities are developed in the Pilbara. Planning is advanced for the provision of new berth capacity at Lumsden Point to service general cargo trade growth beyond this. New capacity at Lumsden needs to be developed to address the approaching cargo capacity limitations of the general cargo berths to service and support inbound growth opportunities.

4.1.2 Port of Dampier Total throughput at the Port of Dampier is anticipated to be 174.09 Mt in 2020-21 . Approximately 82 per cent of Port of Dampier throughput will comprise iron ore from Rio Tinto. The next largest contributor, at 13 per cent, will comprise gas products, followed by solar salt exports (2 per cent) .

A number of projects are being proposed in Dampier and the Burrup Industrial Estate that will require additional port capacity over and above existing port infrastructure. Engineering design studies of expanded berth infrastructure will be undertaken in advance of investment decisions by proponents to facilitate new multi-user port facilities.

4.1.3 Port of Ashburton Throughput at the Port of Ashburton is anticipated to be 10.72 Mt in 2020- 21 . There will be further opportunities to increase import/export volumes through the Port of Ashburton facilities following cargo readiness of the port in 2019-20.

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Table 2: Summary of Trade Forecasts 2018-19 to 2020-21 - Pilbara Ports Authority

TRADEFORECASTS-PPA ACTUAL ACTUAL BUDGET 2018/19 2019/20 2020/21 TONNES TONNES TONNES 000's 000's 000's Exports Port of Port Hedland 511 ,438 536,104 546,198 Port of Dampier 171,868 166,779 172,905 Port of Ashburton 10,966 11,107 10,712 Total Exports 694,272 713,990 729,815 Imports Port of Port Hedland 1,865 2,060 1,801 Port of Dampier 1,128 1,181 1,193 Port of Ashburton - 0 12 Total Imports 2,992 3,241 3,006 Total Tonnes 697,265 717,232 732,821

Table 3: Summary of Trade Forecasts 2018-19 to 2020-21 - Port of Port Hedland

TRADE FORECASTS - PORT OF PORT HEDLAND

ACTUAL ACTUAL BUDGET 2018/19 2019/20 2020/21 TONNES TONNES TONNES 000's 000's 000's Exports Private Berths 491 ,436 515,660 522,000 Utah Point BHF 17,197 17,306 19,600 PPA Berths 1-3 2,804 3,138 4,598 Total Exports 511,438 536,104 546,198 Imports PPA Berths 1-3 1,865 2,060 1,801 Total Imports 1,865 2,060 1,801 Total Tonnes 513,302 538,164 547,999

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Table 4: Summary of Trade Forecasts 2018-19 to 2020-21 - Port of Dampier

TRADE FORECASTS - PORT OF DAMPIER

ACTUAL ACTUAL BUDGET 2018/19 2019/20 2020/21 TONNES TONNES TONNES 000's 000's 000's Exports Private Berths 171,196 165,548 171,916 PPA Bulk Liquids Berth 414 527 700 PPA Dampier Cargo Wharf 258 704 289 Total Exports 171,868 166,779 172,905 Imports PPA Dampier Cargo Wharf 1,128 1,181 1,193 Total Imports 1,128 1,181 1,193 Total Tonnes 172,996 167,961 174,098

Table 5: Summary of Trade Forecasts 2018-19 to 2020-21 - Port of Ashburton

TRADE FORECASTS - PORT OF ASHBURTON

ACTUAL ACTUAL BUDGET 2018/19 2019/20 2020/21 TONNES TONNES TONNES 000's 000's 000's Exports Private Berths 10,966 11,107 10,700 PPA Berths 0 12 Total Exports 10,966 11,107 10,712 Import~ - - PPA Berths - 0 12 Total Imports - 0 12 Total Tonnes 10,966 11,107 10,712

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4.2 Performance Indicators Table 6 summarises the Key Performance Indicators from 2018-19 to 2020-21.

Table 6: Key performance indicators

2018/19 2019/20 2020/21 Key Performance Indicators Actual Actual Budget

Rate of Return on Assets(%) 9.6% 10.7% 13.1%

Economic Rate of Return (%) 9.9% 11 .2% 13.0%

Ship Revenue Earned Per Ship Visit ($) excl. PIR 1

Port of Port Hedland 96,419 102,942 121 ,643

Port of Dampier 15,116 16,519 18,506

Port of Ashburton 61,558 63,905 64,177

Port Trade ('000 tonnes)

Port of Port Hedland 513,302 538 ,164 547,999

Port of Dampier 172,996 167,961 174,098

Port of Ashburton 10,966 11,107 10,724

Total Port Trade ('000 tonnes) 697,265 717,232 732,821

Number of Vessel Visits

Port of Port Hedland 2,951 3,181 3,1 50

Port of Dampier 3,468 3,373 3,490

Port of Ashburton 153 225 150

Total Number of Vessel Visits 6,572 6,695 6,790

Maintenance cosUtonne shipped (PPA Berths) 1.05 1.01 0.92

Note: 1 The differences between Port Hedland and Dampier revenue per ship visit are largely due to differences in ship sizes. Dampier has a larger number of smaller vessels.

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4.3 Financial Summary Table 7 provides PPA's financial summary for the 2020/21 budget year, together with actuals and forecasts for the previous two years for comparison.

PPA's financials are prepared on a basis consistent with the accounting policies detailed in PPA's Annual Report 2018-19. The Annual Report can be accessed via PPA's website.

Table 7: Financial Summary 2018/19 to 2020/21

FINANCIAL SUMMARY

ACTUAL ACTUAL BUDGET FINANCIALS 2018/19 2019/20 2020/21

$'000 $'000 $'000 Total Revenue 441 ,837 465,701 514,616 Total Expenditure 261 ,548 277,614 281 ,735 Operating Profit Before Tax 180,289 188,087 232,880 Income Tax Expense 53,990 56,460 80,629 Net Profit After Tax 126,299 131,628 152,252 Dividend 150,883 31 ,678 190,365 Retained Earnings (24,583) 99,950 (38,113)

As shown in Table 7, total revenue for 2020/21 is budgeted to grow to $514.616 million. The revenue increase is a result of:

• The budgeted increases in throughput, together with ; • Increases in fees and charges.

For the same period operating expenses are expected to rise to $281 .735 million . This is attributed to the higher costs associated with increased throughput, changes to the workforce plan, prudent lease forecasting and an increase in depreciation expense aligning to the capital works program.

The total operating profit before tax is anticipated to grow to $232.880 million. After tax profits are anticipated to grow to $152.25 million.

The total dividend for 2020/21 is budgeted at $190.365 million .

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4.3.1 Dividend policy In accordance with State Government policy, PPA pays dividends to the State on net profits. Dividends have been budgeted in accordance with the State Government's dividend policy, assumed as 85 per cent for the period 2019/20 to 2020/21.

Dividends are paid via an interim dividend and a final dividend. The interim dividend payable is based on 75 per cent of the estimated full year dividend and is to be declared and paid prior to year-end. The final dividend is to be declared and paid prior to 31 December of the following financial year.

4.3.2 Efficiency Dividend In June 2017 PPA was requested by Cabinet to achieve a State net debt reduction target. PPA had flexibility to propose options to meet this measure by reducing operating expenditure, reducing AIP spending, increasing revenue, divesting surplus assets, or any combination of these measures.

Targets were calculated as a steadily-increasing (2%, 3%, 4%, 5%) proportion of each entity's discretionary operating expenditure using Pre-Election Financial Projection Statement 2016/17 data. A steadily increasing proportion was chosen rather than a flat-rate to allow additional flexibility for GTEs to implement any existing savings measures to be applied and other adjustment time-lags they may face.

PPA's targets for the periods 2018/19 to 2020/21 are shown below

2018/19 2019/20 2020/21 $'000 $'000 $'000 6,434 -- PPA's targets have been met to date through increased revenue and reduced expenditure and it is expected that the targets will be achieved in 2020/21 .

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4.3.3 Investment policy PPA's investment policy aims to maximise the return on investments while minimising exposure to risk. The PPA Board determines the extent and nature of investment policy. Funds are invested in short term deposits (one, three and six months) with one of Australia's big four banks or with the Western Australian Treasury Corporation. Investments are generally made in a mix of fixed and floating rates, utilising the best interest rate available from these institutions.

As far as practicable, PPA targets a minimum operating cash balance, thus maximising the amount of surplus retained earnings that can be invested. Internal funds are placed in approved investments until required to meet capital expenditure commitments or to provide working capital for periods of heightened development at PPA's ports.

4.3.4 Pricing PPA's financial objectives include, as a minimum, recovering costs and achieving the State Government's required Rate of Return on Assets. PPA has adopted 'user pays' principles to recover costs and avoid unintended cross-subsidisation of fees and charges amongst users, both across ports and within ports.

PPA benchmarks its prices with other national and international bulk ports and endeavours to minimise costs through efficiency measures with a focus on creating value for customers and stakeholders and to support the competitiveness of the port users in the Pilbara.

PPA prices are reviewed on an annual basis and adjustments made to recover costs and achieve the strategic and operational objectives. Lease revenue is set to market every third year, with annual CPI increases in the interim years.

Financial estimates have been prepared based on the below price increases in 2020/21:

• 10% on tonnage fees at the Port of Port Hedland. • 3% on Port Dues at the Port of Dampier. • 3% on all other fees at the Port of Port Hedland and the Port of Dampier.

The tonnage fee increase at the Port of Port Hedland reflects a recovery for increased depreciation resulting from an increase in the valuation of the Port Hedland channel in 2018/19.

Prices are based on the market outlook and policy considerations at the time of review and do not allow for variations in trends, changes in

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government policy or changes in the external operating environment impacting on costs and revenue.

4.3.5 Sustaining Infrastructure Due A Sustaining Infrastructure Due (SID) has been implemented at the Port of Port Hedland, effective 1 July 2020 for a five-year period. The purposes of this SID is to fund the cost of sustaining critical Port infrastructure being the Nelson Point Tug Haven Revetments and Sheet Pile Wall and the Port Hedland Inner Harbour Revetments. Revenue from this SID will be quarantined for investment in these two identified projects, which benefit all port users.

A Sustaining Infrastructure Due (SID) has been implemented at the Port of Dampier, effective 1 October 2020 to 30 June 2021 . The purposes of this SID is to fund the cost of geotechnical investigation and engineering design studies required to progress planning for upgrades to the Dampier Cargo Wharf. Revenue from this SID will be quarantined to fund these planning scope of work costs.

4.3.6 Rate of return As shown in Table 6, PPA's budget for 2020/21 shows a Rate of Return on Assets of 13.1 per cent and an economic rate of return of 13.0 per cent. These estimates are dependent on several factors including trade projections and assumed levels of capital expenditure.

The rate of return and pricing are subject to ongoing review in the context of changing competitive conditions, trade levels and operating results, while also considering the need to fund significant infrastructure projects and provide appropriate returns to government.

Assets are valued according to the Deprival Value Method. PPA engaged the services of an independent valuer to determine the fair value of assets and will continue to do so at least every three years.

Generally, PPA will seek to recover a financial return on all the assets that it owns and controls and will set its prices accordingly. However, the following assets are excluded from the ROR calculation:

• any assets (either current or non-current) owned or controlled by PPA but not directly connected to providing port services including land that is not applied to port purposes; • gifted assets, where no consideration is paid to the gifting party or where pricing discounts or concessions are offered by PPA to the gifting party; and • funding contributions from any third party or port customer for the purposes of specific capital assets, and assets constructed using

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those funds (this includes assets funded by the Port Improvement Rate (PIR)).

4.3.7 Operating subsidy- Dampier Bulk Liquids Berth Construction of the Dampier Bulk Liquids Berth (BLB) was completed in November 2005. The capital cost involved will be recovered from users. A State Facilitation Deed has been put in place which underwrites the unused portion of the facility with an Operating Subsidy payment, to the extent necessary to enable PPA to service the debt and cover the operating costs of the facility. Table 8 summarises the Budgeted Income Statement for the Dampier BLB through to 2020/21.

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I• o • :

DAMPIER BLB INCOME STATEMENT

ACTUAL ACTUAL BUDGET 2018/19 2019/20 2020/21

$'000 $'000 $'000 Revenue Operating Subsidy Payment 9,121 9,013 9,013 DBLB Tariff 1,641 1,813 2,117 Shipping Revenue 329 428 658 Total Revenue 11,091 11,254 11,788 Expenditure Expenditure 6,999 7,054 6,238 Operating Profit 4,092 4,200 5,550 Income Ta x Equivalent 1,228 1,260 1,665 Ooerating Profit After Tax 2,864 2,940 3,885 Dividend To Declare 2,578 2,499 3,302

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4.3.8 Financial Parameters

PILBARA PORTS AUTHORITY FINANCIAL PARAMETERS 2020/21

$'000

Total Revenue 514,616

Total Expenses 281,735

Profit/(Loss) Before Tax 232,880

Notional Income Tax 80,629

Profit/(Loss) After Tax 152,252

Dividends 190,365

Asset Investment Program 116,347

Notes:

To the extent that the financial parameters within the 2020/21 SCI contain unapproved capital expenditure, net debt and net flows to/from government, Government approval will be obtained prior to any commitments and/or actions being undertaken which will affect approved parameters. Government approval will also be sought prior to commencing new projects not included within the State Government's approved financial parameters.

The financial statements were current as at November 2019, reflecting the relative increases on fees and charges effective 1 July 2019.

The Asset Investment Program includes approved capital expenditure only.

A848846 Page 22 of 26 STATEMENT OF CORPORATE ~./h lLBARA PORTS INTENT 2020/21 ~ AUTHORITY

4.4 Capital Expenditure Program 4.4.1 Service Delivery Objectives In general terms, PPA will invest in port infrastructure and facilities that cannot be funded by the private sector, such as common user channels and some multi-user facilities, which are essential for trade facilitation , provide economic benefits to the State, regional and local communities as well as providing future capability. All investments by PPA must be justified in terms of economic, social, safety and environmental benefits.

PPA requires that private developers provide their own funding for infrastructure that is to be dedicated to their sole needs. PPA encourages private sector investment for trade by facilitating planning approvals and providing land and sea-beds within port areas for infrastructure development. PPA maintains control of common user infrastructure such as access channels and navigation aids, and licenses essential services to ensure they meet required standards for safety, environmental protection and service effectiveness and efficiency.

4.4.2 Capital Works Program The following program is planned in relation to PPA assets and capital works in 2020/21 .

Minor Capital Works

Combined minor works totalling $18.377 million are budgeted in 2020/21 across the Ports of Ashburton, Port Hedland and Dampier (Table 9) .

Approved Major Capital Works in Progress

Approved major capital works totalling $5 million will be progressed in 2020/21 (Table 10). This amount excludes any carry over of approved capital works commenced in 2019/20.

Table 9: Summary of Minor Works

$000 $000 Description 2019/20 2020/21

Treasury Approved Budget Port Hedland, Dampier Projects 17,3 24 17,325 Ashburton Projects 2,302 1,052 Total 19,626 18,377

Minor Works Budget Total

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Table 10: Approved Major Capital Works in Progress as at 30 June 2019

------~------$0~ - $000 $000 $000 $000 $0~ - $000-- Description Expended to 2019120 2020121 2021122 2022123 2023124 Total 3010612019 Third Party Funded Projects 1'' Ashburton As hburton De \elopment (Che.,-on funded) 628 12,933 5 ,000 8,000 5 ,839 32,400 Sub Total- Third Party Funded Projects 628 12,933 5,000 8,000 5,839 0 32,400 Major Capital Projects DCW Extension (Detailed Design and Geotech) 1" 5,000 5,000 Port Hedland Spoilbank Marina 43,500 66,000 109,500 Nelson PointTug Ha\en 25,000 25,000 50,000 Port Hedland Inner Harbour Re\etment Upgrades 10,000 10,000 20,000 Sub Total- Major Capital Projects 0 5,000 78,500 101,000 0 0 184,500 Grand Total Major Capital Works in Progress 628 17,933 83,500 109,000 5,839 0 216,900

1 Excludes final stages of PIR projects which are complete. 2 Capitalisation of this amount is dependent on the decision to proceed - expected in March 2020.

A848846 Page 24 of 26 STATEMENT OF CORPORATE ~ ./h lLBARA PORTS INTENT 2020/21 ~ AUTHORITY

5. INFORMATION TO BE REPORTED TO THE MINISTER FOR PORTS PPA will produce an Annual Report and a Half Yearly Report for the Minister. These will comply with the requirements of the Port Authorities Act 1999 0NA) and will include the following information in sufficient detail to allow the Minister to assess the port's performance:

Half Yearly Report (February 2020)

o Review of PPA's trade and financial performance for the half year. o Financial statements. o Progress against major initiatives, as outlined in relevant Statements of Corporate Intent.

Annual Report (September 2020)

0 Report on the major operations and activities of PPA during the year under review. 0 Review and assessment of performance against targets. 0 Financial statements. 0 Other information required by legislation to be included in the Annual Report.

A848846 Page 25 of 26 STATEMENT OF CORPORATE ~ ./h lLBARA PORTS INTENT 2020/21 ~ AUTHORITY

6. ABBREVIATIONS TERM DESCRIPTION

BHF Bulk Handling Facility

Bl Business intelligence

BLB Bulk Liquids Berth

CPE Cape Preston East

DoT Department of Transport

DSO Direct Shipping Ore

DUKC Dynamic Under Keel Clearance

EMP Environmental Management Plan

HLO Heavy load out

ICT Information and Communications Technology

IMO International Maritime Organisation

IMOC Integrated Marine Operations Centre

ISO International Organisation for Standardisation

KPI Key performance indicator

LNG Liquefied natural gas

Mt Million tonnes

NFSCS National Freight and Supply Chain Strategy

PIR Port Improvement Rate

PPA Pi Ibara Ports Authority

RFP Request for Proposal

SAP Strategic Asset Plan

SCI Statement of Corporate Intent

SOP Strategic Development Plan

SIA Strategic Industrial Areas

SIMS Strategic Information Management System

SPA Shipping and Pilotage Act 1967

swc South West Creek

VTS Vessel Traffic Services

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