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Authorised by the Victorian Government.This publication is produced by Port of Melbourne Corporation.

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MELBOURNE OFFICE

Street addressLevel 4 530 Collins Street | Melbourne Victoria 3000 | Australia

Postal addressGPO Box 261 | Melbourne VIC 3001 | Australia

Tel: 1300 857 662 | Fax: (03) 9683 1570

Email: [email protected] | Website: www.portofmelbourne.com

SOUTH AUSTRALIA

Postal addressGPO Box 261 Melbourne VIC 3001Australia

Tel: +61 3 9683 1300

Fax: +61 3 9683 1570

NEW SOUTH WALES AND SUNRAYSIA

Postal addressPO Box 8804KooringalWagga Wagga NSW 2650Australia

Tel: +61 2 6925 9672

Mob: +61 (0)428 024 161

TASMANIA

Postal addressPO Box 2141Howrah TAS 7018Australia

Tel: +61 3 6245 1890

Fax: +61 3 6245 1890

Port of Melbourne Corporation A

nnual Report 2014-15Annual Report

1PORT OF MELBOURNE CORPORATION ANNUAL REPORT 2014-15

The Hon Luke Donnellan MP Minister for Ports1 Spring Street Melbourne Victoria 3000

The Hon Tim Pallas MP Treasurer1 Treasury PlaceMelbourne Victoria 3000

Dear Ministers,

Port of Melbourne Corporation 2014-15 Annual Report

I have much pleasure in submitting to you the Annual Report of Port of Melbourne Corporation (PoMC) for the period 1 July 2014 to 30 June 2015, in accordance with the provisions of the Transport Integration Act 2010 (Vic) and the Financial Management Act 1994 (Vic).

Yours sincerely,

Mark Birrell Chairman

21 September 2015

Letter to the Ministers

2 PORT OF MELBOURNE CORPORATION ANNUAL REPORT 2014-15


Letter to the Ministers 1

From the Chairman 4

From the Chief Executive Officer 5

Vision, goals and values 6

Key achievements of 2014-15 6

The Port of Melbourne – overview 7

Corporate governance 8

Board of Directors 9

Board and Committee meetings 12

Executive Management Team 13

Organisational structure 14

Our people 15

Trade performance 16

Finance in brief 18

Financial summary 20

Port of Melbourne Lease Transaction 21

Port operations 22

Port Capacity Project 23

Port pricing 24

Statement of Corporate Intent 25

Additional information 34

Transport Integration Act 2010 (Vic) 34

Significant legislative changes 36

National Competition Policy 36

Victorian Industry Participation Policy 36

Victorian Government Risk Management Framework 37

Assets 37

Building and maintenance compliance 37

Protected disclosure 37

Privacy 38

Freedom of Information 38

Consultancies 39

Availability of additional information 39

Financial statements 40

Certification of financial statements 107

Auditor-General’s Report 108

Disclosure index 110

Table of contents


From the Chairman

In an historic era of transition for the Port of Melbourne, the Board has worked closely with the shareholder and its advisers to facilitate the Victorian Government’s intention to seek a lease for the commercial operations of one of the state’s key economic assets.

The Board’s strong focus on overseeing a successful transition reflects the fact the port lease transaction is arguably the most significant reform to state-based port management since the former Melbourne Harbor Trust was established in 1877 as an authority to plan and develop the port as a trade gateway for the young Victorian colony.

Across every facet of the business, extensive planning and preparation has been undertaken to ensure the current high levels of customer service and capability are maintained, particularly with regard to the Victorian Ports Corporation (Melbourne), the state entity which is being created to manage residual functions and activities including Station Pier, vessel traffic and emergency management.

Importantly, PoMC has established a robust platform for the emerging state and private entities to carry forward by maintaining a strong focus on maximising the economic and financial outcomes for all Victorians.

During the year, the Corporation’s significant investment in port infrastructure of $311.1 million gave further impetus to the Port Capacity Project which is on schedule and within budget to provide additional capacity in the Port of Melbourne well into the future.

This additional tranche of capacity is being delivered at a time when the port’s solid trade performance in 2014-15 was underpinned by record container throughput of 2,579,214 TEUs which exceeded the previous benchmark set in 2011-12.

The positive trade environment, together with prudent oversight of operating costs and diligent project management, has reinforced the commercial strength of PoMC’s balance sheet, with earnings before interest and tax (EBIT) of $121 million. An underlying profit of $77.7 million was influenced by port lease transaction costs and debt repayment to record an actual after tax profit of $45.9 million. In addition, a dividend of $33 million was paid to the Victorian Government.

In a year of significant achievement in laying the foundations for the port’s future success, I would like to thank my fellow Directors for their thoughtful contributions throughout the year in Board and Committee meetings.

On behalf of the Board, I would also like to thank Chief Executive Officer, Nick Easy, for his leadership in guiding PoMC’s management and staff through a period of significant change.

Mark BirrellChairman


From the Chief Executive Officer

In a year which has been inevitably shaped by the port lease transaction and the need to prepare and plan for a future separation of the business in terms of assets, functions, systems and people, PoMC has maintained a strong focus on its operations which has delivered a series of key achievements for our customers and users of the port.

PoMC continued to strengthen its track record for infrastructure delivery with excellent progress on the Port Capacity Project, the maintenance dredging program, wharf remediation at Swanson Dock East and pile rehabilitation at Victoria Dock. In total, capital expenditure of $48 million was invested in port infrastructure, excluding the Port Capacity Project.

To enhance the port’s competitive position in Australia and our customer offering, in May PoMC also announced the introduction of differential pricing which will see no change to loaded international container export charges for 2015-16 while loaded container imports will increase by CPI only.

With total revenue of $381.7 million, PoMC’s solid financial performance for 2014-15, together with its net asset base of $3.4 billion, was influenced by a range of factors. PoMC undertook a scheduled five-yearly revaluation of fixed assets and utilised new data and information inputs for port land and channels. The net asset position also benefitted from the repayment of outstanding debt. PoMC’s income tax payable was reduced by a significant Research and Development expense related to technical and environmental aspects of design and construction for the Port Capacity Project.

The Port Capacity Project has visibly taken shape as extensive works have continued at the container and automotive facilities at Webb Dock West and Webb Dock East respectively. Automotive berths at Webb Dock West 1 and 2 were set to host their first vessel arrival while significant community amenity developments include a new observation deck, a network of boardwalks, extensive native landscaping and improvements to bike paths.

In 2014-15, PoMC continued to embrace a growing community appetite to learn more about all aspects of the port’s operations from dredging to infrastructure development in order to foster a greater understanding of the port’s role. The Port Education Centre attracted a record 7,500 students and community members on the strength of its tailored curriculum programs. PoMC also maintained its strong support for a diverse range of eligible community events and festivals with a maritime theme, together with ongoing support for seafarer welfare agencies.

Reflecting Australia’s strongest contemporary trade relationships, during the year PoMC hosted the Tianjin and Melbourne Business Engagement Forum and senior delegations from the Chinese Ministry of Transport, Tokyo Port and Harbor Transportation Business Cooperative Association, Nagoya Port Authority and the Port of Kitakyushu.

In October, PoMC marked the 40th anniversary of its Sister Port relationship with the Port of Osaka by hosting a delegation from the Port and Harbor Bureau from the City of Osaka.

I would like to thank the Chairman, Mark Birrell, and the Board of Directors for their support and strategic leadership throughout the year and commend the Executive Management Team and staff of PoMC for their ongoing commitment and understanding as we work through a period of transition together.

Nick EasyChief Executive Officer


Vision, goals and values

Our vision is for the Port of Melbourne to be Australia’s best connected port.

Our goals are focused on achieving the corporate vision and are responsive to PoMC’s charter ensuring a balanced and sustainable approach to the development and management of the Port of Melbourne. They include:

• Delivering world class port facilities and services• Driving integrated freight transport outcomes• Enhancing Australian and international trading activities

• Ensuring sustainable business performance• Nurturing a shared port-city vision• Developing talented and committed people

Our values are a shared understanding of what we stand for as an organisation. They describe the things we strive for with our customers, the community and each other. They include:

• People - respecting diversity, knowledge and wellbeing• Excellence - being the best we can be• Responsibility - taking ownership of safety, the environment and economic prosperity• Collaboration - achieving more by working together

Key achievements of 2014-15

Trade • Total port trade of 87 million revenue tonnes• Total container throughput of 2.58 million TEU• Total of 350,000 new motor vehicles handled

Finance• Revenue of $381.7 million• Earnings before interest and tax of $121.0 million• Operating profit after tax of $45.9 million• Net assets of $3.4 billion• Total dividends of $33.0 million paid• Repayment of all outstanding debt• Extensive work undertaken for the proposed Port of

Melbourne lease transaction

Stakeholders• PoMC hosted a series of customer workshops and

delegations as part of an extensive engagement program on issues ranging from supply chain connectivity to port pricing

• PoMC’s community sponsorship program helped support a wide range of eligible community festivals and initiatives

• Over 7,500 students visited the Port Education Centre to learn about the port’s role and operations

• Marked the 40th anniversary of the Sister Port relationship with the Port of Osaka

Port projects• Total capital expenditure of $311.1 million of which

$263 million was invested in the Port Capacity Project• Port Capacity Project well advanced and on schedule

to deliver additional container and automotive capacity

• Webb Dock West 1 and 2 on schedule to open• Wharf rehabilitation and remediation at Swanson

Dock East and Victoria Dock

Port operations • Around 3,000 ship visits• Welcomed the arrival of Buxcliff as the largest

container ship to call at the Port of Melbourne measured by TEU capacity (6,450 TEU)

• Welcomed the safe arrival and berthing of deep draught Suezmax vessels

• Successful completion of maintenance dredging program in compliance with Environmental Management Plan

• Hosted 77 cruise ship visits with around 200,000 passengers and crew

Our people• Successful completion of a new Enterprise Agreement • No lost time through industrial activities• No lost time through injuries


The Port of Melbourne – overview

The Port of Melbourne is Australia’s largest maritime hub for containerised and automotive cargo and a key economic asset supporting the prosperity of thousands of businesses and communities across Victoria and south-eastern Australia.

Strategic managementEstablished on 1 July 2003 to provide for the strategic management and development of the Port of Melbourne, PoMC conducts its business operations within the legislative framework provided for under the Transport Integration Act 2010 (Vic) (which sets out the statutory objectives, powers and functions of PoMC) as well as the Port Management Act 1995 (Vic) and other relevant legislation.

Historical developmentIn the 180 years since the arrival of John Pascoe Fawkner aboard the Enterprize in 1835, Melbourne’s history and development has been intertwined with the port’s evolution as a trade gateway.

The Melbourne Harbor Trust was formed in 1877 to create an authority for the development and management of the Port of Melbourne and to foster the city’s international trade links.

Today, PoMC is the contemporary successor of that historical legacy as custodian, developer and strategic manager of the Port of Melbourne to ensure it continues to deliver economic benefits to its customers and the wider community.

TradeThe Port of Melbourne is Australia’s largest container and automotive port handling a total trade volume of 87 million revenue tonnes comprising over 2.58 million TEU and 350,000 new motor vehicles annually.

Port infrastructureThe Port of Melbourne has benefitted from over $2 billion invested in marine and land infrastructure over the last decade. In addition to the channels, PoMC owns and manages around 510 hectares of port land with 36 commercial berths to handle a diverse range of containerised and non-containerised cargo.

Shipping and navigationAs the first port in Australia to operate as a Vessel Traffic Service (VTS) authority under Commonwealth accreditation, safe navigation is supported by modern communication centres located at the Port Operations Control Centre (Melbourne VTS) and Point Lonsdale (Lonsdale VTS).

Tourism gatewayPoMC manages the heritage-listed Station Pier as Victoria’s cruise shipping gateway. The terminal also accommodates TT-Line’s Spirit of Tasmania passenger ferries and other visiting ships including Australian and international navy vessels.

Customer focusWith a trade catchment area covering south-eastern Australia, PoMC works with its customers to share its expertise and understanding of the landside transport connections to benefit their businesses. PoMC’s commitment to trade development is supported by regional offices in Tasmania and New South Wales.

Port of Melbourne at a glance• Largest container and automotive port in Australia handling around 36% of the nation’s container trade• Handles over 7,000 containers and around 1,000 motor vehicles per day on average• Around 3,000 ship visits per year• 36 commercial berths for all types of cargo• Total land area under management of around 510 hectares• Net assets of $3.4 billion


Corporate governance

PoMC is governed by a Board of Directors who set the strategic direction for the business to achieve its corporate goals, compliance, risk and legislative requirements.

The primary responsibility of PoMC’s Board is to manage and develop the Port of Melbourne consistent with the vision statement and transport system objectives as set out in the Transport Integration Act 2010 (Vic) (TIA).

Accountable to the Minister for Ports, Directors are appointed pursuant to section 145(1) of the TIA having regard to the expertise necessary for PoMC to achieve its objectives and functions. Directors are appointed on terms and conditions specified in the instrument of appointment and have overall responsibility for the governance of PoMC and may exercise the powers conferred on PoMC.

With the aim of achieving best practice, the Board has developed and endorsed a set of governance principles which are in line with its responsibilities under the TIA. As a result, the primary focus of the Board is on:

• setting the strategic direction of PoMC including the approval and oversight of the corporate plan, annual operating and capital budgets, port development, risk management policy and strategy, corporate policies and all delegations of authority (including financial delegations) made pursuant to section 170 of the TIA

• having regard to the transport system objectives, the decision making principles and any relevant statement of policy principles in carrying out its functions and exercising its powers

• ensuring accountabilities to the Minister for Ports and the Treasurer of Victoria under the legislation are understood by PoMC

• approving capital projects where the total project value exceeds $5 million (or any other capital projects of strategic significance)

• monitoring compliance with legislative and regulatory requirements, ethical standards and external commitments

• appointing and reviewing the performance of the Chief Executive Officer

• having regard to the safety and security of the Port of Melbourne

• encouraging the business of the Port of Melbourne.

Details of the number of Board and Committee meetings, together with the number of meetingsattended by each of the Directors during 2014-15, are provided on page 12.

Declaration of pecuniary interests All Directors and nominated officers have completed a declaration of pecuniary interests.

Ministerial Directions PoMC received three Ministerial Directions in the reporting period:

• 15 October 2014, The Hon David Hodgett MP (First Direction - Port Lease Transaction) Related to cooperation, assistance and support to the state, Department of Treasury and Finance and its advisers in preparation for the port lease transaction including procurement, preparation or compilation of Port of Melbourne-related analysis, reports and advice.

• 23 October 2014, The Hon David Hodgett MP Revocation of Ministerial Direction issued in July 2000 with regard to bulk liquid storage leases at Coode Island.

• 15 May 2015, The Hon Luke Donnellan MP (Second Direction - Port Lease Transaction) Continue to provide assistance related to a wide range of port lease transaction matters. This included resurvey of port boundaries as required, lease arrangements, repayment of debt facilities, termination of hedging arrangements and facilitating the transaction structures.

Business risks The procedures and policies established at Board and management level are designed to protect PoMC’s assets and interests, uphold the integrity of its reporting systems, maintain its operational viability and ensure compliance with legislative requirements.

PoMC is managed through a comprehensive set of policies and procedures which are subject to regular audit review. These include financial reporting, environmental management, risk management and internal control policies and procedures.


Board of Directors

Mark Birrell, Chairman Mark Birrell was appointed Chairman of Port of Melbourne Corporation (PoMC) on 18 October 2011 and reappointed on 1 October 2014.

Mark brings a wealth of expertise and leadership in the areas of infrastructure development, project management and finance to Australia’s largest container and general cargo port.

Mark is the Chairman of Infrastructure Australia and serves as President of the Victorian Employers Chamber of Commerce and Industry. He is Chairman of PostSuper Pty Ltd and of Regis Healthcare Limited. He is also Chairman of the Australian Payments Council.

An experienced company director and corporate adviser, Mark was the founding Chairman of Infrastructure Partnerships Australia and has served previously as Chairman of Evans & Peck Limited and National Leader of the Infrastructure Group at Minter Ellison Lawyers.

He has a significant public policy background through his earlier roles as Minister for Major Projects and then Minister for Industry, Science & Technology.

Mark holds Bachelor of Economics and Bachelor of Laws degrees and is a Fellow of the Australian Institute of Company Directors.

Board Committee membership:- Chair, Remuneration and People

Committee

- Audit and Finance Committee (ex officio member)

- Risk Committee (ex officio member)

James Cain, Deputy ChairmanJames Cain was appointed Deputy Chairman of PoMC on 1 July 2010 and reappointed on 15 July 2013.

James has an extensive background in project development management in property and infrastructure, in both the public and private sectors.

James’ professional experience includes 12 years with property and construction company Lend Lease in various roles including General Manager for Victoria, Tasmania and South Australia, and five years with the Victorian Government as Executive Director of Major Projects Victoria, the Victorian Government’s major capital works agency.

Since 2006, James has developed his interests in commercial, infrastructure and property areas through his own consulting business.

James is also Chair of the Industry Superannuation Property Trust (ISPT). He was Chair of Port of Hastings Corporation until September 2010 and was a Director of Victorian Rail Track (VicTrack) between April 2008 and July 2010.

Board Committee membership:- Chair, Risk Committee

- Remuneration and People Committee

David CranwellDavid Cranwell was appointed as a Director of PoMC on 1 July 2003 and reappointed on 1 July 2006, 2008, 2010 and 15 July 2013.

David is a Partner of Spencer Stuart, a leading global senior level executive search and director recruitment partnership.

Before joining Spencer Stuart, David spent 11 years in a number of roles with Mayne Group Ltd, including Director of Development; CEO Asia covering China, Thailand, Malaysia, Singapore and Indonesia; CEO of the global logistics business; and more recently, Group General Manager of Pharmacy Retailing and Distribution.

During his time in the health sector, David played an active role serving as President of the National Pharmaceutical Services Association and Chairman, Medicines Partnership of Australia.

David has a Master of Nautical Science degree from RMIT University, Melbourne, an MBA from the Graduate School of Management at Melbourne University, and qualified as a Master Mariner Class 1 with ANL.

Board Committee membership:- Audit and Finance Committee

- Risk Committee


Ingilby DicksonIngilby Dickson was appointed as a Director of PoMC on 1 January 2013.

Ingilby joined the PoMC Board having served as General Manager Supply Chain and Processing for BlueScope Steel, commencing with the company in 2003 as the first external head of the Transport and Logistics function.

Responsible for global supply chain and logistics across all transport modes, including the operations in Australia, NZ, Asia and North America, Ingilby also oversaw significant safety improvements across BlueScope’s Australian business.

Ingilby was appointed to the NSW Road Freight Advisory Council in 2007 and was awarded Freight Personality of the Year at the Australian Freight and Logistics Industry Awards that same year. Ingilby is also a Board member for the Australian Logistics Council.

Prior to his appointment at BlueScope Steel as Vice President Logistics and Procurement, Ingilby held senior Supply Chain and Logistics positions with Goodman Fielder, Toll, Mayne Nickless and Hutchison Australia.

Ingilby holds a Bachelor of Business, Graduate Diploma in Accounting, Graduate Diploma in Institute of Directorships and is a Fellow of the Chartered Institute of Transport and a Certified Practicing Accountant.


John FitzgeraldJohn Fitzgerald was appointed as a Director of PoMC on 1 January 2013.

John joined the PoMC Board with extensive experience in infrastructure delivery and was the acting CEO of Infrastructure Australia until March 2015. He is also the Independent Chair of the ACT Government Capital Metro Project Board, a Director on the Board of the Barangaroo Delivery Authority and the Victorian Funds Management Corporation and Chair of the NSW Government Steering Committee for the Sydney International Convention, Exhibition and Entertainment Precinct Project.

John is a specialist advisor to KPMG on infrastructure and government sectors and his previous Board positions included Director on the National Advisory Board of Infrastructure Partnerships Australia and Executive Director Department of Treasury and Finance (Victoria) Executive Board.

With over 30 years of commercial and financial experience in infrastructure, John was previously a Deputy Secretary, Commercial Division, Department of Treasury and Finance, and has held senior management positions in banking and finance.

John holds a Master of Public Infrastructure (Research) from the University of Melbourne and is a Fellow of the Australian Institute of Company Directors and the Institute of Public Administration Australia (Victoria).

John took leave of absence from 1 July to 21 October 2014 (inclusive).


Jim MarshallJim Marshall was appointed as a Director of PoMC on 15 July 2013.

Jim is a Director of Sai Chang (a joint venture between Australia Post and China Post). He is also a Trustee of the Australia Post Superannuation Scheme.

Having served as the Executive General Manager Postal Services at Australia Post, Jim oversaw a $3.6 billion business encompassing the letters, parcels and international mail businesses as well as the enterprise sales force. Prior to 2010, he managed the Mail and Network Division for nine years and was previously the Group Manager, National Operations in Australia Post’s Head Office overseeing significant change programs in the operations of the business.

Jim was also a member of Australia Post’s Executive Committee, a Director of Australian Air Express, Chairman of Post Logistics Australasia and Chairman of Printsoft Holdings.

Awarded a Public Service Medal in the January 2012 Australia Day Honours, Jim holds a Bachelor of Arts, Bachelor of Economics and Masters of Business Administration from the University of Adelaide.

Board Committee membership:- Risk Committee


Bruce NichollsBruce Nicholls was appointed as a Director of PoMC on 1 January 2013.

Bruce joined the PoMC Board with an extensive background in international trade and investment, having served as Trade Commissioner for Australia in India, Germany, Switzerland, China and Hong Kong, before returning to the private sector to serve on the boards of several public companies in Hong Kong and Australia.

Bruce has served as Chairman of the Royal Automobile Club of Australia, as a director of Crownhampton International (HK) Limited, Promet Petroleum Limited and Goulburn Valley Water Corporation. He is a director of Norcen Financial Services and Chadcorp Communications.

Bruce also served as President of the Australia China Chamber of Commerce & Industry and as a Trustee of the Committee for Economic Development of Australia. He holds a Bachelor of Commerce Degree in Economics, a Diploma in Business and is a Foundation Fellow of the Australian Institute of Company Directors.

Board Committee membership:- Risk Committee

- Remuneration and People Committee

Janice van ReykJanice van Reyk was appointed as a Director of PoMC on 25 October 2011.

Janice is an experienced non-executive Director with broad based business skills gained as a senior executive in listed industrial companies.

Janice is a non-executive Director of Melbourne Water and a member of its Audit Risk and Finance Committee and its Customer and Service Delivery Committee; a non-executive Director of Citywide and a member of its Audit and Finance Committee and Chair of its Risk and Sustainability Committee; a member of the Northern Territory Environment Protection Authority; an Independent Member of the Audit Risk and Finance Committee of Sustainability Victoria; an Independent Member of the Audit and Risk Committee of the Salvation Army; and a non-executive Director of Melbourne Forum Limited.

Janice has an extensive professional background in major capital projects, infrastructure, finance and capital markets, mergers and acquisitions, commercial negotiations, risk management, environmental management and stakeholder engagement.

Janice also holds a Master of Commerce, a Master of Environment (Hons), Bachelor of Laws (Hons) and a Bachelor of Arts (Economics). Janice is a Fellow of the Australian Institute of Company Directors and a Leadership Victoria Fellow.

Board Committee membership:- Chair, Audit and Finance Committee

- Risk Committee

Alice Williams Alice Williams was appointed as a Director of PoMC on 15 July 2013.

Alice has over 25 years of senior management and board level experience in corporate and government sectors and investment banking, together with her ongoing work in strategy and policy development, corporate advisory and funds management through her consulting practice.

Having chaired the Australian Government’s Wheat Marketing Review Panel, Alice has also been a consultant to the Australian Competition & Consumer Commission (ACCC), International Air Services Commission and previously served as a part-time Commissioner of the Victorian Competition and Efficiency Commission.

Formerly a Director of NM Rothschild and Sons (Australia) Limited, Director of Strategy and Planning for Ansett Australia Holdings Limited and a Vice President at JP Morgan Australia, Alice has also held management positions with Elders Finance Group, Hong Kong Bank of Australia Limited and Citibank NA in London.

Alice is a non-executive Director on a range of government, public and private Boards including Djerriwarrh Investments, Equity Trustees Ltd, Guild Group, Defence Health and Cooper Energy. Alice was also a Council member of the Cancer Council of Victoria.

Alice holds a Bachelor of Commerce from Melbourne University and is a Chartered Financial Analyst (Virginia, USA). She is a Fellow of the Australian Institute of Company Directors and a Fellow Certified Practising Accountant.



Board and Committee meetings

Audit and Finance CommitteeThe Audit and Finance Committee’s objective is to support the Board by overseeing PoMC’s financial and capital investment activities, internal and external audit functions, compliance requirements and the effectiveness of the internal control environment.

Members of the Audit and Finance Committee are PoMC Board Directors and are independent members in accordance with the requirements of section 2.2(f) of the Standing Directions of the Minister for Finance under the Financial Management Act 1994 (Vic).

Remuneration and People CommitteeThe Remuneration and People Committee’s objective is to support the Board by reviewing and overseeing PoMC’s policies and processes relating to the remuneration of executives and the development of PoMC’s people and its culture.

Risk CommitteeThe Risk Committee’s objective is to support the Board by overseeing PoMC’s risk management framework and policy to evaluate effectiveness of risk identification and management and compliance with internal guidelines and external requirements.

Attendance at Board and Board Committee meetings 1 July 2014 - 30 June 2015

Chairman /Director

Board Audit and Finance Committee

Remuneration and People Committee

Risk Committee

Meetings eligible to

attend

Meetings attended


attend

Meetings attended


attend

Meetings attended


attend

Meetings attended

M Birrell (Chairman)

11 11 4 4 2 2 4 3

J Cain (Deputy Chairman)

11 11 - - 2 2 4 4

D Cranwell 11 10 4 3 - - 1 1

I Dickson 11 11 4 4 - - - -

J Fitzgerald* 11 7 4 2 - - - -

J Marshall 11 10 - - - - 4 4

B Nicholls 11 11 - - 2 2 4 4

J van Reyk# 11 11 4 4 - 1 4 4

A Williams 11 9 4 4 - - - -

*J Fitzgerald leave of absence 1 July – 21 October 2014 (inclusive)# J van Reyk attended the Remuneration and People Committee meeting as an observer


Executive Management Team

Nick EasyChief Executive Officer

Nick commenced as Chief Executive Officer of PoMC in February 2014, providing leadership for the strategic management of Australia’s largest container and automotive port.

Prior to joining PoMC, Nick was the Chief Executive Officer at the Metropolitan Fire and Emergency Service Board (MFB) from June 2011 until February 2014 where he was responsible for leading an organisation of 2,300 staff through a period of sector reform while it continued to deliver emergency services to the Victorian community and beyond.

Before taking up the MFB appointment, Nick had previously served with PoMC and its forerunner for over 13 years in various senior management positions, most notably as Executive General Manager Port Capacity and Executive General Manager Channel Deepening Project.

Nick holds a Bachelor of Applied Science Planning and Post-Graduate Diploma in Environmental Management which underpin his previous roles in local government planning.

Caryn AndersonExecutive General Manager - Business and Planning

Caryn leads a division which oversees trade development and marketing, infrastructure and land use planning, information technology services and port community relations. More recently, Caryn has also coordinated the planning and preparatory phases of the proposed Port Lease Transaction ahead of a functional separation of the business.

Having joined PoMC in 2006, Caryn’s widely regarded expertise in trade and strategic infrastructure development draws on over 20 years’ experience in the Australian and international ports, shipping and logistics sector.

In addition to her practical industry experience, Caryn holds formal qualifications in science and postgraduate qualifications in law and business.

Katrina ExcellExecutive General Manager - Commercial

Katrina leads PoMC’s Commercial Division and is responsible for overseeing financial management, port pricing, planning and analysis, investment evaluation, taxation, insurance, treasury and financial operations, legal services, Board support, corporate governance arrangements and knowledge management and administration. Katrina is also responsible for managing PoMC’s property holdings including the strategic development of property assets, commercial use of land and improvements, together with leasing arrangements and liaison with port tenants.

Having joined PoMC in 2008, Katrina has worked in senior finance roles for over a decade and holds a Bachelor of Commerce and is a Fellow Certified Practicing Accountant (FCPA).


Station Pier / Cruise Shipping

Infrastructure Projects

Marine and Navigation Infrastructure Delivery

Assets and Spatial Data Bid Management

Environmental Services Commercial

Security Approvals and Compliance

Legal

Board Secretariat

Property

Knowledge Management and Administration

Communications

Strategy

Trade and Marketing

Information Technology Services

Port Community

Land Use Planning

FinanceInfrastructure Planning

Keith GordonExecutive General Manager - Port Operations

Keith oversees a wide range of operational responsibilities including marine and navigation services, environment services, asset and spatial data management, infrastructure projects, cruise shipping, port security, safety and emergency management.

Before joining PoMC in 2006, Keith held a number of senior management roles including that of Chief Executive Officer of Geraldton Port Authority. Keith also served as General Manager Ports for Toll Holdings with responsibility for the ports of Geelong and Hastings for almost a decade.

With over 25 years’ experience in the shipping and logistics industry, Keith has a strong understanding of PoMC’s commercial and operational requirements and obligations.

Jason PriceExecutive General Manager - Port Capacity

Jason is responsible for leading PoMC’s Port Capacity Division. This division oversees the planning, approval, management and development of container and automotive capacity for the Port of Melbourne. Joining the Executive team in June 2009, Jason has extensive experience in service delivery in complex environments, with nearly two decades of professional practice in project and contract management.

Before joining PoMC in 2007, Jason held a number of senior management positions with international building and construction materials supplier Boral Limited, and construction and mining equipment manufacturer Caterpillar. Jason holds a Bachelor of Engineering and postgraduate management qualifications.

Organisational structure

Chief Executive Officer NIck Easy

Commercial Katrina Excell

Business and Planning Caryn Anderson

Port Operations Keith Gordon

Port Capacity Jason Price

People and Culture

Corporate Affairs


Our people

Employee relationsPoMC successfully completed negotiations with staff and unions to agree a new Enterprise Agreement which will remain in effect until the nominal expiry date of 23 August 2017.

Negotiations were undertaken as part of an inclusive, open and transparent process following the issue of the Notice of Employee Representational Rights and a call for Bargaining Representative nominations.

The good faith bargaining process culminated in a staff vote held in November 2014 which resulted in 98% of the staff endorsing the new agreement.

The Fair Work Commission formally approved the 2014 PoMC Enterprise Agreement in December 2014.

Port Lease TransactionIn line with Government policy with regard to leasing the commercial operations of the Port of Melbourne, PoMC has worked to keep staff informed of the policy initiative and prepare the organisation for future functional separation.

To facilitate this separation, PoMC undertook a carefully considered process to allocate the necessary resources across future private and state entities according to their respective functional responsibilities.

Health and safetyAs part of its safety culture, PoMC takes a proactive approach to managing its occupational health and safety (OH&S) responsibilities and continues to deliver initiatives and programs designed to prevent safety incidents and injuries.

In 2014-15, there were no reportable or lost time PoMC injuries.

Statutory complianceThere was no lost time through industrial relations activities in 2014-15. PoMC complies with all applicable statutory requirements in relation to employment legislation which is captured in the Enterprise Agreement. PoMC continues to monitor the National Employment Standards and Fair Work Act 2009 (Cwlth) to ensure compliance.

PoMC continues to foster a culture where it values human rights and subscribes to the Victorian Charter of Human Rights and Responsibilities.

PoMC’s Workplace Relations Policy underpins a commitment to ensuring that all employees are free to work in a harmonious and safe environment, adhering to the PoMC Code of Organisational Values and Behaviour of Employees and to reject discrimination and harassment in the workplace.

Staff at 30 June 2015

2015 2014

Male Female Total Male Female Total

Full-time permanent 114 47 161 114 48 162

Full-time temporary 30 21 51 34 22 56

Part-time 4 5 9 6 4 10

Totals 148 73 221 154 74 228

PoMC recognises that its record for safe and sustainable infrastructure delivery is reliant on retaining and recruiting a diverse range of skills to underpin the ongoing success of one of Victoria’s key economic assets.


Trade performance

Trade summary

Cargo type Throughput 2014-15 % change on 2013-14

Total trade 87.0 million revenue tonnes +1.8%

Containers 2.58 million TEU +1.8%

New motor vehicles 4.7 million revenue tonnes (349,343 units) -3.6%

Liquid bulk 6.1 million revenue tonnes -5.5%

Dry bulk 4.1 million revenue tonnes +0.4%

Breakbulk 4.4 million revenue tonnes +2.3%

Total tradeTotal trade through the Port of Melbourne increased by 1.8% over the previous financial year to 87.0 million revenue tonnes (34.7 million mass tonnes). Overseas imports increased 0.3% to 36.6 million revenue tonnes and overseas exports increased 0.4% to 26.6 million revenue tonnes.

Coastal imports increased 8.1% to 12.0 million revenue tonnes and coastal exports increased 3.9% to 11.8 million revenue tonnes.

Container tradeTotal container throughput increased by 1.8% to 2.58 million TEU. Full container imports increased 3.4% and full container exports decreased 3.0%. Empty container movements increased 6.5% to 555,000 TEU.

The top ten containerised commodity exports were miscellaneous manufactures, cereal grains, meat, dairy products, stockfeed, beverages, pulp and waste paper, paper and newsprint, fruit and vegetables, and timber.

The top ten containerised commodity imports weremiscellaneous manufactures, furniture, electrical equipment, miscellaneous food preparations, metal manufactures, clothing, machinery, paper and newsprint, toys and sporting goods, and vehicle parts.

Non-container tradeTotal non-containerised trade decreased 0.6% to 23.9 million revenue tonnes (11.1 million mass tonnes). Total imports of non-containerised cargo increased 2.7% to 17.3 million revenue tonnes (9.0 million mass tonnes), and total exports decreased 8.2% to 6.6 million revenue tonnes (2.1 million mass tonnes).

The main non-containerised commodities exported were motor vehicles, miscellaneous manufactures, petroleum products, cereal grains, and miscellaneous food preparations. The main non-containerised commodity imports were motor vehicles, crude oil, cement, petroleum products, and transport equipment.

New motor vehiclesNew motor vehicle trade decreased by 3.6% overall in 2014-15.

Imports of new motor vehicles increased 0.3% to 3.6 million revenue tonnes (265,000 units) and exports decreased 14.1% to 1.1 million revenue tonnes (84,000 units).

Liquid bulkLiquid bulk trade fluctuated throughout 2014-15 to record a decrease of 5.5% to 6.1 million revenue tonnes (5.1 million mass tonnes).

Dry bulkDry bulk trade increased 0.4% to 4.1 million revenue tonnes (3.9 million mass tonnes). The main imports were cement, gypsum and sugar. The main exports comprised wheat, canola, barley and scrap metal.


Coastal tradeCoastal trade increased 6.0% to 23.8 million revenue tonnes (8.8 million mass tonnes) and accounted for 27.4% of total port trade in 2014-15. Shipments between Melbourne and Tasmania, which accounted for 76.4% of this coastal trade, increased 4.2% to a total of 18.2 million revenue tonnes (5.5 million mass tonnes). This ‘Bass Strait’ trade comprised of 54.7% containerised, 39.8% non-containerised general and 5.5% bulk cargo.

The main export commodities to Tasmania were miscellaneous manufactures, accompanied passenger vehicles, miscellaneous food preparations, motor vehicles, and beverages. The main commodities imported from Tasmania were miscellaneous food preparations, cement, accompanied passenger vehicles, miscellaneous manufactures, and paper and newsprint.

Mainland coastal trade increased 12.1% to 5.6 million revenue tonnes (3.4 million mass tonnes) and comprised primarily containerised cargo which accounted for 50.3% of the trade followed by dry bulk (31.2%), liquid bulk (13.3%) and 5.2% non-containerised general cargo.

Overseas tradeThe top ten international trading partners for containerised and non-contanerised trade is outlined below with their respective percentage contributions in brackets.

Exports (country of destination) Imports (country of origin)

Containerised Non-containerised Containerised Non-containerised

China (23.0) Saudi Arabia (20.6) China (39.5) Japan (16.9)

New Zealand (9.8) China (18.0) United States (8.8) Gabon (15.7)

United States (7.5) Singapore (16.6) New Zealand (5.5) Singapore (10.4)

Japan (6.2) New Zealand (7.7) Thailand (5.1) Thailand (9.4)

South Korea (4.5) United Arab Emirates (6.8) Malaysia (3.7) Malaysia (7.5)

Indonesia (4.5) Kuwait (6.5) Germany (3.0) United States (6.2)

Taiwan (4.3) Nigeria (3.5) Indonesia (2.6) Belgium (5.1)

Malaysia (3.6) Iraq (2.7) Japan (2.5) New Zealand (5.1)

Thailand (3.3) Vietnam (2.5) Italy (2.4) South Korea (5.1)

Vietnam (2.9) Sudan (2.3) Singapore (2.2) Germany (3.0)

Trade definitions 1. Trade volume is measured in:

• Revenue tonnes – quantity measure based on the greater of weight in mass tonnes and volume in cubic metres

• Mass tonnes – a quantity measure based on the weight of cargo

2. Trade information can be broken down into:

• Overseas trade – trade between Melbourne and non-Australian ports

• Coastal trade – trade between Melbourne and other Australian ports

• Total trade – the sum of both overseas and coastal trade

3. A TEU is a twenty-foot equivalent unit, the standard international measure for container throughput.

4. Gross tonnage (gross tons) is a measure of the total enclosed space or internal capacity of a vessel.


Finance in brief

PoMC delivered a solid financial performance with a profit after tax of $45.9 million.

The 2014-15 financial result has been significantly influenced by ‘abnormal’ costs associated with the Port Capacity Project (PCP), Port of Melbourne lease transaction (PLT), the early repayment of PoMC’s outstanding debt and the 2014-15 scheduled asset revaluation.

PoMC’s underlying financials continue to be shaped by prudent control over operating costs in an improving trade environment supported by a strong balance sheet.

Financial highlights for 2014-15• $121.0 million earnings before interest and tax (EBIT)

• $45.9 million operating profit after tax

• $33.0 million in dividends paid

• $78.4 million Port Licence Fee (PLF)

• $311.1 million in total capital expenditure

• Net Assets amount to $3.4 billion, an increase of $1.7 billion on prior year

• PoMC repaid all outstanding debt

Finance costsFinance costs of $69.7 million were offset by interest income of $0.6 million. The resulting net finance charge of $69.1 million is $41.3 million higher than prior year due to PoMC incurring ‘break costs’ of $40.6 million associated with the early repayment of PoMC’s outstanding debt on 25 June 2015.

Cash flowNet cash inflows from operating activities were $105.6 million compared with $130.7 million in 2013-14. This decrease was due to PoMC incurring ‘break costs’ of $40.6 million associated with the early repayment of PoMC’s outstanding debt on 25 June 2015.

Cash outflows from investing activities increased by $175.7 million to $306.5 million in 2014-15 due to the progression of PCP.

Cash flows from financing activities was $204.3 million in 2014-15 as a capital contribution from the Victorian Government of $652.3 million allowed PoMC to repay net debt of $415.0 million for the year. In addition, dividends of $33.0 million were paid to the Victorian Government.

Operating performancePoMC’s earnings before interest and tax (EBIT) were $121.0 million for 2014-15.

Revenue before interest income increased by $14.0 million as price increases of 0.7% were applied and annual trade growth of 1.8% was recorded. Revenue for 2014-15 was also impacted by a reversal of prior period revaluation decrements of $7.2 million as a result of the 2014-15 scheduled asset revaluation.

Operating expenditure increased to $260.7 million from $237.0 million in 2013-14. This movement was influenced by ‘abnormal’ costs associated with the PCP, PLT, the early repayment of all PoMC’s outstanding debt and the 2014-15 scheduled asset revaluation.

Earnings before interest and tax (EBIT)

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ProfitOperating profit after tax for 2014-15 was $45.9 million against the previous year total of $72.8 million.

PoMC’s income tax expense decreased to $5.4 million from a lower profit before income tax and the impact of a significant Research and Development claim for 2014-15 (related to the Port Capacity Project).

PoMC’s underlying profit for 2014-15 was $77.7 million if the costs associated with the PLT and the ‘break costs’ from the early repayment of all PoMC’s outstanding debt are excluded.


RevenueRevenue for 2014-15 totalled $381.7 million compared to $368.4 million in the previous year.

Trade related revenue from wharfage charges of $241.1 million increased by $2.1 million on the previous year. Property rental and licence fees increased to $54.2 million and channel fees remained relatively flat.

As a result of PoMC’s 2014-15 scheduled asset revaluation there was a reversal of prior period revaluation decrements of $7.2 million.

Since the introduction of the PLF in 2012-13, PoMC has recovered in total $229.7 million related to the recovery of the PLF, a variance of just $0.1 million compared to the $229.8 million PLF incurred.

Revenue by segment

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ExpensesTotal expenses (excluding finance charges) were $260.7 million representing an increase of $23.7 million on the previous year.

As noted earlier, this increase was primarily the result of:

• higher Port Capacity Project ‘one off’ operational costs of $8.7 million

• 2014-15 scheduled asset revaluation decrements of $7.7 million

• increased depreciation of $7.0 million through a higher asset base as a result of the 2014-15 scheduled revaluation

• PLT costs of $4.8 million offset by reduced labour costs of $1.3 million through lower headcount.

Balance sheetAs at 30 June 2015, PoMC’s net assets were $3.4 billion.

The balance sheet comprised:

• cash assets of $39.6 million consisting of cash on hand and term deposits. Deposits earned a weighted average interest rate of 1.9% at 30 June 2015

• infrastructure, property, plant and equipment assets of $4.1 billion including channels, port land, buildings and infrastructure assets. Primarily as a result of the 2014-15 scheduled asset revaluation these assets have increased in value by $1.6 billion compared to 2013-14 as a result of new information influencing the value of these port assets. The key movements were in land ($0.9 billion) and channels ($0.3 billion)

• on 25 June, PoMC repaid its loans with the Treasury Corporation of Victoria. At 30 June 2015, PoMC had no outstanding interest bearing liabilities. This repayment of debt was enabled by a $652.3 million capital contribution from the Department of Treasury and Finance received on 24 June 2015.

Capital expenditureIn keeping with PoMC’s strong track record of port infrastructure investment, PoMC undertook total capital expenditure of $311.1 million. Expenditure included:

• Port Capacity Project (ongoing)

• Maintenance dredging

• 4 and 5 Webb Dock East pile and deck rehabilitation

• Swanson Dock East remediation of wharf deck

• 24 Victoria Dock pile rehabilitation.

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Financial summary


Financial summary

Year ended 30 June2015

$m2014

$m2013

$m2012

$m2011

$m

381.7 368.4 344.8 349.3 242.2

(260.7) (237.0) (219.6) (172.1) (149.7)

Finance costs (69.7) (29.1) (31.4) (35.3) (38.2)

51.3 102.3 93.8 141.9 54.2

(5.4) (29.5) (27.9) (42.1) (15.2)

45.9 72.8 65.9 99.8 39.0

Financial status

Total assets 4,245.9 2,549.2 2,477.2 2,499.9 2,343.5

(880.5) (849.2) (814.0) (900.0) (868.8)

Net assets 3,365.4 1,700.0 1,663.2 1,599.9 1,474.7

Contributed capital and reserves 3,103.9 1,453.1 1,447.8 1,420.9 1,361.2

261.5 246.9 215.4 179.0 113.5

Total equity 3,365.4 1,700.0 1,663.2 1,599.9 1,474.7

105.6 130.7 116.1 116.0 106.2

(306.5) (130.8) (56.6) (37.6) (29.6)

204.3 (13.7) (63.7) (65.4) (81.4)

3.4 (13.8) (4.2) 13.0 (4.8)

Capital works

Total expenditure 311.1 140.2 56.8 33.6 26.0

Dividend

Dividends paid 33.0 43.7 29.7 34.4 13.4

Financial strength

0.0 20.4 19.6 22.5 25.1

2.5 6.2 5.5 4.2 3.7

0.0 2.2 2.1 2.7 3.1


Port of Melbourne Lease Transaction

Ministerial Directions In accordance with the Ministerial Directions related to the Victorian Government’s intention to seek a medium-term lease for the Port of Melbourne’s commercial operations (see page 8), throughout the reporting period PoMC has undertaken a wide range of activities to support its shareholder in facilitating this outcome.

Legislation At the time of writing, PoMC notes that the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015 (The Bill) had been passed by the Legislative Assembly and remains before the Victorian Parliament for consideration by the Legislative Council.

The activities outlined in this section provide an overview of the scope of work carried out by PoMC to prepare for a proposed port lease transaction and do not pre-empt any outcome pending the deliberations of the Victorian Parliament. It should be noted that the proposed port lease transaction is being directly managed by the Department of Treasury and Finance and that PoMC has cooperated fully during this time.

Business separation To facilitate the business separation, a job-matching process was undertaken to identify and allocate resources across the two entities. Organisational structures were developed to reflect the respective functions and responsibilities and presented to PoMC staff in June.

The Bill proposes that PoMC’s current range of functions and responsibilities be separated. It is envisaged that the commercial operations of the Port of Melbourne including leases, channels, the Port Capacity Project and the Port Education Centre will transfer to a new private operator.

Residual responsibilities including the role of Harbour Master, vessel traffic services, Station Pier, dangerous goods, towage regulation, emergency management and waterside emergency response will remain with the State under the proposed Victorian Ports Corporation (Melbourne).

Planning and preparation Preparation and planning for the business separation and its associated activities was a key priority for PoMC in 2014-15. These activities included:

• preparation, review and verification of relevant documentation to support a vendor due diligence process

• undertaking a detailed functional design review process to identify and allocate functions, assets, systems and resources across the respective private and state entities

• preparatory work for the migration of key information technology platforms and applications such as payroll, finance and port operations systems

• identification of records, including heritage assets, for appropriate retention and storage

• identification of contracts which need to be vested, retained, transferred, split or duplicated.

Finance In 2014-15, PoMC incurred total expenditure of $4.8 million in relation to the proposed port lease transaction, which comprised legal, project management, information technology systems and network upgrades and configuration, software licences and hardware replacement.

In accordance with the Ministerial Direction of 15 May, PoMC completed the repayment of debt facilities and terminated hedging arrangements. Costs incurred for the repayment of debt amounted to $40.6 million.


Port operations

The focus of PoMC’s port operations is to ensure safe navigation for vessels to and from the Port of Melbourne, together with the management ofVictoria’s cruise ship gateway at Station Pier and the safety and security requirements of an urban port.

Ship visitsThe Port of Melbourne received a total of 3,023 ship visits in 2014-15 of which 2,994 were by commercial vessels including 1,048 container vessel visits. During the reporting period, PoMC also welcomed the arrival of the two largest container vessels to call at the Port of Melbourne. The Hyundai Oakland called with a capacity of 6,350 TEU before it was superseded by Buxcliff in January 2015 with a capacity of 6,450 TEU.

Suezmax vessel visitsFollowing two years of rigorous risk assessments and simulations, the Port of Melbourne welcomed the arrival of a number of Suezmax vessels which berthed at the liquid bulk terminal at Gellibrand Pier.

The term ‘Suezmax’ denotes the largest dimensions of a tanker capable of transiting the Suez Canal with typical measurements of around 274 metres in length, a beam of up to 50 metres and gross deadweight tonnage of up to 160,000 tonnes.

Adopting a precautionary approach, PoMC put in place stringent parameters around the transit and berthing of the Suezmax vessels which called with draught depths in excess of 14 metres.

Preparations for the arrival of the Suezmax vessels included extensive external risk assessments and simulations at the Australian Maritime College which drew on the expertise of Port Phillip Sea Pilots, OMC International (the vendors of the Dynamic Under Keel Clearance system (DUKC)) and ExxonMobil. The DUKC system in place at the Port of Melbourne was used to optimise the existing channel infrastructure and ensure safe navigation within the channel.

Suezmax vessels are restricted to entering Port Phillip Bay at slack water on a rising tide to make use of tidal assistance. Vessel speed is also limited throughout the transit with additional tugboats assisting berthing.

Maintenance dredgingMaintenance dredging was undertaken in South Channel and the port precinct during 2015 to ensure safe navigation by removing a selection of high spots in channels revealed by PoMC’s ongoing hydrographic survey program.

Limited dredging in South Channel West by the 84-metre long trailer suction hopper dredge, Brisbane, commenced in February. Dredged material removed from South Channel West was used to cap sediments placed in the Port Melbourne Dredged Material Ground.

The Brisbane also provided additional capping material for the Port Melbourne Dredged Material Ground by transporting clean sand previously placed in the South East Dredged Material Ground.

Maintenance dredging was also undertaken in the north of the bay including shipping channels and berths in the port precinct.

All of the dredging works were carried out in accordance with an approved Environmental Management Plan.

Cruise shippingMelbourne hosted a record 77 cruise ship visits with an estimated total of 220,000 visitors passing through Station Pier during the 2014-15 season which extended from October to May.

The record season marks ten years since PoMC took over management of Station Pier when there were 16 vessel visits in 2004-05.

Around 80 cruise ships are scheduled to visit Station Pier in 2015-16, including a record number of turnaround visits by numerous vessels including the Golden Princess, Pacific Jewel and the Pacific Eden.

PoMC’s ongoing collaboration with Tourism Victoria, the City of Melbourne, the City of Port Phillip and the Melbourne Cruise Ship Committee is part of a joint effort to ensure Melbourne continues to benefit from the strong growth in this tourism sector.


Port Capacity Project

The Port Capacity Project in the Webb Dock precinct is a major infrastructure development which will accommodate Melbourne’s container and automotive trade needs well into the future.

Project worksWith significant works undertaken over the reporting period, the Port Capacity Project is well advanced, on schedule and within budget, providing the Port of Melbourne and its customers with a competitive market offering backed up by innovative global expertise.

The diverse range of physical works has included over 3,000 piles being driven, minor dredging, installation of navigation aids at the northern end of Webb Dock and the construction of internal roads including a direct link from the port to the West Gate / M1 corridor, together with upgrades to the existing Todd Road roundabouts.

In addition, the respective concession holders for the container terminal (Victorian International Container Terminal Limited (VICTL)), the automotive terminal (Melbourne International RoRo Automotive Terminal) and the Pre-Delivery Inspection (PDI) Hub (Patrick AutoCare and PrixCar) have undertaken major works at their respective facilities.

Project scheduleProgress on the development of the new 920 metre quayline at the automotive terminal at Webb Dock West will enable berths 1 and 2 to accommodate their first vessel calls in the second half of 2015. This first stage of the development provides a new 550 metre long, 28 metre wide wharf, which has been designed to accommodate a wide range of vessel dimensions and replaces the previous pontoon configuration.

The two private sector operators of the automotive trade’s PDI hub, Patrick AutoCare and PrixCar, are also expected to commence operations in the second half of 2015. The PDI hub consolidates the import pre-delivery service into one location at the northern end of the Webb Dock precinct and streamlines delivery by reducing the number of truck journeys required for new motor vehicles to arrive at dealerships.

The new container terminal development undertaken by VICTL at Webb Dock East is on schedule to host container vessel arrivals in the latter half of 2016.

Project engagement Throughout the project, PoMC has actively worked with customers and the community in the planning and construction phases of the project, particularly with regard to managing potential trade impacts and seeking community input and feedback on buffering and amenity upgrades.

PoMC continued to convene the Project Liaison Group (PLG) which comprises industry, shipping, community groups, peak bodies and local councils. Headed by an independent Chairman, the PLG has played an important role in shaping the buffer management plan which delivers community infrastructure and amenity in the vicinity of Webb Dock.

Similarly, PoMC brought together shipping lines, transport operators and industry representatives to form the Trade Relocation Industry Group to manage the necessary trade relocation during the construction process when some berths were no longer available. This important forum has enabled PoMC to liaise closely with its customers and stakeholders and draw on the group’s industry expertise to identify and resolve potential issues and minimise any inconvenience which might arise from alternative berthing arrangements.

Community amenityRecognising the community amenity expectations of our neighbours, PoMC has undertaken an extensive consultative process to deliver innovative buffering solutions and community infrastructure upgrades with the input of the PLG.

Rising from the southern end of Webb Dock, the recently completed Webb Point / Maritime Cove Observation Deck is open to the public offering an elevated vista from the city skyline to Williamstown. The Webb Trail which runs along the eastern revetment of Webb Dock has also been redeveloped with improved lighting.

FinanceEmbracing innovation throughout the delivery of the project, PoMC’s income tax expense was reduced by a significant Research and Development claim related to technical and environmental aspects of the project’s design and construction.


Port pricing

As a self-funded business, sustainable financial performance is a key corporate goal for PoMC to enable the delivery of high quality facilities and services for its customers.

Price determination Prices charged by PoMC for the provision of shipping channels and infrastructure related to containerised and motor vehicle cargoes are subject to price monitoring by the Essential Services Commission (ESC).

In accordance with the ESC’s Price Monitoring Determination 2010 which applied to 30 June 2015, PoMC prepared a Pricing Policy Statement (PPS) which outlines the principles that guide PoMC in setting its fees and charges for prescribed services over the regulatory period. The PPS can be viewed at PoMC’s website www.portofmelbourne.com

Reference Tariff Schedule 2014-15PoMC undertook an extensive engagement process with stakeholders during 2013-14 to inform the setting of prices for 2014-15. Industry was also provided with two pricing information papers and regular updates regarding trade and the status of Port Licence Fee (PLF) recovery.

Reflecting a competitive trading environment and scrutiny of its own operational expenses, PoMC limited increases to less than 1% overall in the 2014-15 Reference Tariff Schedule (RTS). An overview of the changes to prices which applied from 1 July 2014 is outlined below:

• wharfage fees for loaded twenty-foot containers increased by $0.50 to $64.90 per TEU plus GST

• wharfage fees for empty containers increased by $0.10 to $16.10 per TEU plus GST

• motor vehicle charges increased by an average of $0.26 per motor vehicle to $38.22 plus GST

• channel fees for vessels visiting the Port of Melbourne increased on average by 0.7%

• the Channel Deepening Project (CDP) Infrastructure levy increased in line with CPI.

Reference Tariff Schedule 2015-16Having considered industry submissions and other feedback following the publication of an Industry Information Paper in March 2015, the 2015-16 RTS included the introduction of differential pricing arrangements for full container inward and outward tariffs.

To encourage supply chain efficiency and enhance the port’s competitive position in Australia, loaded international export containers will benefit from a price freeze which sees no change to the existing 2014-15 wharfage rate.

The PoMC Board also made a recommendation to the Victorian Government that wharfage on loaded international export containers be reduced by 2.5% each year over the next four years.

In addition, PoMC will absorb any under-recovery of the PLF which will not flow through to the new tariff charges. This amount will be met through scrutiny of PoMC’s own expenditure and operational efficiencies.

With the exceptions outlined, overall tariffs in the 2015-16 RTS will increase by CPI, including loaded international container import wharfage. An overview of the changes to prices which will apply from 1 July 2015 is outlined below:

• wharfage fees for loaded twenty-foot container exports are unchanged at $64.90 per TEU plus GST

• wharfage fees for loaded twenty-foot container imports increase by $1.78 per TEU to $66.68 (plus GST)

• wharfage fees for empty containers increased by $0.44 to $16.54 (plus GST)

• wharfage on motor vehicles increases in line with CPI by $1.04 per vehicle on average

• channel fees for vessels visiting the Port of Melbourne will increase on average by 2.7%

• the Channel Deepening Project (CDP) Infrastructure levy increased in line with CPI.

The prices outlined in the RTS, together with the ESC’s regulatory regime, will remain in place for the financial year 2015-16.

PoMC’s RTS 2015-16 is available on PoMC’s website at www.portofmelbourne.com

Details of the ESC’s Price Monitoring Determination and Price Monitoring Reports are available on the ESC website at www.esc.vic.gov.au


Statement of Corporate Intent

PoMC has been required to prepare the following Statement of Corporate Intent on the basis of a business-as-usual approach. It is however noted that as a result of the proposed Port of Melbourne Lease Transaction, PoMC is un-dergoing a period of significant transition and will evolve into an organisation responsible for a modified set of port functions and activities.

Port overview and assetsThe Port of Melbourne is Australia’s largest container, automotive and general cargo port handling around 36% of the nation’s container trade and is one of the top 60 container ports in the world (based on 2014 throughput). The port handles a range of maritime trades including containers, automotive, liquid bulk, dry bulk, general cargo, roll on-roll off (Tasmanian passenger / freight and freight only services) and cruise vessels.

PoMC is the strategic manager of the Port of Melbourne. PoMC’s assets include approximately 510 hectares of port land (Figure 1), 100,000 hectares of declared port waters and 36 commercial wharves (spread across nine separate port precincts). Currently, around 3,000 commercial vessels call at the port each year connecting Melbourne with both international and Australian ports.

Figure 1 – PoMC berths and facilities

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1. 24 Victoria Dock

2. F Appleton Dock

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4. 1-4 Swanson Dock East

5. 1-4 Swanson Dock West

6. No. 1 Maribyrnong

7. 5&6 Yarraville Berth

8. Holden Dock

9. Gellibrand & Breakwater Pier

10. Station Pier

11. 3-5 Webb Dock East

12. 1-2 Webb Dock East

13. 2 Webb Dock West

14. Melbourne VTS

15. Port Education Centre

16. 33 South Wharf

17. 27-31 South Wharf

18. 26 South Wharf

Port of Melbourne berths and facilities 1. Swanson Dock – main container hub with two

international terminals

2. Webb Dock East – Tasmanian freight facilities and international container terminal (currently under development)

3. Webb Dock West – purpose built automotive facility (under further development)

4. Holden Dock and Gellibrand Pier – handles bulk fuel, petroleum and oil

5. Appleton Dock – dry and breakbulk, roll-on / roll-off vessels, including the automotive trade

6. Victoria Dock – general cargo, warehousing facilities

7. Yarraville berths – bulk cargo berths for sugar, gypsum and fertiliser

8. Maribyrnong No. 1 – non-hazardous, hazardous and liquid bulk berth, servicing Coode Island facilities

9. South Wharves – multi-purpose berths for steel, gypsum, paper products and cement

10. Station Pier – Victoria’s premier cruise shipping and Tasmanian ferry hub

11. Port Operations Control Centre – shipping navigation services and emergency response management

12. Port Education Centre – community education facility


Corporate planning framework

PoMC has developed an integrated corporate planning framework which is presented in Figure 2. The framework involves the consideration of corporate strategy and is primarily driven by policies, legislation and the external and internal environment. This framework provides direction and strategic choice for each level of business planning.

Figure 2 – PoMC corporate planning framework

ExternalGuiding direction Government legislation, regulation and policies

Operating and strategic environment

External and internal environmental factors that affect PoMC’s strategic considerations and direction

Internal

Corporate strategic direction

Ministerial strategic directions

Board strategic directions

Corporate vision, goals and values

Corporate planning framework

Corporate Plan Statement of Corpoate Intent

Divisional Plans

Implementation framework

Strategic initiatives delivery and outcomes

Collaborative initiatives with Government

Ongoing operational plans, policies and processes

Performance monitoring and reporting

Quarterly Business Performance Reports

PoMC key performance indicators and benchmarks

Port of Melbourne performance metrics

Corporate objectivesIn response to the strategic economic role of the Port of Melbourne, PoMC’s current significant focus on the delivery of the new port infrastructure and capacity, and continued evolution of the policy and external strategic environment, the following corporate objectives will continue for 2015-16.

• Objective 1 – delivering critical port infrastructure and capacity – ensuring that the current program of major infrastructure works being undertaken at the Port of Melbourne, including the Port Capacity Project, are successively delivered on time and to the agreed budgets and are able to cater for the forecast trade demands.

• Objective 2 – responding to ports sector policy evolution – monitoring the evolving Victorian ports sector policy environment and responding to Government directions and requests with regard to the policy changes which impact the Port of Melbourne, including providing support for the transaction activities associated with the lease of the Port of Melbourne to the private sector.

• Objective 3 – ensuring ongoing port operations – continuing to focus on the efficiency and productivity of ongoing port operations which support the prosperity of the Victorian economy.

• Objective 4 – supporting and engaging with port customers – actively engaging with the full range of Port of Melbourne customers to understand their port and trade needs and support them in the moving trade through the Port of Melbourne.

The corporate objectives, in parallel with PoMC’s corporate vision, goals and values, provide the supporting framework around which the Corporate Plan has been developed.


Corporate opportunities and challengesOverall, there are a number of strategic opportunities and challenges for PoMC and the Port of Melbourne. These need to be understood as they have the potential to influence PoMC’s strategic planning and capacity delivery considerations. These challenges and opportunities include:

• Port sector policy evolution – the Australian ports sector has recently undergone a significant period of change with the introduction of new and more integrated stevedoring and supply chain players and the privatisation of other capital city ports. Preparations for leasing the Port of Melbourne to the private sector continue to progress during 2015

• Broader economic and climatic conditions – port trade volumes are driven by the broader economic, demographic and climatic conditions. Imports are influenced by population growth and prosperity while exports principally by climatic conditions and the strength of the Australian dollar. In both cases, the international context is important and trade volumes can be significantly impacted by currency exchange rates, interest rates, extreme climate conditions, changes to broad global economic and production conditions

• Port and freight supply chain competition – within the freight supply chain, there is already competition at a number of different levels, between individual ports, between the individual terminals at each port and between the various logistics players. These sectors are all currently undergoing change with the introduction of new competitors and technology, shifting ownership structures and owners, along with changing levels of supply chain vertical integration

• Container shipping industry economics and dynamics – the world shipping industry is going through a sustained period of structural change. As a result, the industry is moving towards increased concentration of market power in the hands of a smaller number of shipping lines. This is resulting in increased use of alliances for the delivery of shipping services and the potential for reductions in direct port calls and service levels. In particular, it is noted that there is an excess capacity on Australian trade routes which is resulting in significant competition between the major shipping lines

• Port and freight supply chain productivity – the Port of Melbourne is the largest Victorian port and the main State import and export gateway. The port and wider supply chain productivity is critical to Victoria’s economic and social prosperity. The productivity of the supply chain is heavily influenced by a large number of stakeholders, including Government, industry and community. As such, a ‘whole of supply chain’ focus is needed to maintain efficiencies and resolve potential bottlenecks

• Port and city growing and planning together – it is important that the planning for both the port and city is integrated and there is a robust understanding of the mixture of benefits and challenges associated with this close proximity and integration. This includes an understanding of the liveability, urban realm and commuter transport (both public and private) requirements of cities, along with the operational and economic requirements of ports and the wider freight supply chain

• Port competition and financial stability – in order to deliver positive long-term trade and economic outcomes, significant investments in port infrastructure and facilities are required. It is vital that PoMC is able to sustain robust revenues and profits to fund capacity and productivity improvements while maintaining competitive within a changing and increasingly competitive port environment.


Corporate planning framework mapTo enable an effective response to the current and evolving strategic and operational environment, PoMC has developed an integrated corporate planning framework which maps PoMC’s corporate goals across PoMC’s corporate delivery focus; publications; major activities, projects and deliverables. Select elements of the corporate planning framework are presented in Table 1.

Table 1 – Select PoMC corporate planning framework map elements

Corporate goals Corporate delivery focus Major 2015-16 activities, projects and deliverables

Goal 1: Delivering world class port facilities and services

• Asset management• Land management• Port capacity and productivity• Port planning and development• Vessel management

• Continued Government engagement• Maintenance dredging• New and upgraded container terminal capacity

(Port Capacity Project)• New automotive terminal capacity (Port Capacity

Project)• Ongoing port planning and development

Goal 2:

Driving integrated freight transport outcomes

• Road, rail and intermodal transport planning and development

• Continued Government engagement• Development of a port system performance

monitoring system• Improved rail and road interface operations

Goal 3:

Enhancing Australian and international trading activities

• Business intelligence• Port data collection, analysis and

reporting• Port marketing• Trade facilitation and growth

• Continued industry engagement• Maintenance of contestable trade volumes, where

practical and possible• Melbourne Port System Industry Engagement and

Facilitation• Trade volume maintenance and growth

Goal 4:

Ensuring sustainable business performance

• Capital investment• Competitive pricing position• Corporate administration and

communications• Corporate governance and planning• Emergency and crisis management• Environmental management• Financial returns and stability• Health and safety• Risk management• Security management

• Delivery of compliant port operations• Delivery of effective corporate governance,

including risk management • Funding of the Port Capacity Project• Provision of competitive port pricing• Provision of transaction related activities to

support the Government’s proposed lease of the Port of Melbourne

Goal 5:

Nurturing a shared port-city vision

• Community engagement• Land use planning• Port education• Stakeholder relations

• Continued community and stakeholder engagement

Goal 6:

Developing talented and committed people

• Leadership, people and culture • Continued staff development• Continued staff satisfaction surveys


Strategic initiativesFor the 2015-16 financial year, PoMC will be undertaking two strategic initiatives which will dominate our activities based on the current strategic directions of the Government and the significant transition underway in regards to the Port of Melbourne Lease Transaction.

• Port Capacity Project

− The $1.6 billion Port Capacity Project, announced in April 2012, will significantly expand the Port of Melbourne’s container and automotive terminals capacities. The centrepiece for the project is the redevelopment of Webb Dock and includes the construction of a new international container terminal, a new automotive terminal and an automotive pre-delivery inspection hub. The new automotive facilities are expected to become progressively operational from late 2015 and the first container is planned to be handled by the end of 2016.

− PoMC is responsible for the funding and delivery of the redevelopment of the Webb Dock Precinct. These works include the delivery of 920 metres of new automotive wharf as well as the redevelopment of existing wharf assets at Webb Dock East to provide 660 metres of wharf for the Port of Melbourne’s third international container terminal.

− A competitive bidding process has been undertaken by PoMC to appoint private sector entities to build, finance and operate the superstructure elements of the new facilities.

− Subject to complementary investment by the incumbent operators, the Port Capacity Project also includes a range of infrastructure works to facilitate the expansion of the container handling capacity within the two existing container terminals located at Swanson Dock.

• Port of Melbourne Lease Transaction Support

− On 5 May 2014, the Government announced that the Port of Melbourne would be leased to the private sector. The Department of Treasury and Finance (DTF) is coordinating the Port of Melbourne Lease Transaction on behalf of the Premier. PoMC continues to work closely with DTF and, the appointed transaction advisors, to support the Port of Melbourne lease transaction process and activities.

− PoMC continues to provide significant support to the Port of Melbourne Lease Transaction. These activities have, and will continue to, require significant senior management, Board and staff commitment and involvement with the overall aim of maximising the understanding of the existing Port of Melbourne functions, assets and activities and ensuring that there is a seamless and successful transition from PoMC into the respective private and state port entities, as required under the legislation. It is recognised that PoMC as an entity will now remain and continue to exist post the transaction (i.e. operate as a continuing body by transforming into the Victorian Ports Corporation (Melbourne) following the passage of legislation).


Risk managementPoMC maintains a comprehensive corporate risk management framework which is integrated into all business planning processes and activities, including corporate planning. The key elements of the PoMC risk management framework include the:

• Risk Management Policy – the policy provides a structured and consistent approach to risk management across the corporation which aligns strategy, processes, people, technology and knowledge. The purpose of the policy is to evaluate and manage the uncertainties which PoMC is facing

• Risk Management Plan and Procedures – the plan and procedures include details regarding the application of risk management at corporate and divisional levels and also for significant projects. PoMC uses the processes and procedures outlined within these documents to evaluate and prioritise the risk within the PoMC operating and business context

• Corporate, Divisional, Project / Program and Operational Risk Registers – the registers hold the risk management information relevant to the respective business level and activity and are informed by annual risk management assessments.

PoMC continuously undertakes internal reviews, updates and refinements of this risk management framework which are complemented with external strategic reviews as required.

Performance indicators and metrics PoMC has developed an integrated set of Key Performance Indicators (KPIs) and metrics which are used to assess the operation of PoMC and the Port of Melbourne. These KPIs and metrics are as follows:

• PoMC KPIs are metrics which are largely or fully under the control of PoMC

• Port of Melbourne performance metrics are metrics for which PoMC has either limited or no control.

The PoMC KPIs and Port of Melbourne performance metrics for 2015-16 are presented in Tables 2 and 3 respectively, along with their alignment to PoMC’s corporate goals.


Table 2 – PoMC Key Performance Indicators (KPI)

PoMC KPI Definition Reporting frequency

Goal 1 – Delivering world class port facilities and services

1. PoMC delivery of the Port Capacity Project according to the approved budget

Percentage of Port Capacity Project deliverables completed during the period according to the approved budget

Quarterly

2. PoMC delivery of Capital Expenditure Program (excluding Port Capacity Project) according to the approved budget

Percentage Capital Expenditure Program deliveries completed during the period according to the approved budget

Quarterly

3. Percentage of critical PoMC marine and navigational system availability – Dynamic Under Keel Clearance (DUKC)

Percentage availability of the DUKC during the period Quarterly

4. Percentage of critical PoMC marine and navigational system availability – radar

Percentage availability of the radar during the period Quarterly

5. Percentage of critical PoMC marine and navigational system availability – navigation aids

Percentage availability of the navigation aids during the period

Quarterly

Goal 4 – Ensuring sustainable business performance

6. PoMC return on capital employed Adjusted net operating profit after tax divided by the average total capital employed at the end of the period

Quarterly

7. PoMC gearing ratio Total adjusted borrowings divided by equity at the end of the period

Quarterly

8. PoMC interest cover ratio Free funds from operations divided by net finance charges Quarterly9. PoMC leverage ratio A measure of PoMC’s ability to meet its debt financing

obligations calculated as: Total adjusted borrowing divided by (free funds from operations plus net finance charges plus capitalised lease interest)

Quarterly

10. PoMC Board approval of annual risk attestation

Board approval of the annual risk attestation for inclusion in the PoMC Annual Report

Annually

11. PoMC reportable environmental regulation breaches

Number of PoMC reportable environmental regulation breaches during the period

Quarterly

12. PoMC delivery of environmental inspections according to the approved schedule

Number of environmental inspections completed during the period. The schedule may be adjusted over time subject to management approval requirements

Quarterly

13. Percentage of PoMC’s electricity consumption generated by renewable sources

Percentage of PoMC’s electricity consumption which is generated by renewable sources during the period

Quarterly

14. PoMC lost time injury frequency rate Number of lost time injuries during the period multiplied by one million and divided by the total number of hours worked during the period

Quarterly

15. PoMC reportable security regulation breaches

Number of PoMC reportable security regulation breaches during the period

Quarterly

Goal 5 – Nurturing a shared port-city vision

16. Execution of all capital works projects Stakeholder Engagement Plans

Percentage execution of all Stakeholder Engagement Plans for capital works projects (as required) identified within the PoMC enterprise project management system

Annually

Goal 6 – Developing talented and committed people

17. Employee satisfaction rating Employee satisfaction rating within the People Matter Survey

Every two years

18. Employee turnover Number of permanent and contract employees that left PoMC during the period divided by the average number of permanent and contract employees for the period

Quarterly


Table 2 – PoMC Key Performance Indicators (KPI)

PoMC KPIfrequency

1. PoMC delivery of the Port Capacity Project according to the approved budget

Percentage of Port Capacity Project deliverables completed during the period according to the approved budget

Quarterly

2. PoMC delivery of Capital Expenditure Program (excluding Port Capacity Project) according to the approved budget

Percentage Capital Expenditure Program deliveries completed during the period according to the approved budget

Quarterly

3.

Dynamic Under Keel Clearance (DUKC)

Percentage availability of the DUKC during the period Quarterly

4. Percentage availability of the radar during the period Quarterly

5. period

Quarterly


6. PoMC return on capital employedaverage total capital employed at the end of the period

Quarterly

Total adjusted borrowings divided by equity at the end of the period

Quarterly

Quarterly

plus capitalised lease interest)

Quarterly

10. PoMC Board approval of annual risk in the PoMC Annual Report

Annually

11. PoMC reportable environmental breaches during the period

Quarterly

12. PoMC delivery of environmental

schedule subject to management approval requirements

Quarterly

13. Percentage of PoMC’s electricity

sourcesgenerated by renewable sources during the period

Quarterly

by one million and divided by the total number of hours worked during the period

Quarterly

15. breaches during the period

Quarterly

Goal 5 – Nurturing a shared port-city vision

16. Stakeholder Engagement Plans

PoMC enterprise project management system

Annually

SurveyEvery two years

18. Employee turnoverPoMC during the period divided by the average number of permanent and contract employees for the period

Quarterly


Table 3 – Port of Melbourne performance metrics

Port of Melbourne Metric Definition Reporting frequency

Goal 1 – Delivering world class port facilities and services

1. Port of Melbourne Swanson Dock East container berth utilisation rate

Number of twenty-foot equivalent units (TEUs) handled during the period divided by the total berth length of all operational port container terminals during the period

Quarterly

2. Port of Melbourne Swanson Dock West container berth utilisation rate

Number of TEUs handled during the period divided by the total berth length of all operational port container terminals during the period

Quarterly

3. Port of Melbourne container berth occupation rate

Percentage of hours that container vessels are berthed at all container berths compared to the total operational hours of all container berths during the period

Quarterly

4. Port of Melbourne and shared channels draught utilisation

Percentage of port vessel visits (for both Port of Melbourne and shared channels) which have registered draught of greater than 11.6 m compared to the total number of port vessel visits during the period

Quarterly

5. Port of Melbourne container vessels delayed due to berth unavailability for on window arrivals

Percentage of container vessels which are delayed due to the berth being unavailable on arrival where the vessel arrived within their scheduled arrival window during the period

Quarterly

6. Port of Melbourne container vessels delayed due to berth unavailability for off window arrivals

Percentage of container vessels which are delayed due to the berth being unavailable on arrival where the vessel arrived outside their scheduled arrival window during the period

Quarterly

Goal 2 – Driving integrated freight transport outcomes

7. Port of Melbourne container truck utilisation

Number of TEUs handled during the period divided by the number of container truck visits during the period

Annually

8. Port of Melbourne rail throughput Percentage of total port trade volume (measured in mass tonnes) which is moved to or from the port using rail terminals located within the Port of Melbourne or Dynon

Quarterly

Goal 3 – Enhancing Australian and international trading activities

9. Port of Melbourne trade volume Port of Melbourne trade volume (in revenue tonnes) for the period

Quarterly

10. Port of Melbourne rolling annual trade growth

Percentage increase in the Port of Melbourne trade volume (in revenue tonnes) for the 12 months ending the period compared to the previous 12 month period

Quarterly

11. Port of Melbourne container trade volume

Port of Melbourne containerised trade volume (in TEU) for the period

Quarterly

12. Port of Melbourne automotive trade volume

Port of Melbourne automotive trade volume (in revenue tonnes) for the period

Quarterly

13. Port of Melbourne container market share

Percentage Port of Melbourne containerised trade market share (in TEU) compared to the five major capital city ports (Port of Melbourne, Port Botany, Port of Brisbane, Flinders Ports and Port of Fremantle) during the period

Quarterly

14. Port of Melbourne commercial vessel visits

Number of commercial vessels subject to PoMC charges during the period

Quarterly


15. Port of Melbourne reportable environmental regulation breaches

Number of Port of Melbourne reportable environmental regulation breaches during the period

Quarterly

16. Port of Melbourne reportable safety and security regulation breaches

Number of Port of Melbourne reportable safety and security regulation breaches during the period

Quarterly


Table 3 – Port of Melbourne performance metrics

Port of Melbourne metricfrequency

1. Port of Melbourne Swanson Dock East Number of twenty-foot equivalent units (TEUs) handled during the period divided by the total berth length of all

Quarterly

2. Port of Melbourne Swanson Dock West Number of TEUs handled during the period divided by

terminals during the period

Quarterly

3. Port of Melbourne container berth Percentage of hours that container vessels are berthed

hours of all container berths during the period

Quarterly

4. Port of Melbourne and shared channels Percentage of port vessel visits (for both Port of Melbourne and shared channels) which have registered draught of greater than 11.6 m compared to the total number of port vessel visits during the period

Quarterly

5. Port of Melbourne container vessels delayed due to berth unavailability for on window arrivals

Percentage of container vessels which are delayed due to the berth being unavailable on arrival where the vessel arrived within their scheduled arrival window during the period

Quarterly

6. Port of Melbourne container vessels delayed due to berth unavailability for

Percentage of container vessels which are delayed due to the berth being unavailable on arrival where the vessel arrived outside their scheduled arrival window during the period

Quarterly

Goal 2 – Driving integrated freight transport outcomes

7. Port of Melbourne container truck Number of TEUs handled during the period divided by the number of container truck visits during the period

Annually

8. Port of Melbourne rail throughput Percentage of total port trade volume (measured in mass tonnes) which is moved to or from the port using rail terminals located within the Port of Melbourne or Dynon

Quarterly

9. Port of Melbourne trade volume Port of Melbourne trade volume (in revenue tonnes) for the period

Quarterly

10. Port of Melbourne rolling annual trade growth

Percentage increase in the Port of Melbourne trade volume (in revenue tonnes) for the 12 months ending the period compared to the previous 12 month period

Quarterly

11. Port of Melbourne container trade volume

Port of Melbourne containerised trade volume (in TEU) for the period

Quarterly

12. volume tonnes) for the period

Quarterly

13. Port of Melbourne container market share

Percentage Port of Melbourne containerised trade market

ports (Port of Melbourne, Port Botany, Port of Brisbane, Flinders Ports and Port of Fremantle) during the period

Quarterly

14. Port of Melbourne commercial vessel visits

Number of commercial vessels subject to PoMC charges during the period

Quarterly


15. Port of Melbourne reportable Number of Port of Melbourne reportable environmental Quarterly

16. Port of Melbourne reportable safety Number of Port of Melbourne reportable safety and Quarterly


AbbreviationsThe following abbreviations have been used within this document:

CEO Chief Executive Officer

CPI Consumer Price Index

DTF Department of Treasury and Finance

DUKC Dynamic Under Keel Clearance

EBITDA Earnings Before Interest Tax Depreciation and Amortisation

ELA Enterprise Labour Agreement

ESC Essential Service Commission

FRD Financial Reporting Direction

GDP Gross Domestic Product

GFC Global Financial Crisis

GSP Gross State Product

KPIs Key Performance Indicators

MSA Marine Safety Act 2010 (Vic)

NOPATD Net Operating Profit After Tax and Dividends

PMA Port Management Act 1995 (Vic)

PoM Port of Melbourne

PoMC Port of Melbourne Corporation

PPS Pricing Policy Statement

TCV Treasury Corporation of Victoria

TEU Twenty –foot equivalent

TIA Transport Integration Act 2010 (Vic)

WACC Weighted Average Cost of Capital


Additional information

Transport Integration Act 2010 (Vic)

The Transport Integration Act 2010 (Vic) (TIA) commenced on 1 July 2010. Its purpose is to create a new framework for the provision of an integrated and sustainable transport system in Victoria consistent with the vision statement contained in section 6 which reads:

‘The Parliament recognises the aspirations of Victorians for an integrated and sustainable transport system that contributes to an inclusive, prosperous and environmentally responsible State’

PoMC is defined as a ‘transport body’ under the TIA.

Under section 24 of the TIA, PoMC is required to have regard to the ‘transport system objectives’, ‘decision-making principles’ and any applicable ‘specified policy principles’ when performing its functions or exercising its powers under any ‘transport legislation’. Transport legislation includes the Port Management Act 1995 (Vic) and the Marine Safety Act 2010 (Vic).

The transport system objectives provide for:

• Social and economic inclusion

• Economic prosperity

• Environmental sustainability

• Integration of transport and land use

• Efficiency, coordination and reliability

• Safety, health and wellbeing

The decision making principles provide for:

• Integrated decision-making

• Triple bottom line assessment

• Equity

• Transport system user perspective

• The precautionary principle

• Stakeholder engagement and community participation

• Transparency

Section 141D: Object

The primary object of PoMC is to manage and develop the port of Melbourne consistent with the vision statement and the transport system objectives.

The primary object includes:

a. to ensure, in collaboration with relevant responsible bodies, that the port of Melbourne is effectively integrated with the transport system and other systems of infrastructure in the State;

b. to facilitate, in collaboration with relevant responsible bodies, the sustainable growth of trade through the port of Melbourne;

c. to ensure that essential port services of the port of Melbourne are available and cost effective;d. to establish and manage channels in port of Melbourne waters for use on a fair and reasonable basis.


Section 141E: Functions

The functions of PoMC are to:

a. plan for the development and operation of the port of Melbourne;

b. provide land, waters and infrastructure necessary for the development and operation of the port of Melbourne;

c. develop, or enable and control the development by others of, the whole or any part of the port of Melbourne;

d. manage, or enable and control the management by others of, the whole or any part of the port of Melbourne;

e. provide, or enable and control the provision by others of, services for the operation of the port of Melbourne;

f. promote and market the port of Melbourne;

g. facilitate the integration of infrastructure and logistics systems in the port of Melbourne with the transport system and other relevant systems outside the port of Melbourne;

h. manage and, in accordance with standards developed by the Director, Transport Safety, to dredge and maintain channels in port of Melbourne waters;

i. provide and maintain, in accordance with the standards developed by the Director, Transport Safety, navigation aids in connection with navigation in port of Melbourne waters;

j. generally direct and control, in accordance with the Marine Safety Act 2010 (Vic), the movement of vessels in port of Melbourne waters;

k. perform functions in accordance with a direction given by the Minister under section 141H of the Act;

l. perform any other functions or duties conferred on PoMC by any other Act or any regulations under any other Act.

In performing its functions, PoMC must:

a. carry out its functions consistently with State policies and strategies for the development of the Victorian port and freight networks; and

b. to the extent that it is possible to do so consistently with paragraph (a) above, operate in a commercially sound manner having regard to:

i. the benefits of increased competition between persons and bodies that provide services related to the operation of the port of Melbourne;

ii. the persons living or working in the immediate neighbourhood of the port of Melbourne;

iii. the need to conduct research and collect information relating to the performance of the functions and the operation of the port of Melbourne so as to enable PoMC to meet its primary object;

iv. the need to deal efficiently with any complaints relating to the performance of its functions.

Section 152: Powers

As a ‘transport corporation’ under the Act, PoMC has power to do all things that are necessary or convenient to be done for or in connection with, or as incidental to, the achievement of its object and the performance of its functions.


Significant legislative changes

Emergency Management Amendment (Critical Infrastructure Resilience) Act 2014 (Vic) The Emergency Management Amendment (Critical Infrastructure Resilience) Act 2014 (Vic) was assented to on 21 October 2014 and commenced on 1 July 2015. The legislation amends the Emergency Management Act 2013 (Vic) and provides for new emergency risk management arrangements for Victorian critical infrastructure. It establishes a system to classify Victorian critical infrastructure as ‘significant’, ‘major’ or ‘vital’, and imposes obligations on owners and operators of ‘vital’ critical infrastructure. The port of Melbourne has not yet been classified. Emergency Management Act 2013 (Vic) The Emergency Management Act 2013 (Vic) commenced on 1 July 2014 and is the first of a four part reform package covering emergency management in Victoria. The purpose of the Act is to establish new governance arrangements for emergency management in Victoria. PoMC’s key emergency management responsibilities arise under the Emergency Management Manual Victoria and this continues under the new legislation.

National Competition Policy

PoMC has complied with the Victorian Government’s requirements in respect of the National Competition Policy by adopting the following behaviours and principles:

• clear and non-conflicting objectives

• managerial responsibility, authority and autonomy

• independent and objective performance monitoring

• performance-based rewards and sanctions

• competitive neutrality in input and output markets

• clear delineation of commercial and non-commercial activities

• clearly defined financial reporting requirements

• separate accounting for and funding of non-commercial activities

• appropriate return on assets used in the commercial activity

• application of a tax equivalent regime

• debt guarantee fees

• arrangements for allocation of profits from commercial activities

Victorian Industry Participation Policy

The Victorian Industry Participation Policy Act 2003 (Vic) requires the Victorian Government to develop and implement a Victorian Industry Participation Policy (VIPP) that aims at promoting employment and business growth for local industries, providing contractors with increased access to local industry capability, exposing local industry to world’s best practice and developing local industry’s international competitiveness and flexibility in responding to changing global markets.

During the year, no projects were commenced / completed by PoMC to which the VIPP applied.


Victorian Government Risk Management Framework

In accordance with Standing Direction 4.5.5 of the Minister for Finance, I, Mark Birrell, certify that Port of Melbourne Corporation has risk management processes in place consistent with the Australian/New Zealand Risk Management Standard (AS/NZS ISO 31000:2009) and an internal control system is in place that enables the executive of Port of Melbourne Corporation to understand, manage and satisfactorily control risk exposures. The Board verified this assurance and that the risk profile of Port of Melbourne Corporation has been critically reviewed within the last 12 months.

Mark BirrellChairman

Assets

All assets of PoMC were noted on a register maintained by the organisation in accordance with the Financial Management Act 1994 (Vic).

Building and maintenance compliance

PoMC buildings were maintained in accordance with relevant building and maintenance provisions in the Building Act 1993 (Vic) and Building Regulations 2006.

All PoMC owned buildings were audited in accordance with Part 12 of the Building Regulations 2006.

Protected disclosure

The purpose of the Protected Disclosure Act 2012 (Vic) (PDA) is to encourage and facilitate disclosure of improper conduct by public officers and public bodies and to provide protection for persons who make those disclosures. PoMC is a public body and disclosures under the PDA can therefore be made about PoMC or PoMC’s members, officers or employees. Disclosures must be made directly to the Independent Broad-based Anti-corruption Commission at:

Independent Broad-based Anti-corruption CommissionGPO Box 24234Melbourne VIC 3001 Tel: 1300 735 135www.ibac.vic.gov.au


Privacy

The Privacy and Data Protection Act 2014 (Vic) (PDPA) requires the responsible collection and handling of personal information in the Victorian public sector. The PDPA applies to PoMC and therefore PoMC has responsibilities under the PDPA which include:

• to collect, use and disclose personal information only in accordance with the Information Privacy Principles set out in the PDPA

• to provide individuals with access to information about them held by PoMC and by its contracted service providers

• to provide individuals with the right to request PoMC to correct information about them held by PoMC and its contracted service providers

• to set out in a document clearly expressed policies on its management of personal information and making the document available to anyone on request

During 2014-15, there were no complaints by an individual to PoMC or the Commissioner for Privacy and Data Protection (or the former Victorian Privacy Commissioner) about an act or practice of PoMC that may be an interference with the privacy of an individual.

Freedom of Information

The Freedom of Information Act 1982 (Vic) (FOI Act) enables members of the public to obtain information held by PoMC. During the period 1 July 2014 to 30 June 2015, PoMC received seven requests. All requests for information came directly from the public. During this period there was one review by the FOI Commissioner.

The outcomes of the seven requests were as follows:

• one request was granted in part• one request was denied in full• five requests were determined to be outside of the provisions of the FOI Act.

One request from the previous reporting period was decided during the year. That request was granted in part.

Requests for documents under the FOI Act should be made in writing and addressed to:

Freedom of Information OfficerPort of Melbourne CorporationGPO Box 261Melbourne VIC 3001

The request should provide such information as is reasonably required to enable the documents to be identified, and include a $27.20 application fee or evidence that payment should be waived because paying it could cause hardship.


Consultancies To deliver its extensive capital program, together with its ongoing operational responsibilities, PoMC routinely engages a wide range of consultants including engineering, environmental, information technology and professional services providers. For the period 1 July 2014 to 30 June 2015, PoMC engaged 29 consultants where the value of the consultancy was less than $10,000 in value (excluding GST). The total expenditure on these 29 consultancies was $150,267 (excluding GST). This included five consultancies related to the Port Capacity Project with a total value of $18,206. For the period 1 July 2014 to 30 June 2015, PoMC engaged 55 consultants where the value of the consultancy was $10,000 or greater (excluding GST). The total expenditure on these 55 consultancies was $11,634,865 (excluding GST). This included 21 consultancies related to the Port Capacity Project with a total value of $4,339,947 and nine consultancies related to the Port Lease Transaction with a total value of $2,140,102. The name, purpose and value of these consultancies can be found on PoMC’s corporate website at www.portofmelbourne.com/publications/annual-reports.

Advertising expenditure disclosure

During the reporting period, PoMC undertook advertising expenditure in support of its ‘Steer Clear’ campaign to promote and advocate safe boating on Port Phillip Bay with specific regard to the dangers of anchoring and mooring in shipping channels. Working alongside Victoria Water Police, Transport Safety Victoria, Port Phillip Sea Pilots and the Australian Volunteer Coast Guard, the Steer Clear campaign comprised targeted broadcast advertising on C31 and print advertising in the Fishing Monthly publication. Total expenditure was less than $100,000.

Availability of additional information

The following information relating to PoMC, relevant to the period 2014-15, has been prepared and is available to the Minister, Members of Parliament and the public on request:

• Declarations of pecuniary interests duly completed by relevant officers

• Details of publicly available documents produced by PoMC about the port of Melbourne and the places where these publications can be obtained

• Details of any major external reviews carried out on PoMC

• Details of major research and development activities undertaken by PoMC

• Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit

• Details of major promotional, public relations and marketing activities undertaken by PoMC to develop community awareness of the organisation and the services it provides

• Details of assessments and measures undertaken to improve the occupational health and safety of employees

• Details of consultancies and contractors engaged including services provided and expenditure committed for each engagement

• List of committees sponsored


Financial statements

Financial statements for the year ended 30 June 2015

41PORT OF MELBOURNE CORPORATION ANNUAL REPORT 2014-15 3

Port of Melbourne CorporationComprehensive Operating StatementFor the year ended 30 June 2015

2015 2014Notes $'000 $'000

Continuing operations

Revenue 3 381,657 368,421

Expenses 4 (260,682) (237,031) Finance costs 9 (69,705) (29,093) Profit before income tax 51,270 102,297 Income tax expense 5 (5,392) (29,542)

Profit after income tax 20(b) 45,878 72,755

Other comprehensive incomeItems that will not be reclassified to profit after income taxAsset revaluation reserve movement 20(a) 1,425,970 - Employee benefits reserve movement 20(a) (2,180) 5,381

5(c) (427,790) - 996,000 5,381

Items that will be reclassified to profit after income taxCash flow hedge reserve movement 20(a) 6,115 2,449 Income tax on items that may be reclassified to profit after income tax 5(c) (1,835) (735)

4,280 1,714

Other comprehensive income/(loss) for the year, net of tax 1,000,280 7,095

Total comprehensive income for the year 1,046,158 79,850

The above Comprehensive Operating Statement should be read in conjunction with the accompanying notes.

Income tax on items that will not be reclassified to profit after income tax

3

Port of Melbourne CorporationComprehensive Operating StatementFor the year ended 30 June 2015

2015 2014Notes $'000 $'000

Continuing operations

Revenue 3 381,657 368,421

Expenses 4 (260,682) (237,031) Finance costs 9 (69,705) (29,093) Profit before income tax 51,270 102,297 Income tax expense 5 (5,392) (29,542)

Profit after income tax 20(b) 45,878 72,755

Other comprehensive incomeItems that will not be reclassified to profit after income taxAsset revaluation reserve movement 20(a) 1,425,970 - Employee benefits reserve movement 20(a) (2,180) 5,381

5(c) (427,790) - 996,000 5,381

Items that will be reclassified to profit after income taxCash flow hedge reserve movement 20(a) 6,115 2,449 Income tax on items that may be reclassified to profit after income tax 5(c) (1,835) (735)

4,280 1,714

Other comprehensive income/(loss) for the year, net of tax 1,000,280 7,095

Total comprehensive income for the year 1,046,158 79,850

The above Comprehensive Operating Statement should be read in conjunction with the accompanying notes.

Income tax on items that will not be reclassified to profit after income tax


Port of Melbourne CorporationStatement of Financial PositionAs at 30 June 2015

2015 2014Notes $'000 $'000

Current assetsCash and cash equivalents 10 39,580 36,165 Receivables 11 39,998 37,689 Current tax assets 6 35,557 - Other assets 12 2,053 2,270

117,188 76,124

Non-current assetsProperty, plant and equipment 13 4,110,402 2,451,195 Deferred tax assets 7 15,036 16,650 Intangible assets 14 3,259 5,188

4,128,697 2,473,033

Total assets 4,245,885 2,549,157

Current liabilitiesPayables 15 65,818 59,242 Interest bearing liabilities 16 - 97,074 Provisions 17 21,595 18,919 Current tax liabilities 6 - 7,040 Other liabilities 18 5,067 6,223

92,480 188,498

Non-current liabilitiesInterest bearing liabilities 16 - 324,041 Deferred tax liabilities 8 786,857 335,278 Provisions 17 1,129 1,336

787,986 660,655

Total liabilities 880,466 849,153

NET ASSETS 3,365,419 1,700,004

EquityContributed capital 19 1,510,321 858,021 Reserves 20(a) 1,593,623 595,116 Retained profits 20(b) 261,475 246,867

TOTAL EQUITY 3,365,419 1,700,004

The above Statement of Financial Position should be read in conjunction with the accompanying notes.


Port of Melbourne CorporationStatement of Changes in EquityFor the year ended 30 June 2015

Notes

Contributedcapital

$'000

Cash flow hedge

reserve $'000

Asset revaluation

reserve$'000

Employee benefits reserve

$'000

Retained profits

$'000Total equity

$'000

Balance at 1 July 2013 857,296 (5,994) 596,491 - 215,364 1,663,157 Profit for the year 20(b) - - - - 72,755 72,755 Other comprehensive income 20(a) - 1,714 - 5,381 - 7,095 Total comprehensive income for the year - 1,714 - 5,381 72,755 79,850

Transactions with owners in their capacity as owners:Contributions/(distributions) of equity, net of transaction costs 19 725 - - - - 725 Dividends paid 20(b) - - - - (43,728) (43,728) Transfers from asset revaluation reserve to retained profits 20(a) (b) - - (2,476) - 2,476 -

725 - (2,476) - (41,252) (43,003)

Balance at 30 June 2014 858,021 (4,280) 594,015 5,381 246,867 1,700,004

Balance at 1 July 2014 858,021 (4,280) 594,015 5,381 246,867 1,700,004 Profit for the year 20(b) - - - - 45,878 45,878 Other comprehensive income 20(a) - 4,280 998,180 (2,180) - 1,000,280 Total comprehensive income for the year - 4,280 998,180 (2,180) 45,878 1,046,158

Transactions with owners in their capacity as owners:Contributions/(distributions) of equity, net of transaction costs 19 652,300 - - - - 652,300 Dividends paid 20(b) - - - - (33,043) (33,043) Transfers from asset revaluation reserve to retained profits 20(a) (b) - - (1,773) - 1,773 -

652,300 - (1,773) - (31,270) 619,257

Balance at 30 June 2015 1,510,321 - 1,590,422 3,201 261,475 3,365,419

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Port of Melbourne CorporationStatement of Changes in EquityFor the year ended 30 June 2015

Notes

Contributedcapital

$'000

Cash flow hedge

reserve $'000

Asset revaluation

reserve$'000

Employee benefits reserve

$'000

Retained profits

$'000Total equity

$'000

Balance at 1 July 2013 857,296 (5,994) 596,491 - 215,364 1,663,157 Profit for the year 20(b) - - - - 72,755 72,755 Other comprehensive income 20(a) - 1,714 - 5,381 - 7,095 Total comprehensive income for the year - 1,714 - 5,381 72,755 79,850

Transactions with owners in their capacity as owners:Contributions/(distributions) of equity, net of transaction costs 19 725 - - - - 725 Dividends paid 20(b) - - - - (43,728) (43,728) Transfers from asset revaluation reserve to retained profits 20(a) (b) - - (2,476) - 2,476 -

725 - (2,476) - (41,252) (43,003)

Balance at 30 June 2014 858,021 (4,280) 594,015 5,381 246,867 1,700,004

Balance at 1 July 2014 858,021 (4,280) 594,015 5,381 246,867 1,700,004 Profit for the year 20(b) - - - - 45,878 45,878 Other comprehensive income 20(a) - 4,280 998,180 (2,180) - 1,000,280 Total comprehensive income for the year - 4,280 998,180 (2,180) 45,878 1,046,158

Transactions with owners in their capacity as owners:Contributions/(distributions) of equity, net of transaction costs 19 652,300 - - - - 652,300 Dividends paid 20(b) - - - - (33,043) (33,043) Transfers from asset revaluation reserve to retained profits 20(a) (b) - - (1,773) - 1,773 -

652,300 - (1,773) - (31,270) 619,257

Balance at 30 June 2015 1,510,321 - 1,590,422 3,201 261,475 3,365,419

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.


Port of Melbourne CorporationStatement of Cash FlowsFor the year ended 30 June 2015

2015 2014Notes $'000 $'000

Cash flows from operating activitiesReceipts from customers 411,581 389,385 Payments to suppliers and employees (123,386) (92,442) Interest received 676 1,270 Interest paid (75,838) (29,033) Income Tax paid 6 (24,421) (38,324) Goods and Services Tax paid (5,045) (24,103)

4(i) (77,882) (76,072) Net cash inflow from operating activities 32 105,685 130,681

Cash flows from investing activitiesPayments for property, plant and equipment (308,134) (131,341) Proceeds from sale of property, plant and equipment 1,607 563 Net cash (outflow) from investing activities (306,527) (130,778)

Cash flows from financing activitiesProceeds from borrowings 188,974 72,000 Repayment of borrowings (603,974) (42,000) Capital contribution from the Department of Treasury and Finance 19 652,300 - Dividends paid 20(b) (33,043) (43,728) Net cash (outflow) from financing activities 204,257 (13,728)

Net increase/(decrease) in cash and cash equivalents 3,415 (13,825) Cash and cash equivalents at the beginning of the financial year 36,165 49,990

Cash and cash equivalents at end of the financial year 10 39,580 36,165

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

Port Licence Fee

6

Port of Melbourne CorporationStatement of Cash FlowsFor the year ended 30 June 2015

2015 2014Notes $'000 $'000

Cash flows from operating activitiesReceipts from customers 411,581 389,385 Payments to suppliers and employees (123,386) (92,442) Interest received 676 1,270 Interest paid (75,838) (29,033) Income Tax paid 6 (24,421) (38,324) Goods and Services Tax paid (5,045) (24,103)

4(i) (77,882) (76,072) Net cash inflow from operating activities 32 105,685 130,681

Cash flows from investing activitiesPayments for property, plant and equipment (308,134) (131,341) Proceeds from sale of property, plant and equipment 1,607 563 Net cash (outflow) from investing activities (306,527) (130,778)

Cash flows from financing activitiesProceeds from borrowings 188,974 72,000 Repayment of borrowings (603,974) (42,000) Capital contribution from the Department of Treasury and Finance 19 652,300 - Dividends paid 20(b) (33,043) (43,728) Net cash (outflow) from financing activities 204,257 (13,728)

Net increase/(decrease) in cash and cash equivalents 3,415 (13,825) Cash and cash equivalents at the beginning of the financial year 36,165 49,990

Cash and cash equivalents at end of the financial year 10 39,580 36,165

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

Port Licence Fee


Port of Melbourne CorporationNotes to the Financial StatementsFor the year ended 30 June 2015

1

(a)

Summary of significant accounting policies

Port of Melbourne Corporation (PoMC) is a Government Business Enterprise established by the Victorian Government under the Port Management Act 1995 (Vic) (formerly the Port Services Act 1995 (Vic)). These financial statements cover PoMC as an individual reporting entity. The Board of PoMC is directly accountable to the Victorian Government through the Minister for Ports, and the Treasurer.

PoMC is responsible for the strategic management and development of the port of Melbourne including facilitating trade and trade-related businesses. The trade and trade-related businesses in the port of Melbourne are container and general cargo.

These financial statements incorporate all activities of PoMC.

Corporate information

During the current reporting period, the Victorian Government continued with its plans to lease the Port of Melbourne's commercial operations to a private operator.

In accordance with the Port Management Amendment (Port of Melbourne Corporation Licence Fee) Act 2012 (Vic) which received royal assent on 6 March 2012 with an effective date of commencement of 1 July 2012, PoMC is required to remit to the Victorian Government an annual Port Licence Fee (PLF). The quantum of the PLF for 2014-15 was $78.4 million which was payable by PoMC to the Victorian Government in four equal quarterly instalments of $19.6 million.

On 15 May 2015, PoMC received a further Direction (Direction No. 2) from the Minister for Ports with approval from the Treasurer which included instructions for PoMC to repay all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria on or before 30 June 2015 in order to prepare the business to be leased to its new operator for 50 years on a debt free basis. A capital contribution via equity in the form of cash from the Department of Treasury and Finance enabled this repayment. The 'break costs' incurred on the early repayment of total interest bearing liabilities is disclosed in Note 9.

As per the Treasurer's second reading speech in the Victorian Parliament on 27 May 2015, the primary purposes of the bill are to authorise and facilitate the leasing of land and disposal of other assets of the Port of Melbourne Corporation to a private sector entity and to amend existing legislation to provide for an appropriate regulatory regime for the port of Melbourne.

On 25 June 2015, the Legislative Assembly (Lower House) of the Victorian Parliament passed the 'Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015' which was subsequently introduced in the Legislative Council (Upper House).

Total operating expenses for the current reporting period incurred on the Planning and Foundation stages of the Port Lease Transaction are disclosed in Note 4.

On 5 August 2015, the Legislative Council (Upper House) of the Victorian Parliament established a Select Committee (Port of Melbourne Select Committee) of eight members to inquire into and report on the proposed lease of the Port of Melbourne. The reporting date for the inquiry is 30 November 2015.

On 15 October 2014, PoMC received a Direction (Direction No. 1) from the then Minister for Ports with approval from the then Treasurer, which required PoMC to assist the Victorian Government through the Planning and Foundation stages of the Port Lease Transaction.



1

(b)

(c)

(d)

(e) Revenue

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges.

Revenue is measured at the fair value of the consideration received or receivable.

The Board of PoMC is of the view that the financial statements of PoMC also comply with IFRS as issued by the International Accounting Standards Board (IASB).

Compliance with International Financial Reporting Standards (IFRS)

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

Summary of significant accounting policies (continued)

The financial statements of PoMC are general purpose financial statements which have been prepared on an accruals basis in accordance with the Financial Management Act 1994 and applicable Australian Accounting Standards and Interpretations (AAS). PoMC has been designated a "for profit" entity. The annual financial statements were authorised for issue by the Board of PoMC on 21 September 2015.

The financial statements have been prepared on an accruals and a historical cost basis, except for Property, plant and equipment which, subsequent to acquisition, are measured at a revalued amount being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Cost is based on the fair values of the consideration given in exchange for assets. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Basis of preparation

Statement of compliance

The financial statements have been prepared on a going concern basis, as referred to in note 19.

Foreign currency translation

PoMC recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to PoMC and specific criteria have been met for each of PoMC's activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the revenue have been resolved. PoMC bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(i) Functional and presentation currency

(ii) Transactions and balances

Both the functional and presentation currency of PoMC is Australian dollars ($).



1

(e) Revenue (continued)

(iii) Rent and licence fees

(iv) Interest revenue

(vi) Government Grants

(v) Other revenue

(f) Expenses

(g) Income tax

Expenses from transactions are recognised as they are incurred, and reported in the financial year to which they relate. Operating expenses generally represent day-to-day running costs incurred in normal operations.

Revenue is recognised for the major business activities as follows:

(ii) Channel usage charges (Channel fees)

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met.

All other revenue from major business activities is recognised at the time the service to which the revenue relates is provided or work is undertaken and the revenue is receivable.


Channel fees are charged for the provision of channels for use by vessels in port of Melbourne waters and the provision of associated services. Channel fees are levied once per ship on the gross tons of vessels using the channels or in other manners specified for the provision of channel related services.

Revenue from operating leases is recognised in accordance with PoMC’s accounting policy outlined in note 1(h).

Interest revenue is recognised as the interest accrues to the net carrying amount of the financial asset using the effective interest rate method.

(i) Charges on goods (wharfage fees)

PoMC is subject to the National Tax Equivalent Regime. In accordance with this legislation, PoMC is required to pay to the State Government Consolidated Fund, amounts determined to be equivalent to the amounts that would be payable by PoMC if it was subject to the Income Tax Assessment Act 1936 (Cwlth) and Income Tax Assessment Act 1997 (Cwlth).

Wharfage fees are charged per unit of quantity, volume or weight of cargo for all cargoes, including empty containers, loaded on or discharged from vessels or between vessels in the port of Melbourne. Revenue is recognised at the time of the related vessel’s departure from its designated berth.



1

(g) Income tax (continued)

(i) Current tax

(ii) Deferred tax

(h) Leases

(i) Finance lease

(ii) Operating lease

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.

Deferred income tax liabilities are recognised for all taxable temporary differences.

No deferred tax assets and liabilities will be recognised from the initial recognition of an asset or liability, excluding a business combination where there is no effect on accounting or taxable profit or loss.

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense in the year in which they are incurred. This reflects the pattern of benefits derived by PoMC.

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased property to the lessee. All other leases are classified as operating leases.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and PoMC intends to settle its current tax assets and liabilities on a net basis.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Income tax expense comprises current and deferred tax expense. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised directly in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.




1

(h) Leases (continued)

Income as lessor

Expense as lessee

(i)

(j)

(k)

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Receivables consist of contractual receivables and statutory receivables. Contractual receivables mainly include trade receivables in relation to goods and services. Statutory receivables include amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax credits recoverable. Contractual receivables are classified as financial instruments in note 25. Statutory receivables are not classified as financial instruments as they do not arise from a contract.

If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written off by a charge to profit or loss except to the extent that the write-down can be debited to an asset revaluation reserve amount applicable to that specific asset. The recoverable amount for an asset is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 15 to 30 days. PoMC’s trading terms allow for interest to be charged on unpaid amounts that are not settled within the normal trading terms.

All assets are assessed annually for indications of impairment (i.e. as to whether their carrying value exceeds their recoverable amount).

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease agreement.

Impairment of assets

Cash and cash equivalents

For the Statement of Cash Flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Receivables




1

(k)

(l)


Derivatives and hedging activities

Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Receivables (continued)

PoMC used derivative financial instruments (including foreign exchange forward contracts and forward settled loans) to hedge its risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at each reporting date.

The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. PoMC has designated certain derivatives as cash flow hedges in prior reporting periods. If designated, at the inception of the transaction, the relationship between hedging instruments and hedging items, as well as PoMC's risk management objective and strategy for undertaking various transactions is documented.

PoMC does not have any derivatives designated in a hedge accounting relationship as at the 30 June 2015 (2014: Nil).

Derivatives are recognised as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the year.

The fair values of foreign exchange forward contracts are calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair values of forward settled loans are determined by reference to market values for similar instruments.

Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that PoMC may not be able to collect the receivable. Financial difficulties of the debtor or debts more than 120 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable's carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.



1

(l)

Cash flow hedge

For designated hedge accounting relationships, at each balance date, PoMC tests each of the designated cash flow hedges for effectiveness both retrospectively and prospectively using the dollar offset method. If as a result of the effectiveness test, the change in the fair value of the hedge instrument over the change in the fair value of the hedge item falls within the 80% to 125% range, the hedge is considered highly effective and the effective portion of the change in fair value of the derivative is recognised in the hedge reserve directly in equity. Where the cumulative gain or loss on the hedging instrument exceeds the cumulative change in the fair value of the expected future cash flows of the hedged item, the ineffectiveness is taken immediately to profit or loss.

PoMC does not have any designated hedge accounting relationships as at 30 June 2015 (2014: Nil). Therefore, PoMC is not required to perform the annual effectiveness tests both retrospectively and prospectively as at 30 June 2015 (2014: Not applicable).

If a hedge of a forecast transaction, such as a future loan or foreign currency exposure, subsequently results in the recognition of a financial assets or liability, the associated gains or losses that were recognised directly in equity should be reclassified into profit or loss in periods during which the asset acquired or liability assumed affects profit and loss.

PoMC continued to amortise the cash flow hedge reserve (over the maturity of the loans) until 25 June 2015 on which date the remaining balance of the cash flow hedge reserve was fully amortised upon PoMC's repayment of all its outstanding interest bearing liabilities. Refer to Note 16 for further details.

Forward settled loans are fixed rate facility loans to be drawn down at a future date. The principal amounts, interest rates and drawdown dates for these future loans have been pre-determined at inception of the forward settled loans and have the effect of locking in the interest rates and amounts to be borrowed. For the purposes of hedge accounting, hedges entered into by PoMC are classified as cash flow hedges if they meet the documentation and effectiveness criteria for hedge accounting.


Derivatives and hedging activities (continued)

Cash flow hedges were used to hedge PoMC’s exposure to variability in cash flows that was attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, whilst the ineffective portion is recognised in profit or loss.



1

(m)

Class Method Valuer Channels Discounted cash flows

Land Income approach

Infrastructure Depreciatedreplacement cost

Plant and equipment (except for Office and computer equipment, Motor vehicles and Furniture and fittings)

Depreciatedreplacement cost

Office and computer equipment, Motor vehicles and Furniture and fittings

Depreciated written down value

If an asset's carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is debited directly to equity under the heading of asset revaluation reserve to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

If an asset's carrying amount is increased as a result of a revaluation, the increase is credited directly to equity under the heading of asset revaluation reserve net of applicable tax. However, the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease previously recognised in profit or loss in respect of that asset.

Property, plant and equipment represent non-current assets comprising land, buildings and improvements, channel assets, and plant and equipment used by PoMC in its operations.

All non-current physical assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment.

Non-current physical assets measured at fair value are revalued in accordance with Financial Reporting Direction 103F Non-Financial Physical Assets (FRD 103F). This revaluation process occurs every five years, based upon the asset’s classification under the Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Revaluation increments or decrements arise from differences between an asset’s carrying value and fair value.

Jones Lang LaSalle *



Management Assessment

* The valuation scope, methodology adopted and the calculations applied to the valuations have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F.

In 2015, a valuation of PoMC's non-current physical assets were performed to determine fair value as presented below. The valuations were effective as at 30 June 2015.

Property, plant and equipment

Gains and losses on disposals of assets are determined by comparing proceeds from sale with the carrying amount and selling costs. These are included in profit or loss. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being sold or written off is transferred to retained profits.

Pitcher Partners *




1

(m)

2015 2014Channels 40 years 40 yearsInfrastructure 2 - 85 years 2 - 85 yearsPlant and equipment 1 - 25 years 1 - 25 years

All items with a cost or value in excess of $1,000 (2014: $1,000) and with a useful life greater than one year are recognised as assets. All items within the threshold of $91 to $1,000 (2014: $91 to $1,000) and with a useful life greater than one year are grouped and recognised as assets within the Low Value Asset Pool. All other items are expensed as acquired.

(iv) Recoverable amount

Land held by PoMC is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives (or, in the case of leasehold improvements and certain leased plant and equipment, the lease term if shorter) as follows:

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (refer to note 1(i)).

Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Where the repair relates to the replacement of a component of an asset and the cost exceeds the capitalisation threshold, the cost is capitalised and depreciated.

(v) Repairs and maintenance

The shipping channels in port waters are subject to deterioration through siltation, which reduces the depth of water available to commercial shipping. The channels are restored to declared depths by routine maintenance dredging. Dredging and associated costs (including all costs incurred under the dredging contract to restore the channels to declared depths) are capitalised and amortised.

The purchase method of accounting is used for all acquisitions of assets, being the fair value of the assets provided as consideration at the date of acquisition plus any incidental costs attributable to the acquisition. Where assets are constructed by PoMC, the costs at which they are initially recorded include an appropriate share of labour costs incurred directly in the construction of the asset.

(vi) Major maintenance dredging costs

(ii) Change in accounting estimates

(i) Depreciation


Property, plant and equipment (continued)

The estimated useful lives, residual values and depreciation method are reviewed at the end of each financial reporting period and, where revised, are accounted for as a change in an accounting estimate. Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method.

(iii) Acquisition



1

(n)

(o) Intangible assets

2015 2014Software and systems 4 years 4 years

(p) Financial Instruments

Assets classified as held for sale


The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) over the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments.

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.

Due to the nature of PoMC's activities, certain financial assets and liabilities arise under statute rather than a contract. Such financial assets and liabilities do not meet the definition of financial instruments per AASB 132 - Financial Instruments: Presentation. Statutory receivables and payables arising from taxes, fines and penalties do not meet the definition of financial instruments as they do not arise under contract. Refer to note 25 for further details.

Intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to PoMC.

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment.

For an asset in the disposal group to be so classified, it must be available for immediate sale in its present condition and its sale must be highly probable.

Non-current assets are not depreciated or amortised while they are classified as held for sale.

Non-current assets classified as held for sale are presented separately from the other assets in the Statement of Financial Position.



1

(q) Payables

(r)

(s) Finance costs

(t) Provisions

Provisions are recognised when PoMC has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.

Trade payables are carried at amortised cost. Due to their short term nature they are not discounted. They represent liabilities for goods and services provided to PoMC prior to the end of the financial year that are unpaid as at year end. The amounts are unsecured and are usually paid within 30 days of recognition.


Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are expensed rather than added to the cost of the assets on the basis that PoMC's Property, plant and equipment are recognised at fair value. All other finance costs are recognised as expenses in the period in which they are incurred.

Interest bearing liabilities are fixed rate facility loans and are recorded at amortised cost. Interest bearing liabilities are classified as current liabilities unless PoMC has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Interest bearing liabilities

All interest bearing liabilities are initially recognised at fair value of the consideration received less, directly attributable transaction costs. The measurement basis subsequent to initial recognition depends on whether PoMC has classified the debt as financial liabilities designated at fair value through profit and loss or financial liabilities at amortised cost.

Payables consist of contractual payables and statutory payables. Contractual payables include mainly trade payables creditors in relation to goods and services. Statutory payables include GST payable, fringe benefits tax and other tax payable. Contractual payables are classified as financial instruments in note 25. Statutory payables are not classified as financial instruments as they do not arise from a contract.

On 15 May 2015, PoMC received Direction No. 2 from the Minister for Ports with approval from the Treasurer which included instructions for PoMC to repay all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria on or before 30 June 2015 to prepare the business to be leased to its new operator for 50 years on a debt free basis. A capital contribution via equity in the form of cash from the Department of Treasury and Finance enabled this repayment. The 'break costs' incurred on the early repayment of total interest bearing liabilities is disclosed in Note 9.



1

(t) Provisions (continued)

(u) Employee benefits

(ii) Annual leave

(iii) Long service leave

Estimated costs of environmental assessment, management and restoration of assets are recognised as a liability when the obligation is identified and the costs can be reliably estimated.

(i) Environmental restoration feasibility studies and remediation costsThe direct costs of land remediation are included in the cost of the land (where it is expected to enhance the value of the land by providing future economic benefits) and a corresponding liability or provision is recognised when the obligation for remediation arises and can be reliably estimated.


Annual leave entitlements are accrued on a pro‑rata basis in respect of services provided by employees up to the reporting date, having regard to rates expected to apply when the liabilities are settled. The entire obligation has been recognised as a current liability as PoMC does not have an unconditional right to defer settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled within 12 months are also recognised in the provision for employee benefits as current liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement.

Liabilities for wages and salaries, expected to be settled within 12 months of the reporting date, are measured at their nominal amounts (including on-costs) using the remuneration rates expected to apply at the time of the settlement and are recognised as current liabilities. PoMC does not have an unconditional right to defer settlement of these liabilities. No liability is recognised for non‑vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non‑vesting leave will not be used.

Long service leave entitlements are assessed at balance date having regard to expected employees’ remuneration rates on settlement, employment related on-costs and other factors including expected accumulated years of employment on settlement and past experience. Commonwealth bond rates are used for discounting future cash flows.

Unconditional long service leave is disclosed as a current liability even when the liability is not expected to settle within 12 months as PoMC does not have an unconditional right to defer the settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled beyond 12 months are measured at present value.

(i) Wages, salaries and sick leave

PoMC's land and channel assets may be subject to varying degrees of contamination. On-going environmental assessment and restoration costs are progressively charged as part of the expenses from ordinary activities when incurred.



1

(u) Employee benefits (continued)

(iv) Superannuation

(v) Contributed capital


Contributions to defined benefit schemes are based on a percentage of members' annual salary as actuarially determined and reviewed annually. Any deficiency in the net assets of a defined benefit scheme is recognised as a liability when it arises. Refer to note 21 for further details.

Conditional long service leave is disclosed as a non‑current liability as there is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. Conditional long service leave is disclosed as a non‑current liability measured at present value.

Some PoMC employees are members of defined benefit superannuation schemes, being the Port of Melbourne Superannuation Fund and the State Superannuation Scheme. These defined benefit funds are closed to new members. PoMC does not recognise any defined benefit liability in respect of the State Superannuation Scheme. The Department of Treasury and Finance recognises and discloses the defined benefit liabilities for the State Superannuation Scheme in its financial report. PoMC has no legal or constructive obligation to pay future benefits relating to its employees in the State Superannuation Scheme as its only obligation is to pay superannuation contributions as they fall due.

Contributions to defined contribution funds are made in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cwlth). Contributions are charged as an expense as the contributions are paid or become payable.

Consistent with applicable Australian reporting requirements and the Financial Management Act 1994 (Vic), transfers and appropriation for additions of net assets between PoMC and State Government Departments designated as contributed capital, are recognised as capital transactions.

The net liability recognised in the Statement of Financial Position represents the present value of the defined benefit obligation, adjusted for unrecognised past service cost, net of the fair value of the plan assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reduction in future contributions to the plan.

A liability in respect of the Port of Melbourne Superannuation Fund is recognised in the Statement of Financial Position in the provision for employee benefits, and is determined using the Projected Unit Cost Method, with actuarial valuations being carried out at each reporting date. Actuarial gains and losses are recognised in Other Comprehensive Income in the period in which they occur.

Past service cost is recognised immediately to the extent that the benefits are already vested, otherwise it is amortised on a straight-line basis over the average period until the benefits become vested.



1

(v) Contributed capital (continued)

(w) Commitments

(x) Contingent assets and contingent liabilities

(y) Dividend policy

(z)

(aa) Rounding of amounts

Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item of expense. The GST recoverable from, or payable to, the Australian Taxation Office is included as part of statutory receivables or statutory payables.

Transfers of net assets arising from administrative restructures and/or from all other arrangements which are deemed to be contributions by owners, where there is insufficient contributed capital for distribution are recognised as an expense by the transferor and income by the transferee in accordance with Financial Reporting Direction 119A - Transfers through Contributed Capital (FRD 119A). Alternatively, if the transferor has approval to reclassify sufficient accumulated funds to contributed capital prior to or at the time of the asset transfer date then a distribution from contributed capital can occur.

PoMC pays dividends in accordance with a determination of the Treasurer of Victoria under the Transport Integration Act 2010 (Vic). The obligation to pay a dividend arises after consultation between PoMC’s Board, the Minister for Ports and the Treasurer of Victoria. Following this consultation process, the Treasurer makes a formal determination. Only dividends declared on or before reporting date are recognised as a liability.

Goods and Services Tax (GST)

Contingent assets and contingent liabilities are not recognised in the statement of financial position, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are presented inclusive of GST. Refer to note 26 for further details.

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed in note 28 at their nominal value including GST payable.


Unless otherwise stated, amounts in the financial report have been rounded to the nearest thousand dollars or in certain cases to the nearest dollar.

On 15 May 2015, PoMC received Direction No. 2 from the Minister for Ports with approval from the Treasurer which included instructions for PoMC to repay all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria on or before 30 June 2015 to prepare the business to be leased to its new operator for 50 years on a debt free basis. A capital contribution via equity in the form of cash from the Department of Treasury and Finance enabled this repayment. The transfer was recognised as a contribution by owners in accordance with FRD 119A.



1

(ab)

(ac)

Reference SummaryApplication

date Impact on PoMC’s financial

statementsAASB 9 Financial Instruments

The key changes include the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1/7/2018 The assessment has identified that the financial impact of available for sale (AFS) assets will now be reported through other comprehensive income (OCI) and no longer recycled to the profit and loss.

While the preliminary assessment has not identified any material impact arising from AASB 9, it will continue to be monitored and assessed.

AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.

1/7/2017 The changes in revenue recognition requirements in AASB 15 may result in changes to the timing and amount of revenue recorded in the financial statements. The Standard will also require additional disclosures on service revenue and contract modifications.

A potential impact will be the upfront recognition of revenue from licenses that cover multiple reporting periods. Revenue that was deferred and amortised over a period may now need to be recognised immediately as a transitional adjustment against the opening returned earnings if there are no former performance obligations outstanding.

New accounting standards and interpretations applicable but not operative


At the date of this financial report the following standards and interpretations which are applicable to PoMC, have been issued but are not yet operative. A discussion of their future requirements and their impact on PoMC is as follows:

New accounting standards and interpretations that became operative during the year

No new accounting standards and interpretations became operational during the year.



2

(a)

Critical accounting estimates and judgements

In the application of AASs, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

Critical accounting judgements

Critical judgements that management has made in the process of applying PoMC’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements are:

Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that may have a financial or disclosure impact on PoMC and are believed to be reasonable under the circumstances.

(i) Recovery of deferred tax assetsDeferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise these temporary differences.

(ii) Impairment of non-financial assetsPoMC assesses impairment of all assets at each reporting date by evaluating conditions specific to PoMC and to the particular asset that may lead to impairment. These include obsolescence or physical damage, technology, economic and political environments and future income expectations. If an impairment trigger exists, the recoverable amount of the asset is determined.

(iii) Fair value of property, plant and equipmentAll non-current physical assets are measured initially at cost and subsequently revalued at fair value in accordance with FRD 103F.

In 2015, the fair values of all classes of property, plant and equipment were determined by independent valuation firms (except for Office and computer equipment, Motor vehicles and Furniture and fittings which were determined by a managerial assessment).

The valuation scope, methodology adopted and the calculations applied to the valuations have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F. Further details of the estimates and assumptions used in the 2015 fair value assessment are disclosed in Note 13.



2

(b)

PoMC's property, plant and equipment assets are measured and disclosed at fair value for financial reporting purposes as per note 13. PoMC's financial assets and liabilities are disclosed at fair value for financial reporting purposes as per note 25. In order to determine fair value of an asset or a liability, PoMC uses market-observable data to the extent it is available.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available, with limited exceptions.

(ii) Fair value measurement and valuation processes

No provision was required to be recognised in 2015 and the balance of the provision is nil at 30 June 2015 (2014: Nil).

The categorisation of fair value measurement into different levels of the fair value hierarchy depends on the degree to which the inputs into the fair value measurement are observable and the significance of the inputs into the fair value measurement. The hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable valuation inputs. The hierarchy categorises the inputs used in valuation techniques into three levels:

Critical accounting estimates and judgements (continued)

Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:- quoted prices for similar assets or liabilities in active markets- quoted prices for identical or similar assets or liabilities in markets that are not active- inputs other than quoted prices that are observable for the asset or liability, for example interest rates and yield curves observable at commonly quoted intervals, implied volatilities, credit spreads etc.- inputs that are derived principally from or corroborated by observable market data by correlation or other means ('market-corroborated inputs').

A provision is recognised for the present value of anticipated costs of future restoration of contaminated land. The provision is based on estimates and time frames provided by external consultants. The estimates include future costs associated with remediation. The calculation of this provision requires estimations such as degree of contamination and contaminated land area compared with past experiences. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the Statement of Financial Position by adjusting both the expense or asset (if applicable) and provision.

Key sources of estimation uncertainty

(i) Remediation of contaminated land



2

(b)

In 2015, the fair values of Channel assets was determined by an independent valuation firm. The valuation scope, methodology adopted and the calculations applied to the Channel assets' valuation have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F. Further details of the estimates and assumptions are disclosed in Note 13.

A revaluation adjustment is made to the Channel assets if the fair value based on the discounted cash flow model is greater than 10% when compared to the carrying amount. An increase/decrease in the Channel assets is reflected by an increase/decrease in asset revaluation reserve and deferred tax liability.

The Channel assets are subject to annual fair value assessments as required by FRD 103F. The fair value of Channel assets is assessed annually using the same principles used by the Valuer-General Victoria to value the Channel assets (i.e. the discounted cash flow (DCF) method, income approach). This method is used in the absence of market based evidence of fair value (i.e. value through sale) of the Channel assets given the specialised nature of the assets in question and is applied consistently year on year.

(iii) Fair value assessment of Channel assets

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.

Critical accounting estimates and judgements (continued)

Key sources of estimation uncertainty (continued)

(ii) Fair value measurement and valuation processes (continued)



2015 2014Notes $'000 $'000

3 Revenue

Operating revenues

Charges on goods (wharfage fees) 241,149 238,955 Rent and licence fees 54,164 52,491 Channel usage charges (channel fees) 50,129 50,364 Land tax recovered from tenants 8,406 9,397 Charges for berth and area hire 6,799 6,738 Other charges for services 4,159 4,199 Recoverable works 8,750 4,728 Total operating revenues (i) 373,556 366,872

Other incomes

Interest received 25 590 1,307

7,172 - Other revenue 339 242 Total other incomes 8,101 1,549

Total revenues 381,657 368,421

Year ended 30 June 2014


Reversal of prior period revaluation decrements - Property, plant and equipment

The quantum of the PLF for 2014-15 was $78.4 million and this was payable by PoMC to the Victorian Government in four equal quarterly instalments of $19.6 million. The total operating revenue includes $76.7 million of revenue related to the recovery of the PLF. This represents an under recovery of $1.7 million when compared to the $78.4 million PLF payable to the Victorian Government for 2014-15.

(i) In accordance with the Port Management Amendment (Port of Melbourne Corporation Licence Fee) Act 2012 (Vic) which received royal assent on 6 March 2012 with an effective date of commencement of 1 July 2012, PoMC is required to remit to the Victorian Government an annual Port Licence Fee (PLF).

The quantum of the PLF for 2013-14 was $76.4 million and this was payable by PoMC to the Victorian Government in four equal quarterly instalments of $19.1 million. The total operating revenue includes $80.33 million of revenue related to the recovery of the PLF. This represents an over recovery of $3.90 million when compared to the $76.43 million PLF payable to the Victorian Government for 2013-14.

Since the PLF became effective in 2012-13, PoMC has incurred PLF expenditure of $229.8 million and recovered PLF revenue of $229.7 million.



2015 2014Notes $'000 $'000

4 Expenses

Operating expenses

Port Licence Fee (i) 31 78,366 76,429 Depreciation and amortisation expenses 32 80,648 73,616 Contractors and consultant expenses 36,958 30,176 Salaries and employee benefits expenses 31,171 32,430 Land tax expenses 11,004 11,723 Operating lease expenses - minimum lease payments 2,852 2,773 Other expenses 8,081 8,189 Total operating expenses (ii) 249,080 235,336

Other expenses

(Gain)/loss on disposal of Property, plant and equipment 32 3,881 1,695 7,721 -

11,602 1,695

Total expenses 260,682 237,031



(i) In accordance with the Port Management Amendment (Port of Melbourne Corporation Licence Fee) Act 2012 (Vic) which received royal assent on 6 March 2012 with an effective date of commencement of 1 July 2012, PoMC is required to remit to the Victorian Government an annual Port Licence Fee (PLF).

Revaluation decrements - Property, plant and equipment

The quantum of the PLF for 2013-14 was $76.4 million and this was payable by PoMC to the Victorian Government in four equal quarterly instalments of $19.1 million.

The quantum of the PLF for 2014-15 was $78.4 million and this was payable by PoMC to the Victorian Government in four equal quarterly instalments of $19.6 million.

(ii) Total operating expenses for the current reporting period include $4.8 million (2014: Nil) of costs incurred on the planning and foundation stages of the Port Lease Transaction.



2015 2014Notes $'000 $'000

5 Income tax expense

(a) Income tax expense

Current tax 24,131 40,638 Movement in deferred tax (8,625) (9,464) Deferred tax - research and development tax credit (10,114) (1,632)

5,392 29,542

(Increase)/decrease in deferred tax assets 7 (221) (229) (Decrease) in deferred tax liabilities 8 (8,404) (9,235)

(8,625) (9,464)

(b)

Profit from continuing operations before income tax expense 51,270 102,297 Tax at the Australian tax rate of 30% (2014 - 30%) 15,382 30,689

Under/(over) provided in prior year - - 124 369

Deferred tax - research and development tax credit (10,114) (1,516) Income tax expense 5,392 29,542

(c)

Asset revaluation reserve 20(a) 427,790 - Cash flow hedge reserve 20(a) 1,835 735

429,625 735

Deferred income tax (benefit)/expense included in income tax expense comprises:

Tax effect of sundry amounts which are not deductible/(taxable)

Tax expense/(income) relating to items of other comprehensive income

Numerical reconciliation of income tax expense to prima facie tax payable

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:



2015 2014Notes $'000 $'000

6 Current tax assets/ liabilities

Current tax asset 35,557 - Income tax liabilities - 7,040

35,557 7,040

Movement in current tax (assets)/liabilities:

Carrying amount 1 July 7,040 9,410 Charged to income tax expense 5(a) 24,131 40,638 Research and development tax incentive offset (i) (42,307) (4,684) Under/(over) provision in prior year - - Income Tax paid 31 (24,421) (38,324) Carrying amount 30 June (35,557) 7,040

7 Deferred tax assets

The balance comprises temporary differences attributable to:Employee benefits 6,817 6,076 Derivative financial instruments - 1,835 Provision (37) (36) Income received in advance 4,803 5,161 Project costs 3,086 3,086 Accrued expenses 367 528

15,036 16,650

Movement in deferred tax assets:

Carrying amount 1 July 16,650 17,156 5(a) 221 229

Credited/(charged) to Statement of Equity (1,835) (735) Carrying amount 30 June 15,036 16,650

Credited/(charged) to Comprehensive Operating Statement

(i) The research and development tax incentive offset for the current reporting period was $ 42.3 million based on eligible research and development expenditure of $107.7 million that was undertaken as part of the Port Capacity Project.



2015 2014Notes $'000 $'000

8 Deferred tax liabilities

The balance comprises temporary differences attributable to:Depreciation 59,336 67,740 Capitalised research and development 37,120 4,928 Revalued Property, plant and equipment 690,401 262,610

786,857 335,278

Movement in deferred tax liabilities:

Carrying amount 1 July 335,278 341,462 5(a) (8,404) (9,235)

(Credited)/charged to Statement of Equity 427,790 - Capitalised research and development 32,193 3,051 Carrying amount 30 June 786,857 335,278

9 Finance costs

Interest expense (i) 25 66,296 25,714 Other financing charges 3,409 3,379

69,705 29,093

10 Cash and cash equivalents

Cash at bank and in hand (ii) 3,580 3,326 Deposits (iii) 36,000 32,839

25 39,580 36,165

(iii) Deposits earn a weighted average interest rate of 1.95% at 30 June 2015 (2014: 2.45%).

(ii) Cash at bank earns a weighted average interest rate of 1.50% at 30 June 2015 (2014: 2.00%).

(i) Interest expense includes $40,571,152 of 'break costs' paid to the Treasury Corporation of Victoria as part of the early repayment of PoMC's outstanding interest bearing liabilities' balance of $538,974,318 on 25 June 2015. (Refer to Note 1a for further information).

(Credited)/charged to Comprehensive Operating Statement



2015 2014Notes $'000 $'000

11 Receivables

CurrentContractualTrade receivables (i) (ii) (iv) 25 32,976 33,584 Less provision for doubtful debt (iii) - -

32,976 33,584

StatutoryGST Input tax credit recoverable 7,022 4,105

7,022 4,105

39,998 37,689

(ii) Ageing of past due but not impaired31 - 60 days 11,245 2,799 61 - 90 days 85 33 91 - 120 days - -

11,330 2,832

(iii) Ageing of impaired trade receivables31 - 60 days - - 61 - 90 days - - 91 - 120 days - -

- -

(iv) Trade receivables write-offs

12 Other assets

CurrentPrepayments 2,003 2,129 Other assets 50 141

2,053 2,270

In the current financial year there were no trade receivable write-offs (2014: $19,494.50).

(i) Refer to note 1(k) for terms that apply to trade receivables and note 25 for the nature and extent of risks arising from contractual receivables.


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30,8

65

114,

112

2,45

1,19

5

At 3

0 Ju

ne 2

014

Fair

valu

e 20

1292

2,00

3 -

-

-

-

92

2,00

3 Fa

ir va

lue

2010

-

773,

788

593,

991

31,2

35

-

1,39

9,01

4 Co

st18

,709

33

,391

16

3,01

9 15

,407

11

4,11

2 34

4,63

8 Ac

cum

ulat

ed d

epre

ciat

ion

(58,

088)

-

(1

40,5

95)

(15,

777)

-

(2

14,4

60)

Net

boo

k am

ount

882,

624

807,

179

616,

415

30,8

65

114,

112

2,45

1,19

5



13 Property, plant and equipment (continued)

2015 Valuation

a) Channels

Channels sensitivity analysis

Independent valuations were undertaken in 2015 for Financial Reporting Purposes in accordance with the Financial Management Act 1994 (Vic). The effective date of the valuations was 30 June 2015 and they incorporated requirements outlined in:- AASB 116 Property Plant & Equipment ; - AASB 13 Fair Value Measurement ; and- FRD 103F Non-Financial Physical Assets , issued by the Department of Treasury and Finance.

The fair value of Channel assets was determined by an Independent Valuation firm (Pitcher Partners) using the discounted cash flow method (income approach). The valuation scope, methodology adopted and the calculation applied to the valuation have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F.

The main assumptions applied were as follows:- a discount rate calculated using a nominal post tax weighted average cost of capital of 7.6% (mid-point of the calculated range 6.6% - 8.6%);- cash flows modelled over a 30 year period;- trade forecasts that are consistent with PoMC’s financial models (i.e. based on Meyrick 2010 trade growth forecasts);- the 2015-16 Reference Tariff Schedule and longer term pricing assumptions consistent with PoMC's revised 2015 Pricing Policy Statement (CPI plus 1.5% plus or minus an adjustment for the Port Licence Fee);- projected expenses that are in line with PoMC's financial models (i.e. an appropriate allowance for wage inflation for labour and CPI for other expenditure items);- capital expenditure forecasts that are consistent with PoMC's current long term capital investment program; and- a terminal value based on an inflation indexed written down value approach.

The value of the Channel assets could change in future financial years as a result of changes outside management's control.

In determining the fair value of the Channel assets, the valuation inputs that have been used are considered to be Level 3 inputs in accordance with the fair value hierarchy as per Note 2(b)(ii).

The discount rate, projected capital expenditure and projected trade volumes are considered to be the significant unobservable valuation inputs for the purposes of the valuation of the Channel assets.




b) Land

In accordance with FRD 103F, PoMC is required to undertake the revaluation process once every five years unless the annual fair value assessments indicate a material change in values (refer to Note 1(m)).

In order to determine fair value of the land assets, the valuer has adopted the capitalisation of net income approach as the primary methodology over both passing and conservative market rental profiles (where appropriate) and the direct comparison approach over non-income producing land and other sites (where applicable). The valuation has been undertaken on a per title basis. Where new information is available, for example, where a previously vacant site becomes tenanted, the capitalisation of net income approach has been applied instead of the direct comparison approach.

Discount rate - volatility in the discount rate can have a significant impact on the value of the Channel assets. An increase in the discount rate by 1% will have an unfavourable impact of $141.0 million (2014: $99.1 million) on the fair value of the Channel assets. A decrease in the discount rate by 1% will have a favourable impact of $140.0 million (2014: $117.0 million) on the fair value of the Channel assets. This is based on a discount rate range of between 6.6% - 8.6%.

Projected capital expenditure - variability in the capital expenditure forecast ($5.7 - $78.9 million per annum) can have a significant impact on the value of the Channel assets. An increase in the capital expenditure forecast by 10% per annum ($1,024.9 million of nominal capital expenditure over 30 years) will have an unfavourable impact of $18.1 million (2014: $22.6 million) on the fair value of the Channel assets. A decrease in the capital expenditure forecast by 10% per annum ($838.5 million of nominal capital expenditure over 30 years) will have a favourable impact of $18.1 million (2014: $22.6 million) on the fair value of the Channel assets.

Projected trade volumes - variability in the trade volume forecast (112.4 - 204.0 million gross tons per annum) can have a significant impact on the value of the Channel assets. An increase in the total trade forecast by 1% per annum on a cascading basis will have a favourable impact of $51.6 million (2014: $72.8 million) on the fair value of the Channel assets. A decrease in the total trade forecast by 1% per annum on a cascading basis will have an unfavourable impact of $87.5 million (2014: $94.4 million) on the fair value of the Channel assets.

The fair value of Land assets was determined by an Independent Valuation firm (Jones Lang LaSalle) as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation scope, methodology adopted and the calculation applied to the valuation have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F.




The market rate, including adjustments for rental reversions, letting up and incentive allowances, future lease agreements and stepped rentals, range between $10 - $125 per square metre across PoMC's land assets. This range reflects the varying uses and activities undertaken and lease tenure durations across PoMC's land assets.

The capitalisation percentage represents a measure of the level of confidence or risk associated with the valuer's assessment of the market rate adopted for the individual leases within each title, i.e. the higher the risk associated with achieving the market rate the higher the capitalisation percentage and vice-versa.

In determining the fair value of the Land assets, the valuation inputs that have been used (in the capitalisation of net income approach) are unobservable and are considered to be Level 3 inputs in accordance with the fair value hierarchy as per Note 2(b)(ii). Therefore, as at 30 June 2015, the Land assets class has been transferred from Level 2 (as previously reported) to Level 3.

The capitalisation of net income approach involves the addition of the valuer's opinion of market rate (for the various tenancies contained within the title) and the deduction of outgoings (where appropriate) in order to determine the net market income on a per title basis. This net market income is capitalised at the adopted capitalisation percentage to derive a core value.

The market rate, capitalisation percentage and capital expenditure forecast are considered to be the significant unobservable valuation inputs for the purposes of the valuation of the Land assets.

The core value is adjusted for items including rental reversions, letting up and incentive allowances, future lease agreements and stepped rentals, and capital expenditure forecasts to derive the fair value.

The valuation of Land assets has been undertaken having regard to the Highest and Best Use of the respective assets and includes the valuation of certain parcels of land on the premise that they will be fully developed in future years. Where applicable, a nil residual value has been assumed for all third party assets that may transfer to PoMC at the expiration of commercial leases.

The valuer has considered the leasing evidence, market indicators and the level of investor sentiment for comparable real estate and adjusted specifically for the following:- the characteristics of each precinct and associated users;- the shape, topography and utility of each title;- any leasing covenants/security of income cash flow;- the weighted remaining lease duration;- the expiry profile of tenancies;- the opportunity for rental reversion to market levels;- the appropriate letting up and incentive allowances;- the present value of unexpired and/or forecast incentives;- any future lease agreement and stepped rentals; and- the capital expenditure forecast relevant to each title and/or precinct.




Land sensitivity analysis

c) Infrastructure

Capital expenditure forecast - variability in the capital expenditure forecast ($0.1 - $341.7 million) can have a significant impact on the value of the Land assets. An increase in the capital expenditure forecast by 10% will have an unfavourable impact of $35.3 million on the fair value of the Land assets. A decrease in the capital expenditure forecast by 10% will have a favourable impact of $35.3 million on the fair value of the Land assets.

The valuation is based on the assumption that the Infrastructure assets are being utilised as assets of a profitable undertaking with benefits of continuity of tenure of land and buildings during the foreseeable future.

Where the fair value of an Infrastructure asset can be determined by reference to its price in an active market for the same or similar asset, the fair value of the asset has been determined based on this information. Where the fair value of the asset is not able to be reliably determined using market based evidence, depreciated replacement cost has been considered to be the most appropriate basis for determination of the fair value.

The fair value of Infrastructure assets was determined by an Independent Valuation firm (Jones Lang LaSalle) using the depreciated replacement cost method. The valuation scope, methodology adopted and the calculation applied to the valuation have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F.

The value of the Land assets could change in future financial years as a result of changes in the significant and unobservable valuation inputs that have been adopted to determine the fair value.

Market rate - changes in the market rate adopted ($10 - $125 per square metre) can have a significant impact on the value of the Land assets. An increase in the market rate by 10% will have a favourable impact of $173.0 million (2014: $83.4 million) on the fair value of the Land assets. A decrease in the market rate by 10% will have an unfavourable impact of $173.0 million (2014: $83.4 million) on the fair value of the Land assets. It should be noted that in determining the impact of changes in the market rate the capitalisation percentage adopted has been maintained as a constant.

Capitalisation percentage - changes in the capitalisation percentage adopted (5.0% - 7.5%) can have a significant impact on the value of the Land assets. An increase in the capitalisation percentage by 0.5% will have an unfavourable impact of $113.0 million (2014: $54.5 million) on the fair value of the Land assets. A decrease in the capitalisation percentage by 0.5% will have a favourable impact of $115.0 million (2014: $55.4 million) on the fair value of the Land assets. It should be noted that in determining the impact of changes in capitalisation percentage the market rate adopted has been maintained as a constant.




d) Plant and equipment

The valuation takes into consideration the specialised nature of the Infrastructure assets and determines the fair value on the basis of a depreciated replacement cost approach. Depreciated replacement cost is the gross current replacement cost reduced by factors providing for age, physical depreciation and technical and functional obsolescence taking into account the asset's total estimated useful life and anticipated residual value (if any).

Where the fair value of a Plant and equipment asset can be determined by reference to its price in an active market for the same or similar asset, the fair value of the asset has been determined based on this information. Where the fair value of the asset is not able to be reliably determined using market based evidence, depreciated replacement cost has been considered to be the most appropriate basis for determination of the fair value.

Useful life - 1 to 60 years (2014: 1 to 32 years) and a weighted average of 44 years (2014: 26 years) - A significant increase or decrease in the estimated useful life of the asset would result in a significantly higher or lower valuation.

The fair value of Plant and equipment (except for Office and computer equipment, Motor vehicles and Furniture and fittings) was determined by an Independent Valuation firm (Jones Lang LaSalle) using the depreciated replacement cost method. The valuation scope, methodology adopted and the calculation applied to the valuation have been examined and certified by the Valuer-General Victoria as meeting the relevant Australian Accounting Standards and FRD 103F.

In determining the fair value of the Infrastructure assets, the valuation inputs that have been used are considered to be Level 3 inputs in accordance with the fair value hierarchy as per Note 2(b)(ii).

Replacement costs relate to costs to replace the current service capacity of the asset. Where it has not been possible to examine hidden works, the use of reasonable materials and methods of construction have been assumed bearing in mind the age and nature of the assets.

Cost per unit - $33,700 - $4,831,000 per unit (2014: $17,000 - $2,022,000 per unit) and weighted average cost of $2,931,200 per unit (2014: $1,537,000 per unit) - A significant increase or decrease in the cost per unit would result in a significantly higher or lower fair value.

The valuation is based on the assumption that the Plant and equipment assets are being utilised as assets of a profitable undertaking with benefits of continuity of tenure of land and buildings during the foreseeable future.

The cost per unit and useful life are considered to be the significant unobservable valuation inputs for the purposes of the Infrastructure assets valuation.

Infrastructure sensitivity analysis




e) Office and computer equipment, Motor vehicles and Furniture and fittings

Asset ClassCarrying amount

Level 1 Level 2 Level 3$'000 $'000 $'000 $'000

Channels 1,221,475 - - 1,221,475 Land 1,674,952 - - 1,674,952 Infrastructure 770,370 - - 770,370 Plant and equipment 37,920 - - 37,920 Total 3,704,717 - - 3,704,717

Useful life - 1 to 17 years (2014: 1 to 13 years) and a weighted average of 13 years (2014: 10 years) - A significant increase or decrease in the estimated useful life of the asset would result in a significantly higher or lower valuation.

The valuation takes into consideration the specialised nature of the Plant and equipment assets and determines fair value on the basis of a depreciated replacement cost approach. Depreciated replacement cost is the gross current replacement cost reduced by factors providing for age, physical depreciation and technical and functional obsolescence taking into account the asset's total estimated useful life and anticipated residual value (if any).

The cost per unit and useful life are considered to be the significant valuation inputs for the purposes of the Plant and equipment assets valuation.

Plant and equipment sensitivity analysisCost per unit - $3,600 - $134,300 per unit (2014: $4,300 to $122,000 per unit) and weighted average cost of $92,200 per unit (2014: $87,000 per unit) - A significant increase or decrease in cost per unit would result in a significantly higher or lower fair value.

In determining the fair value of the Plant and equipment assets, the valuation inputs that have been used are considered to be Level 3 inputs in accordance with the fair value hierarchy as per Note 2(b)(ii).

As at 30 June 2015, based on the determination of the fair value hierarchy as per Note 2(b)(ii), the Land assets class has been transferred from Level 2 (as previously reported) to Level 3.

Fair value measurement at reporting period using:

The main assumptions applied were as follows:- effective life of the assets is accurate (reviewed annually); and - asset utilisation remains unchanged (enables PoMC to perform its normal day to day operations).

Management has determined the fair value of Office and computer equipment, Motor vehicles and Furniture and fittings on the basis that the depreciated written down value of these assets approximates their fair value. PoMC acquires, uses and depreciates these assets solely for their service potential and not to generate profits from their resale.

Fair value measurement hierarchy for assets as at 30 June 2015:




Channels$'000

Land$'000

Infra-structure

$'000

Plantand

equip-ment$'000

Opening balance - 1 July 2014 882,624 - 616,415 30,865 Additions 1,475 - 21,036 3,006 Disposals - - (4,479) (706) Transfers in/(out) - within Level 3 - - (2,029) 2,029 Transfers into/(out of) Level 3 - 807,179 - - Revaluation adjustments 369,576 867,773 179,774 8,298 Depreciation (32,200) - (40,347) (5,572)

Closing balance - 30 June 2015 1,221,475 1,674,952 770,370 37,920

14 Intangible assets 2015 2014Notes $'000 $'000

Software and systemsAt cost 12,148 12,038 Accumulated amortisation (8,889) (6,850)

3,259 5,188

Movement in intangible assets:Carrying amount 1 July 5,188 4,484 Transfer from capital works in progress 13 903 3,693 Disposals (303) (258) Amortisation expense (2,529) (2,731) Carrying amount 30 June 3,259 5,188

Reconciliation of Level 3 fair value as at 30 June 2015



2015 2014Notes $'000 $'000

15 Payables

CurrentUnsecured

Contractual19,592 19,107

Trade payables (i) (ii) 14,136 12,362 Accrued expenses (ii) 27,450 23,104

61,178 54,573 Statutory

FBT payable 116 115 GST payable 4,524 4,554

4,640 4,669

65,818 59,242 (i) Refer to note 1(q) for terms that apply to payables.

16 Interest bearing liabilities

CurrentTreasury Corporation of Victoria borrowings 25 - 97,074

Non-currentTreasury Corporation of Victoria borrowings 25 - 324,041

Port Licence Fee payable

(ii) Refer to note 25 for the nature and extent of risks arising from contractual payables and maturity analysis of contractual payables.

During the current financial year up to 30 June 2015, PoMC's interest bearing liabilities were secured by a Victorian State Government guarantee. The interest rates relating to interest bearing liabilities were fixed rates, ranging from 4.78% to 6.99% (2014: 2.73% to 6.99%).

During the current financial year and up to 30 June 2015, PoMC had available an unused overdraft facility of $1,000,000 (2014: $1,000,000).

On 15 May 2015, PoMC received Direction No. 2 from the Minister for Ports with approval from the Treasurer which included instructions for PoMC to repay all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria on or before 30 June 2015 to prepare the business to be leased to its new operator for 50 years on a debt free basis. A capital contribution via equity in the form of cash from the Department of Treasury and Finance enabled this repayment. The 'break costs' incurred on the early repayment of total interest bearing liabilities is disclosed in Note 9.

On 25 June 2015, PoMC repaid all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria.



2015 2014Notes $'000 $'000

17 Provisions

CurrentEmployee benefits - employee leave provisions (i) 6,726 5,828 Employee benefits - defined benefits superannuation fund liability (i) 21(a) 14,869 13,091

21,595 18,919

Non-currentEmployee benefits - employee leave provisions (i) 1,129 1,336 Total Provisions 22,724 20,255

(i) Employee benefits and related on-costs

Current employee benefitsAnnual leave entitlements

Unconditional and expected to wholly settle within 12 months 1,729 1,726 Long service leave entitlements

Unconditional and expected to wholly settle within 12 months 643 530 Unconditional and expected to wholly settle after 12 months 3,513 2,855

Defined benefits superannuation fund liability 21(a) 14,869 13,091

Non-current employee benefitsLong service leave entitlements 978 1,159

Total employee benefits 21,732 19,361

Current on-costs 841 717 Non-current on-costs 151 177

Total on-costs 992 894

Total employee benefits and related on-costs 22,724 20,255

(ii) Movement in Provisions2015 2015 2015

$'000 $'000 $'000

On-costs Total

Opening balance 6,270 894 7,164 Additional provision recognised 2,315 379 2,694 Reductions arising from payments (1,614) (263) (1,877) Unwind of discount and effect of changes in discount (108) (18) (126) Closing balance 6,863 992 7,855

Employee benefits

The movement in the Port of Melbourne Superannuation Fund liability is disclosed in Note 21(a). Only movements in provisions for annual leave and long service leave entitlements and on-costs are presented in the table above.



2015 2014Notes $'000 $'000

18 Other liabilities

Income in advance 5,053 6,204 Other liabilities 14 19

5,067 6,223

19 Contributed capital

Carrying amount 1 July 858,021 857,296 Capital contribution from the Department of Treasury and Finance 31 652,300 -

31 - 725 Carrying amount 30 June 1,510,321 858,021

Capital Management

There have been no changes to the general processes and procedures that are applied by PoMC in managing capital risk since 2014.

PoMC does not have any externally imposed debt related covenants, financial ratios or any other capital requirements.

PoMC’s Treasury Management Policy and procedures are in compliance with the Borrowing and Investment Powers Act 1987 (Vic), the Department of Treasury and Finance Treasury Management Guidelines and Standing Direction 4.5.6 Treasury Risk Management .

In accordance with the Borrowings and Investment Powers Act 1987 (Vic) the Treasurer has extended a temporary purpose financial accommodation of $166 million to PoMC for the reporting period 1 July 2015 to 30 June 2016.

As a result of the repayment of all outstanding interest bearing liabilities on 25 June 2015, as at year end 30 June 2015, the majority of PoMC's financial ratios have improved significantly from 2014 (including a liquidity ratio of greater than one).

PoMC manages capital risk through the monitoring and reporting of key ratios to the Board on a monthly basis including:- Interest cover ratio- Gearing ratio- Leverage ratio- Liquidity ratio

A key outcome for PoMC’s business financial sustainability is to ensure that it makes a sufficient return from its operational activities and investments in infrastructure to fund the future development of the Port. The key ratios monitored are based on maintaining a minimum of a BBB credit rating and that future decisions regarding capital investment and funding requirements ensure that PoMC does not breach these key ratios. Target maximum gearing is between 40%‑45%.

Capital contribution from the then Department of Transport, Planning and Local Infrastructure



2015 2014Notes $'000 $'000

20 Reserves and retained profits

(a) Reserves

Asset revaluation reserve 1,590,422 594,015 - (4,280)

Employee benefits reserve 3,201 5,381 1,593,623 595,116

Movement in asset revaluation reserve:Carrying amount 1 July 594,015 596,491 Transfer to retained earnings on assets disposed (1,773) (2,476) Revaluation - Property, plant and equipment 1,425,970 - Tax effect charged to other comprehensive income (427,790) - Carrying amount 30 June 1,590,422 594,015

Movement in cash flow hedge reserve:Carrying amount 1 July (4,280) (5,994) Interest bearing liabilities - Forward settled loans 25(e) 6,115 2,449

25(e) (1,835) (735) Carrying amount 30 June - (4,280)

Movement in employee benefits reserve:Carrying amount 1 July 5,381 - Movements in actuarial gains/ losses (2,180) 5,381

- - Carrying amount 30 June 3,201 5,381

(b) Retained profits

Carrying amount 1 July 246,867 215,364 Profit after income tax 45,878 72,755 Dividends paid 31 (33,043) (43,728) Transfer from asset revaluation reserve 1,773 2,476 Carrying amount 30 June 261,475 246,867

This reserve has been set up in accordance with the revised AASB 119 Employee Benefits to capture the movements in the actuarial gains and losses in respect of the Port of Melbourne Superannuation Fund. Refer to Note 21 for further details.

The cash flow hedge reserve records the unamortised portion of the gain or loss on a hedging instrument in a prior cash flow hedge that has previously been determined to be an effective hedge. The balance of this reserve is nil as the reserve was fully amortised as part of PoMC's repayment of all its outstanding interest bearing liabilities on 25 June 2015.

Cash flow hedge reserve

PoMC has a separate asset revaluation reserve for Channels, Land, Infrastructure and Plant and equipment. The reserves record the increments and decrements in the fair value of the assets net of tax effect.

Tax effect charged to other comprehensive income




21 Superannuation

Defined benefit superannuation plan

Contribution recommendations

The Fund only has defined benefit members and is closed to new members. Members receive pension benefits on retirement, death and disablement. On withdrawal, members have a choice of receiving a lump sum benefit and/or a deferred pension benefit.

A liability in respect of the Port of Melbourne Superannuation Fund (Fund) is recognised in the Statement of Financial Position, and is measured as the present value of the defined benefit obligation at 30 June 2015 less the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to year end, calculated annually by an independent actuary using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service.

Future taxes, such as taxes on investment income and employer contributions, are taken into account in the actuarial assumptions used to determine the relevant components of PoMC’s defined benefit liability.

Employer contributions to the defined benefit superannuation plan are based on recommendations by the plan’s actuary. Actuarial assessments are made annually and the last such assessment was made at 30 June 2015. The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. PoMC has no legal obligation to settle this liability with an immediate contribution or additional one off contributions.

The Superannuation Industry Supervision (SIS) legislation governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions.

The Fund’s Trustee is responsible for the governance of the Fund. The Trustee has a legal obligation to act solely in the best interests of Fund beneficiaries. The Trustee has the following roles: - Administration of the Fund and payment to the beneficiaries from Fund assets when required in accordance with the Fund rules;- Management and investment of the Fund assets; and- Compliance with superannuation law and other applicable regulations.

The prudential regulator, the Australian Prudential Regulation Authority (APRA), licenses and supervises regulated superannuation plans.

As at 30 June 2015, the Fund has 9 active members (2014: 9), 1 deferred pension member (2014: 1) and 23 members drawing a pension (2014: 23).



21 Superannuation (continued)

Funding method

Nature of asset/liability

PoMC may, at any time by notice to the Trustee, terminate its contributions. PoMC has a liability to pay the contributions due before the effective date of the notice, but there is no requirement for it to pay further contributions, irrespective of the financial condition of the fund. However, PoMC does have a constructive obligation for the fund and therefore has recognised a current liability in the Statement of Financial Position in respect of its defined benefit superannuation arrangements. Refer to note 17.

The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate funding method. The method adopted affects the timing of the cost to PoMC.

The Port of Melbourne Superannuation Fund does not impose a legal liability on PoMC to cover any deficit that exists in the fund. If the fund were wound up, there would be no legal obligation on PoMC to make good any shortfall. The Trust Deed of the fund states that if the fund winds up, the remaining assets are to be distributed by the Trustee of the fund in an equitable manner as it sees fit.

The Fund typically exposes PoMC to actuarial risks such as investment risk, salary growth risk, legislative risk, pension risk and inflation risk as outlined in more detail below:

Investment risk - the risk that investment returns will be lower than assumed and PoMC will need to increase contributions to offset this shortfall.

Pension risk - The risk is firstly that pensioner mortality will be lighter than expected, resulting in pensions being paid for a longer period. Secondly, that a greater proportion of eligible members will elect to take a pension benefit, which is generally more valuable than the corresponding lump sum benefit.

Inflation risk - The risk that inflation is higher than anticipated, increasing pension payments, and thereby requiring additional employer contributions.

Salary growth risk - the risk that wages or salaries (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.

Legislative risk - The risk is that legislative changes could be made which increase the cost of providing the defined benefits.

The defined benefit assets are invested in the BT Institutional Retirement PST and the Schroder Balanced Fund Standard Class. The assets are diversified within these investment options and therefore the Fund has no significant concentration of investment risk.

There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year. No other post retirement benefits are provided to these employees.




(a)

2015 2014$'000 $'000

Net defined benefit liability/(asset) at start of the year 13,091 18,081 + Current services cost 671 850 + Net interest 433 561 + Past service cost - - + (Gain)/loss on settlements - - - Actual return on fund assets less interest income 1,340 2,178 + Actuarial (gain)/losses arising from changes in demographic assumptions - - + Actuarial (gain)/losses arising from changes in financial assumptions 3,037 (2,251) + Actuarial (gain)/losses arising from changes in liability experience 483 (482) + Adjustment for effect of asset ceiling - - - Employer contributions 1,506 1,490 Net defined benefit liability/(asset) at end of the year 14,869 13,091

(b)

2015 2014$'000 $'000

Fair value of fund assets at beginning of the year 26,599 23,452 + Interest income 1,092 897 + Actual return on fund assets less interest income 1,340 2,178 + Employer contributions 1,506 1,490 + Contributions by fund participants 111 93 - Benefits paid 1,050 1,071 - Taxes, premiums & expenses paid 469 440 + Transfers in - - - Contributions to accumulation section - - + Settlements - - + Exchange rate changes - - Fair value of fund assets at end of the year 29,129 26,599

Reconciliation of the Net Defined Benefit Liability/(Asset)

Movements in the net defined benefit liability/(asset) were as follows:

Reconciliation of Fair Value of Defined Benefit Fund Assets

Movements in the fair value of the defined benefit fund assets were as follows:




(c)

2015 2014$'000 $'000

Present value of defined benefit obligation at beginning of the year 39,690 41,533 + Current service cost 671 850 + Interest cost 1,525 1,458 + Contributions by fund participants 111 93 + Actuarial (gain)/losses arising from changes in demographic assumptions - - + Actuarial (gain)/losses arising from changes in financial assumptions 3,037 (2,251) + Actuarial (gain)/losses arising from changes in liability experience 483 (482) - Benefits paid 1,050 1,071 - Taxes, premiums & expenses paid 469 440 + Transfers in - - - Contributions to accumulation section - - + Past service cost - - + Settlements - - + Exchange rate changes - - Present value of defined benefit obligation at end of the year 43,998 39,690

(d)

Asset category Carrying amount

Level 1 Level 2 Level 3$'000 $'000 $'000 $'000

Cash and cash equivalents - - - - Equity instruments - - - - Debt instruments - - - - Real Estate - - - - Investment funds - Growth Fund 29,129 - 29,129 - Asset-backed securities - - - - Structured debt - - - - Total 29,129 - 29,129 -

As at 30 June 2015

Fair value measurement at reporting period using:

The fair value of the Fund assets does not include amounts relating to PoMC's own financial instruments or any property occupied, or other assets used.

Reconciliation of Defined Benefit Obligation

Movements in the defined benefit obligation were as follows:

Fair value of Defined Benefit Fund assets




(e) The percentage invested in each asset class at reporting date

2015 2014% %

Australian equity 31 33 International equity 22 22 Fixed income 22 24 Property 4 3 Alternatives/Other 11 11 Cash 10 7

100 100

(f) Significant actuarial assumptions at the reporting date

Assumptions to determine Defined Benefit Cost 2015 2014% %

Discount rate 4.1 3.8 Expected salary increase rate 3.4 3.4 Expected pension increase rate 2.5 2.5 Pension mortality Standard Standard

Assumptions to determine Defined Benefit Obligation 2015 2014% %

Discount rate 3.7 4.1 Expected salary increase rate 3.4 3.4 Expected pension increase rate 2.5 2.5 Pension mortality Standard Standard

(g) Sensitivity Analysis

The defined benefit obligation as at 30 June 2015 under several scenarios is presented below.Scenario A: 0.5% per annum discount rate sensitivityScenario B: 0.5% per annum higher salary increase rate sensitivityScenario C: 0.5% per annum higher pension increase rate sensitivityScenario D: pensioner mortality sensitivity

Base Case

ScenarioA

ScenarioB

ScenarioC

ScenarioD

Discount rate 3.7 % pa -0.5% pa - - - Salary increase rate 3.4 % pa - +0.5% pa - - Pension increase rate 2.5% pa - - +0.5% pa - Pensioner mortality assumption Standard - - - 90%Defined benefit obligation ($'000) 43,998 48,228 44,347 47,897 45,130




(h) Funding arrangements

(i) Expected contributions2016$'000

Expected employer contributions 493

(i) Maturity profile of defined benefit obligations

$'00030 June 2015 1,113 30 June 2016 1,173 30 June 2017 1,370 30 June 2018 1,581 30 June 2019 1,729 Following 5 years 10,169

(j) Asset-Liability matching strategies

The financing objective adopted for the year ended 30 June 2015, was for the Fund to maintain the value of its assets at least equal to: - 100% (2014: 100%) of accumulated account balances; and - for defined benefits, the greater of 110% (2014: 100%) of Vested Benefits and 100% (2014: 100%) of the Actuarial Value of Accrued Benefits.

The weighted average duration of the defined benefit obligation is 16 years

There are no asset and liability matching strategies adopted by the Fund.

For the year ended 30 June 2015, based on the actuaries recommendation, PoMC contributed the following to the Fund: - 20% (2014: 20%) of superannuation salaries; - additional lump sum contributions of $85,000 per month (2014: $85,000); and - additional lump sum contributions of $22,500 per month (2014: $21,500) to finance expected administration and insurance costs.



22 Responsible persons

(a) Names

Responsible Ministers:The Hon. Luke Donnellan MP (appointed 4 December 2014) Minister for PortsThe Hon. David Hodgett MP (term ended 4 December 2014) Minister for PortsThe Hon. Tim Pallas MP (appointed 4 December 2014) Treasurer of VictoriaThe Hon. Michael O'Brien MP (term ended 4 December 2014) Treasurer of Victoria

Directors - as at 30 June 2015:The Hon. Mark Birrell ChairmanMr J Cain Deputy ChairmanMr D B CranwellMr I DicksonMr J Fitzgerald (leave of absence from 1 July 2014 to 22 October 2014)Mr J MarshallMr B Nicholls Ms J van ReykMs A Williams

Accountable Officer:Mr N Easy Chief Executive Officer

(b)

As at 30 June 2015, the CEO was entitled to an annual remuneration package including a base salary of $436,130 (2014: $425,000) and a potential annual incentive based bonus of up to 20% of salary.

In addition, the CEO is eligible for a retention payment arrangement associated with the Port Lease Transaction. This arrangement was approved by the then Treasurer on 4 November 2014. Retention payments are for key executives critical to the continuing effective operation of the business and the provision of full support in the period of preparing the business for the lease of the port. These payments also encourage the retention of the executives until transaction close. Payments are to be made by PoMC in instalments between completion of due diligence and transaction close. As at 30 June 2015, no payments were made to the CEO.

In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994 (Vic), the following disclosures are made regarding responsible persons for the reporting period.

The names of persons who were responsible persons of PoMC at any time during the financial year were:

RemunerationThe Responsible Ministers’ remuneration is reported in the financial statements of the Department of Premier and Cabinet.

The number of responsible persons, other than Responsible Ministers, and their total remuneration received or receivable during the reporting period are shown in the first two columns in the table below in their relevant income bands.



22 Responsible persons (continued)

(b)

Income Band2015 2014 2015 2014No. No. No. No.

$30,000 to $39,999 1 - 1 -$40,000 to $49,999 - 8 - 8$50,000 to $59,999 6 - 6 -$60,000 to $69,999 1 - 1 -$70,000 to $79,999 - - - 1$80,000 to $89,999 - 1 - 1$90,000 to $99,999 - 1 - -$100,000 to $109,999 1 - 1 -$140,000 to $149,999 - - - 1$170,000 to $179,999 - 1 - -$250,000 to $259,999 - - - 1$390,000 to $399,999 - 1 - -$430,000 to $439,999 - - 1 -$510,000 to $519,999 1 - - -Total number of responsible persons 10 12 10 12Total Amount 1,071,115 1,132,878 988,250 949,981

(b) Loans

(c) Other transactions of responsible persons and their related parties

Total remuneration includes base remuneration, bonus paid or payable and termination and retirement type payments.

Base remuneration is exclusive of bonus paid or payable and long service leave payouts, termination and retirement type payments.

For the year ended 30 June 2014, the former CEO was paid retirement benefits including annual leave and long service leave payouts of $154,866. There were no such payments for the year ended 30 June 2015.

Total Remuneration Base Remuneration

There were no loans in existence between PoMC and responsible persons and/or their related parties during the reporting period and at the date of this report (2014: Nil).

The terms and conditions of transactions entered into with responsible persons’ related entities occurred within a normal customer and supplier relationship on terms and conditions no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to other entities on an arm’s length basis.

Remuneration (continued)



22 Responsible persons (continued)

(c) Other transactions of responsible persons and their related parties (continued)

Mr J Fitzgerald is a director of PoMC and in 2013-14 was an independent steering committee member of the then Victorian Department of State Development, Business and Innovation (DSDBI). On 30 June 2014, DSDBI transferred to PoMC via the then Department of Transport, Planning and Local Infrastructure two parcels of land under seabed at Beacon Cove precinct, Port Melbourne. The value of the land parcels was $724,040. The transfer was designated as a contribution by owners in accordance with FRD 119A - Transfers through Contributed Capital .

Mr N Easy is the Chief Executive Officer of PoMC. Mr N Easy's sibling is employed at SeaRoad Holdings Pty Ltd (SeaRoad). SeaRoad is an Australian integrated transport and logistics service provider specialising in Bass Strait shipping and logistics. SeaRoad is an existing tenant at a PoMC owned site. PoMC derives rental revenue from SeaRoad. PoMC and SeaRoad have continued to maintain their pre-existing landlord-tenant relationship on a commercial basis.

Mr M Birrell is the Chairman of PoMC and:- was the Chairman of Citywide (until his retirement in February 2015), a provider of open space, environmental and civil infrastructure services which provides services to PoMC. Expenses incurred in 2015 were $4,640 (2014: $107,679)- was the Chairman of Infrastructure Partnerships Australia (IPA) (until his retirement in December 2013), the peak national infrastructure body. PoMC is a corporate member of IPA. Expenses incurred in 2015 were $25,500 (2014: $25,000)- is the President of the Victorian Employers Chamber of Commerce and Industry (VECCI). PoMC is a corporate member of VECCI. Expenses incurred in 2015 were $40,299 (2014: $38,218).

Mr I Dickson is a director of PoMC and a director of the Australian Logistics Council (ALC), the peak national body representing the major and national companies in the Australian freight transport and logics supply chain. PoMC is a corporate member of ALC. Expenses incurred in 2015 were $14,567 (2014: 11,550).

Ms J van Reyk is a director of PoMC and:- a director of Citywide, a provider of open space, environmental and civil infrastructure services which provides services to PoMC. Expenses incurred in 2015 were $4,640 (2014: $107,679)- a director of Melbourne Water (MW), which manages Melbourne's water supply catchments, treats and supplies drinking and recycled water and manages waterways and major drainage systems in the Port Philip and Westernport region. In 2008, PoMC and MW entered into a Services Protection Works Agreement (SPWA) as part of the Channel Deepening Project (CDP). The SPWA provided that an integrated protective structure be designed and constructed above the Hobsons Bay Main Sewer (HBMS), which is a MW asset that was affected by the CDP undertaken by PoMC. PoMC designed and constructed the protective structure above the HBMS in 2009. Post completion, PoMC commenced a Service Life Maintenance Regime (SLMR) on the protective structure to ensure that its design functionality is maintained at all times. All costs of administering the SLMR are borne by PoMC. As part of the SLMR, PoMC undertakes hydrographic surveys every five years and shares the results with MW.



23

(a)

Remuneration of executives and payments to other personnel(i.e. contractors with significant management responsibilities)

RemunerationThe remuneration of responsible persons (Responsible Ministers, Directors and Accountable Officer (CEO)) is disclosed in Note 22.

The number of executive officers, other than responsible persons (Responsible Ministers, Directors and Accountable Officer (CEO)), and their total remuneration received or receivable during the reporting period are shown in the table below in their relevant $10,000 income bands.

Termination and retirement type payments such as long service leave payouts, redundancy payments and retirement benefits paid or payable during the year pursuant to employment contracts were Nil (2014: Nil).

The disclosure is limited to executive officers, other than responsible persons for whom the total remuneration received or receivable during the reporting period was in excess of $100,000. This is in accordance with the Financial Reporting Direction 21B (FRD 21B) - Disclosures of Responsible Persons, Executive Officers and Other Personnel (Contractors with Significant Management Responsibilities) in the Financial Report.

Total remuneration includes base remuneration, bonus paid or payable, long service leave payouts, redundancy payments and termination and retirement type payments.

Base remuneration is exclusive of bonus paid or payable, long service leave payouts, redundancy payments and termination and retirement type payments.

The total annualised employee equivalent provides a measure of full time equivalent executive officers over the reporting period.

Bonuses paid or payable during the year pursuant to individual employment contracts are based on a short term (annual) incentive program.

In addition, 12 executive officers are eligible for retention payment arrangements associated with the Port Lease Transaction. These arrangements were approved by the then Treasurer on 4 November 2014. Retention payments are for key executives critical to the continuing effective operation of the business and the provision of full support in the period of preparing the business for the lease of the port. These payments also encourage the retention of the executives until transaction close. Payments are to be made by PoMC in instalments between completion of due diligence and transaction close. As at 30 June 2015, no payments were made.



23

(a)Income Band

2015 No. 2014 No.(ii)

2015 No. 2014 No.(ii)

$90,000 to $99,999 - - 1 -$100,000 to $109,999 1 1 - 1$110,000 to $119,999 1 1 1 1$120,000 to $129,999 1 7 2 10$130,000 to $139,999 2 3 3 1$140,000 to $149,999 9 2 10 6$150,000 to $159,999 5 7 7 9$160,000 to $169,999 5 5 4 5$170,000 to $179,999 2 2 7 1$180,000 to $189,999 4 5 3 4$190,000 to $199,999 4 2 2 6$200,000 to $209,999 3 1 5 3$210,000 to $219,999 1 5 3 3$220,000 to $229,999 2 5 - 1$230,000 to $239,999 5 4 2 -$240,000 to $249,999 3 - 1 1$250,000 to $259,999 - - 1 1$260,000 to $269,999 2 1 - -$270,000 to $279,999 - 1 - 2$280,000 to $289,999 2 - - -$290,000 to $299,999 - 1 1 -$300,000 to $309,999 - - - 1$310,000 to $319,999 - - 1 -$320,000 to $329,999 - 2 1 1$330,000 to $339,999 1 - 1 -$350,000 to $359,999 1 1 - -$360,000 to $369,999 1 - - -$370,000 to $379,999 - 1 - -$380,000 to $389,999 1 - - -Total number of executives 56 57 56 57

54.9 55.0 54.9 55.0Total Amount 11,103,522 11,064,036 10,086,918 10,089,136

Remuneration of executives and payments to other personnel(i.e. contractors with significant management responsibilities) (continued)

Remuneration (continued)Total Remuneration Base Remuneration

Total annualised employee equivalent (AEE) (i)

i) Annualised employee equivalent is based on 38 paid working hours per week over 52 weeks.ii) Prior year balances have been restated for comparative purposes.



23

(a)

(b)

Expense Band2015 2014No. No.

$100,000 to $109,999 2 1$110,000 to $119,999 - 2$140,000 to $149,999 - 2$150,000 to $159,999 - 3$160,000 to $169,999 - 1$170,000 to $179,999 - 2$180,000 to $189,999 - 1$190,000 to $199,999 - 1$200,000 to $209,999 1 1$210,000 to $219,999 1 -$250,000 to $259,999 2 -$270,000 to $279,999 2 -$320,000 to $329,999 1 -Total number of contractors charged with significant management responsibilities 9 14

8.6 9.2Total Amount 2,018,439 2,192,352

(c) Loans and Other transactions of executives and their related partiesThere were no loans or other transactions in existence between PoMC and executive officers and/or their related parties during the current financial year and at the date of this report (2014: Nil).

For the 2014 and 2015 reporting periods, the contractors charged with significant management responsibilities were engaged to provide Project Management services to the Port Capacity Project, Information Technology services and Environmental services.

The number of contractors charged with significant management responsibilities other than executive officers within the relevant $10,000 expense bands for the 2015 and 2014 reporting periods are shown in the table below.

Remuneration of executives and payments to other personnel(i.e. contractors with significant management responsibilities) (continued)

Payments to other personnel, i.e. contractors with significant management responsibilities

Total Expenditure

Total annualised employee equivalent (AEE)

Remuneration (continued)In accordance with FRD 21B bonuses paid or payable disclosed in this note only relate to employment contracts where the total remuneration received or receivable during the reporting period exceeds $100,000 and they occupy a management role.



24 Remuneration of auditors

Victorian Auditor-General's Office 2015 2014$ $

Audit of financial reports 74,600 72,600

25 Financial Instruments

2015 2014Notes $'000 $'000

(a) Categorisation of financial instrumentsContractual financial assets

Current assetsCash and cash equivalents 10 39,580 36,165 Receivables - Trade receivables 11 32,976 33,584 Total contractual financial assets 72,556 69,749

Contractual financial liabilitiesLiabilities at amortised costCurrent liabilitiesPayables 15 61,178 54,573 Interest bearing liabilities 16 - 97,074 Non-current liabilitiesInterest bearing liabilities 16 - 324,041 Total contractual financial liabilities 61,178 475,688

During the year the following fees were paid or payable for services provided by the auditors of PoMC:

Details of significant accounting policies and methods adopted including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, with respect to each class of financial asset, financial liability and equity instruments are disclosed in note 1 to the financial statements.

The main purpose in holding financial instruments is to prudentially manage PoMC's financial risks within the State Government's policy parameters. PoMC's main financial risks include credit risk, liquidity risk and foreign currency risk. PoMC manages these financial risks in accordance with its Treasury Management Policy.



25 Financial Instruments (continued) 2015 2014Notes $'000 $'000

(a) Categorisation of financial instruments (continued)

Net holding gain/(loss) on financial instruments by categoryInterest income on contractual financial assets (i) 3 590 1,307 Interest expense on contractual financial liabilities (ii) 9 (66,296) (25,714) Total (65,706) (24,407)

(b) Credit quality of contractual financial assets that are neither past due nor impaired

Notes

Financialinstitu-

tioncredit ratingAAA

Govern-ment

agencycreditratingAAA

Third parties credit rating other thanAAA Total

$'000 $'000 $'000 $'0002015Current assets Cash and cash equivalents 10 3,580 36,000 - 39,580 Receivables - Trade receivables (i) 11 - - 32,976 32,976

3,580 36,000 32,976 72,556

2014Current assetsCash and cash equivalents 10 3,326 32,839 - 36,165 Receivables - Trade receivables (i) 11 - - 33,584 33,584

3,326 32,839 33,584 69,749

(i) The total amounts disclosed here exclude statutory receivables.

(i) The net holding gain/(loss) on contractual financial assets equates to the interest income on cash and cash equivalents.

(ii) The net holding gain/(loss) on contractual financial liabilities equates to the interest expense on interest bearing liabilities.



25 Financial Instruments (continued)

(c) Credit Risk

(d) Market risk

Interest rate risk sensitivity

Notes

Carrying amount

$'000

Netresult

interest rate -100

basis points

Netresult

interest rate +100

basis points

2015 - contractual financial assetsCash and cash equivalents 10 39,580 (396) 396

2014 - contractual financial assetsCash and cash equivalents 10 36,165 (362) 362

Market risk refers to the risk that PoMC's profit or loss or equity could change as a result of changes in market prices. Market risk comprises currency risk, interest rate risk and other price risk. PoMC's policy is to continuously monitor its exposure to market risk arising from existing and future transactions.

PoMC is not exposed to currency risk in the current or comparative reporting periods since its operative functional currency is the Australian Dollar. During the year and prior to their repayment on 25 June 2015, PoMC's loans had fixed rates therefore were not subject to interest rate risk exposure. PoMC is not exposed to any other price risk.

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to PoMC. The carrying amount of PoMC's financial assets recognised in the Statement of Financial Position, net of any provisions for doubtful debt, represents PoMC's maximum exposure to credit risk from financial assets.

PoMC actively manages its credit risk using a range of processes and procedures. These include performing credit checks for new and existing customers as required, obtaining bank guarantees where considered appropriate and monitoring the performance of significant trading partners on an ongoing basis.

PoMC does not engage in hedging for its contractual assets. PoMC only deals with banks with high credit ratings.

A movement of 100 basis points up and down in market interest rates are "reasonably possible" over the next 12 month period. A sensitivity analysis with respect to cash and cash equivalents on the following basis is presented in the table below.

The provision for impairment of financial assets is calculated based on past experience and current and expected changes in clients' credit ratings. An ageing analysis is provided in note 11 to outline PoMC’s exposure to credit risk.



25 Financial Instruments (continued) 2015 2014Notes $'000 $'000

(e) Derivative instruments used by PoMC

Cash flow hedges

Movements in cash flow reserve:Carrying amount 1 July (4,280) (5,994) Interest bearing liabilities - Forward settled loans 20(a) 6,115 2,449

20(a) (1,835) (735) Carrying amount 30 June - (4,280)

Gain/(loss) transferred to Comprehensive Operating Statement - -

(f) Financial Risk Management

(g) Liquidity risk

In order to protect against rising interest rates, PoMC entered into forward settled loans under which it had a right to pay interest at fixed rates. The forward settled loans were measured at fair value and all gains and losses attributable to the hedged risk were taken directly to equity and amortised as the interest expense is recognised. All forward settled loans were drawn down by 30 June 2010.


PoMC maintains a comprehensive Risk Management System which is integrated with its business planning processes. There is a formally documented Risk Management Policy, Risk Management Procedures and a framework which are consistently applied across all levels of the business. A Financial Risk Management Assessment is tabled to the Audit and Finance Committee on an annual basis in line with the requirements of the Standing Directions of the Minister for Finance, under the Financial Management Act 1994 (Vic). In addition, a quarterly risk status report is presented to the Risk Committee and the Board outlining PoMC's significant material risks including financial risks. Each risk is reviewed regularly against the risk matrix to ensure the level of risk is appropriate and the treatment and controls are adequate.

Liquidity risk is the risk that PoMC will be unable to meet its financial obligations as and when they fall due. PoMC manages its liquidity risk to ensure that adequate cash funds are available at all times to meet its commitments as they arise. This objective is met through:- sound cash management practices;- regular identification and monitoring of the maturity profile of liquid assets and liabilities together with regular cash flow forecasting;- having sufficient overdraft facilities; and- investments that are limited to highly liquid and secure assets.

PoMC's maximum exposure to liquidity risk is the carrying amount of financial liabilities as disclosed in the Statement of Financial Position. Refer to 25(i) for interest rate risk and financial liability and financial asset maturity analysis.

The balance of the cash flow hedge reserve is nil as at 30 June 2015, as the reserve was fully amortised as part of PoMC's repayment of all its outstanding interest bearing liabilities on 25 June 2015.



25 Financial Instruments (continued)

(h) Net fair value of financial assets and liabilities

Comparison betweencarrying amount and fair value Notes

Carrying amount Fair value

Carrying amount Fair value

2015 2015 2014 2014$'000 $'000 $'000 $'000

Contractual financial assets Current assetsCash and cash equivalents 10 39,580 39,580 36,165 36,165 Receivables - Trade receivables 11 32,976 32,976 33,584 33,584

72,556 72,556 69,749 69,749 Contractual financial liabilitiesCurrent liabilitiesPayables 15 61,178 61,178 54,573 54,573 Interest bearing liabilities 16 - - 97,074 97,074 Non-current liabilitiesInterest bearing liabilities 16 - - 324,041 365,613

61,178 61,178 475,688 517,260

The net fair value of PoMC’s cash and deposits and non-interest bearing financial assets and liabilities is equal to their carrying value.

The net fair value of PoMC’s financial instruments assets and liabilities is determined with reference to market prices where a market exists or the net present value of expected future cash flows using a discount factor of the current interest rate applicable to liabilities with a similar risk profile as follows:

Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.



(h) Net fair value of financial assets and liabilities (continued)

Fair value hierarchy of financial assets and liabilities Notes Fair value

2015$'000

Contractual financial assets Current assetsCash and cash equivalents 10 (i) 39,580 Receivables - Trade receivables 11 (i) 32,976

72,556 Contractual financial liabilitiesCurrent liabilitiesPayables 15 (ii) 61,178 Interest bearing liabilities 16 (ii), (iii) - Non-current liabilitiesInterest bearing liabilities 16 (ii), (iii) -

61,178

(iii) On 25 June 2015, at the Direction of the Minister for Ports with approval from the Treasurer, PoMC repaid all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria. A capital contribution via equity in the form of cash from the Department of Treasury and Finance enabled this repayment. The transfer was recognised as a contribution by owners in accordance with FRD 119A - Transfers through Contributed Capital.

(i) Counterparty's credit risk is considered to be a significant valuation input. However, considering the nature of PoMC's financial assets the risk is considered to be very low.

(ii) Credit risk and interest rate risk are considered to be the significant valuation inputs. However, considering the nature of PoMC's financial liabilities the risks are considered to be very low.

Discounted cash flow


All the above financial assets and liabilities are considered to fall within Level 2 of the fair value hierarchy. There has been no change in the fair value hierarchy of the above financial assets and liabilities during the reporting period.

Valuationtechnique

Valuation input

Notional amount Discounted cash flow



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26 Contingencies

Contingencies as at 30 June 2015

27 Assets and liabilities transfers between public sector entities



On 30 June 2014, the then Department of State Development, Business and Innovation transferred to PoMC via the then Department of Transport, Planning and Local Infrastructure two parcels of land under seabed at Beacon Cove precinct, Port Melbourne. The value of the land parcels was $724,040. The transfer was designated as a contribution by owners in accordance with FRD 119A - Transfers through Contributed Capital .

PoMC is aware of possible contamination in relation to its land. At the certification date of the financial statements, PoMC is unable to determine the total extent of potential contamination or restoration costs.

Management is of the opinion that provisions are not required in respect of the above matters, as it is considered highly improbable that a future sacrifice of economic benefits will be required or the amount is not capable of accurate assessment.

PoMC in conjunction with other parties have continued legal proceedings to challenge a revaluation of its Port land holdings and an associated increase in its land tax liability. A trial took place in the Supreme Court in April 2015 and the Court's judgement is not expected until late 2015. At the time of signing the Financial Statements, PoMC is unable to assess the probability of success or otherwise of the challenge.

On 25 June 2015, at the Direction of the Minister for Ports with approval from the Treasurer, PoMC repaid all its outstanding interest bearing liabilities with the Treasury Corporation of Victoria. A capital contribution of $652.3 million via equity in the form of cash from the Department of Treasury and Finance enabled this repayment. The transfer was recognised as a contribution by owners in accordance with FRD 119A - Transfers through Contributed Capital .

During 2015, a tenant commenced legal proceedings against PoMC in the Supreme Court. The proceedings relate to clauses in the lease regarding improvements on the site. At the time of signing the Financial Statements, PoMC is unable to assess the probability of success or otherwise of the challenge.



2015 2014$'000 $'000

28 Commitments for expenditure

(a) Commitments for expenditure

Capital expenditure commitments

201,191 420,787 Total capital expenditure commitments 201,191 420,787

Intangible asset commitments

- - Total intangible asset commitments - -

Operating expenditure commitments

34,545 45,545 Total operating expenditure commitments 34,545 45,545

Total commitments for expenditure 235,736 466,332

(b) Commitments for expenditure payable

Capital expenditure commitments payable- within one year 170,329 275,532 - later than one year but not later than five years 30,862 145,255 - later than five years - - Total capital expenditure commitments 201,191 420,787

Intangible asset commitments payable- within one year - - - later than one year but not later than five years - - - later than five years - - Total intangible assets commitments - -

Operating expenditure commitments payable (excluding lease commitments)- within one year 29,340 36,047 - later than one year but not later than five years 5,206 9,498 - later than five years - -

34,545 45,545

Total commitments for expenditure payable 235,736 466,332

Commitments for the payments of operating expenditure excluding lease commitments contracted for at balance date but not incurred or recognised as liabilities

Total operating expenditure commitments (excluding lease commitments)

Commitments for the construction and acquisition of infrastructure, property, plant and equipment, contracted for at balance date but not incurred or recognised as liabilities

Commitments for the acquisition of intangible assets contracted for at balance date but not incurred or recognised as liabilities



2015 2014$'000 $'000

29 Leases

(a) Operating leasesNon-cancellable operating lease receivable- within one year 57,352 52,966 - later than one year but not later than five years 430,727 186,883 - later than five years 2,995,508 417,562

3,483,587 657,411

Non-cancellable operating lease payable- within one year 3,176 3,179 - later than one year but not later than five years 3,705 6,963 - later than five years 1,010 1,102

7,891 11,244

(b) Finance leases

In 2015, PoMC has recognised leases related to the Port Capacity Project given the scheduled completion of the project in 2017.

PoMC does not have any finance leases as at 30 June 2015 (2014: nil).

PoMC has entered into a number of long and short term leases and preferential berthing licences for land, buildings and infrastructure. The leases and licences terms range from 1 year and up to 25 years or more in some cases.

Longer term leases are entered into where PoMC requires the tenant to invest substantial capital to improve the land and provide infrastructure. Ministerial approval is required for leases with terms greater than 25 years in duration which includes an option term.

Generally rental income under leases is reviewed to market at two or three yearly intervals. Some leases provide for annual or biennial CPI reviews or an agreed fixed increase.

PoMC leases various offices and equipment under non-cancellable operating leases expiring within 1 to 6 years. The leases have varying terms that are negotiated on renewal of the leases.



30 Events occurring after the reporting period

On 5 August 2015, the Legislative Council (Upper House) of the Victorian Parliament established a Select Committee (Port of Melbourne Select Committee) of eight members to inquire into and report on the proposed lease of the Port of Melbourne. The reporting date for the inquiry is 30 November 2015.

On 25 June, the Legislative Assembly (Lower House) of the Victorian Parliament passed the 'Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015' and subsequently introduced in the Legislative Council (Upper House).

As at the date of this report, the international container terminal, automotive terminal and the PDI hub operators have been appointed following a competitive bidding process. Construction works are currently underway at Webb Dock and are scheduled for completion in 2017.

By way of background, in April 2012, the Victorian Government announced PoMC’s Port Capacity Project which includes the redevelopment of the Webb Dock precinct. The works at Webb Dock centre on the creation of a new international container terminal, a world class automotive terminal and a dedicated ‘on–dock’ automotive pre-delivery inspection (PDI) hub.

During the current reporting period, the Victorian Government continued with its plans to lease the Port of Melbourne's commercial operations to a private operator.

There are no events that have arisen since 30 June 2015 that have significantly affected or may significantly affect the operations, or results, or state of affairs of PoMC.



2015 2014Notes $'000 $'000

31 Related party transactions

Operating revenue 831 929 Operating expenses (14,773) (14,621) Finance charges (30,115) (28,851) Port Licence Fee 4 (77,882) (76,429) Dividend paid 20(b) (33,043) (43,728) Income tax paid 6 (24,421) (38,324) Assets 36,439 35,665 Liabilities 18 428,158 Capital contribution from the Department of Treasury and Finance 27 652,300 -

27 - 725

32

Profit for the year 20(b) 45,878 72,755

Depreciation and amortisation 4 80,648 73,616 Loss on sale of non-current assets 4 3,882 1,695

3 548 -

Change in operating assets and liabilitiesDecrease in receivables 69,838 34,316 (Increase) in deferred tax assets 7 (222) (229) Decrease/(increase) in other operating assets 134 (318) (Decrease) in payables (75,349) (48,800) (Decrease) in provision for income taxes payable 6 (42,596) (2,370) Increase/(decrease) in deferred tax liabilities 8 23,788 (6,184) Increase in current provisions 17 497 478 (Decrease)/increase in non current provisions 17 (207) 216 (Decrease)/increase in other liabilities (1,154) 5,506

Net cash inflow from operating activities 105,685 130,681

Reconciliation of profit after income tax to net cash inflow from operating activities

The Victorian State Government prepares consolidated financial statements relating to its controlled entities. For the purpose of preparing the State Government's Annual Financial Report (AFR), transactions which PoMC has undertaken with other State Government controlled entities will be eliminated in the State Government's AFR.

The aggregate amounts of PoMC's transactions conducted during the year and its assets and liabilities at the end of the year which relate to State Government controlled entities are as follows:

Non-cash movements in income and expense

Revaluation (gain)/loss on Property, plant and equipment

Capital contribution from the then Department of Transport, Planning and Local Infrastructure


Port of Melbourne CorporationCertification of Financial Statements30 June 2015

We certify that the attached financial statements for Port of Melbourne Corporation has been prepared in accordance with the Standing Direction 4.2 of the Financial Management Act 1994 (Vic), applicable Financial Reporting Directions, Australian Accounting Standards, including Interpretations and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the Comprehensive Operating Statement, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2015 and financial position of the Port of Melbourne Corporation as at 30 June 2015.

The financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

At the time of signing, we are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on 21 September 2015.

Mr M BirrellChairman21 September 2015

Mr N EasyChief Executive Officer21 September 2015

Ms K L ExcellExecutive General Manager Commercial21 September 2015


Auditor-General’s Report


Disclosure index

Charter and purpose Page

FRD 22F Manner of establishment and the relevant Ministers 8

FRD 22F Objectives, functions, powers and duties 34-35

FRD 22F Nature and range of services provided 7

Management and structure

FRD 22F Organisational structure 14

Financial and other information

FRD 10 Disclosure index 108-109

FRD 10 Application and operation of the Privacy and Data Protection Act 2014 (Vic) 36

FRD 10 Ministerial Directions pursuant to Sections 163 and 141H of the Transport Integration Act 2010 (Vic)

8

FRD 10 Statement of Corporate Intent pursuant to Section 79Q of the Transport Integration Act 2010 (Vic)

25-33

FRD 22F Occupational health and safety policy 15

FRD 22F Employment and conduct principles and workforce data 15

FRD 22F Summary of the financial results for the year 20

FRD 22F Significant changes in financial position during the year 18-19

FRD 22F Operational and budgetary objectives and performance against objectives 30-32

FRD 22F Subsequent events 103

FRD 22F Details of consultancies over $10,000 37

FRD 22F Details of consultancies under $10,000 37

FRD 22F Advertising expenditure disclosure 37

FRD 22F Analysis of operating results and financial position 18-19

FRD 22F Application and operation of the Freedom of Information Act 1982 (Vic) 37

FRD 22F Compliance with the building and maintenance provisions of the Building Act 1993 (Vic)

36

FRD 22F Application and operation of the Protected Disclosure Act 2012 (Vic) 36

FRD 22F Statement on compliance with National Competition Policy 35

FRD 22F Statement of availability of other information 37

FRD 25B Victorian Industry Participation Policy disclosures 36

FRD 30B Standard Requirements for the design and print of annual reports 1-110

Standing Directions of the Minister for Finance under the Financial Management Act 1994 (Vic) – other information

SD 2.2 (f) Audit Committee - independence of committee members 12

SD 4.5.5 Victorian Government Risk Management Framework Attestation 36

Financial Report

Standing Direction 4.2 of the Minister for Finance under the Financial Management Act 1994 (Vic) (FMA) – Reporting Requirements under Part 7 of the FMA

Financial statements

SD4.2(b) Comprehensive Operating Statement 39

SD4.2(b) Statement of Financial Position 40

SD4.2(b) Statement of Changes in Equity 41

SD4.2(b) Statement of Cash Flows 42


Other requirements Page

SD4.2(b) Notes to financial statements 43-104

SD4.2(a) Compliance with Financial Reporting Directions 43-105

SD4.2(a) Compliance with Australian accounting standards and other authoritative pronouncements

43-105

SD4.2(c) Accountable officer’s declaration 105

SD4.2(d) Rounding of amounts 56

Other disclosures as required by Financial Reporting Directions in the notes to the financial statements

FRD 03A Accounting for Dividends 56

FRD 17B Long Service Leave, Wage Inflation and Discount Rates 54-55

FRD 21B Responsible persons, Executive officers and other Personnel in the Financial Report

86-91

FRD 100 Financial Reporting Directions - Framework 105

FRD 103F Non-Current Physical Assets 50-51

FRD 104 Foreign Currency 44

FRD 105A Borrowing Costs 53

FRD 106 Impairment of Assets 47

FRD 108A Classification of Entities as For-Profit 44

FRD 109 Intangible Assets 52

FRD 110 Statement of Cash Flows 42

FRD 112D Defined Benefit Superannuation Obligations 80-85

FRD 114A Financial Instruments 92-99

FRD 119A Contributions by Owners 100

FRD 120I Accounting and Reporting Pronouncements applicable to the 2014-15 Reporting Period

57

Legislation

Building Act 1993 (Vic) 36

Financial Management Act 1994 (Vic) 1, 12, 36, 44 & 105

Freedom of Information Act 1982 (Vic) 37

Marine Safety Act 2010 (Vic) 33-34

Port Management Act 1995 (Vic) 7, 33, 34 & 43

Protected Disclosure Act 2012 (Vic) 36

Transport Integration Act 2010 (Vic) 1, 7, 8, 33 & 56

Victorian Industry Participation Policy Act 2003 (Vic) 36

Borrowing and Investment Ports Act 1987 (Vic) 78

Emergency Management Act 2013 (Vic) 35

Emergency Management Amendment (Critical Infrastructure Resilience) Act 2014 (Vic) 35

Privacy and Data Protection Act 2014 (Vic) 36

Port Management Amendment (Port of Melbourne Corporation Licence Fee) Act 2012 (Vic) 43, 61-62

Income Tax Assessment Act 1997 (Cwlth) 45

Income Tax Assessment Act 1936 (Cwlth) 45

Superannuation Guarantee (Administration) Act 1992 (Cwlth) 55

Authorised by the Victorian Government.This publication is produced by Port of Melbourne Corporation.

Proudly designed and produced by abCreative productions. Tel: +61 3 9500 2266 www.abCreative.comCover photo by Ric Wallis www.ricwallis.com

Printed on recycled paper.

MELBOURNE OFFICE

Street addressLevel 4 530 Collins Street | Melbourne Victoria 3000 | Australia

Postal addressGPO Box 261 | Melbourne VIC 3001 | Australia

Tel: 1300 857 662 | Fax: (03) 9683 1570

Email: [email protected] | Website: www.portofmelbourne.com

SOUTH AUSTRALIA

Postal addressGPO Box 261 Melbourne VIC 3001Australia

Tel: +61 3 9683 1300

Fax: +61 3 9683 1570

NEW SOUTH WALES AND SUNRAYSIA

Postal addressPO Box 8804KooringalWagga Wagga NSW 2650Australia

Tel: +61 2 6925 9672

Mob: +61 (0)428 024 161

TASMANIA

Postal addressPO Box 2141Howrah TAS 7018Australia

Tel: +61 3 6245 1890

Fax: +61 3 6245 1890

Port of Melbourne Corporation A

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