For a port that measures its longevity in centuries, the last six years represent a mere blip for the Port of Newcastle (PoN).

Over that compressed period, however, and after dealing with more challenges than it cares to recall, PoN is now in a position to go about securing its long-term future.

Chief financial officer Nick Levesey, who joined PoN in 2019 when the outlook was uncertain at best, said challenges outside the port’s direct control had “pretty much been knocked on the head”.

“We were too highly leveraged so we weren’t in a position to invest in our diversification, and there were state government issues (related to terms in the 2013 privatisation of Port Kembla and Port Botany) that prevented us from going into container freight which have now been resolved,” Mr Livesey said.

“When I started in May 2019, those issues, and others too, were there, so there’s been a lot of obstacles we’ve had to remove before we could get to the point of starting to invest money.”

PoN has been exporting coal since 1799 and is the largest bulk shipping port on Australia’s east coast, supporting almost 9000 direct and indirect jobs and a major source of prosperity in the Hunter region in NSW.

Coal, which represents about 95% of the port’s volumes and 72% of its revenue, transits through the port.

Under the global standard in the Science Based Targets Initiative, emissions from the end-use combustion of transported coal are excluded from PoN’s Scope 3 emissions – those which are not within the port’s direct control but are still part of the value chain.

However, as the world moves to renewable and low-carbon energy in the transition to net zero, the pressure is intensifying on emissions-intensive thermal coal.

PoN – an equal joint venture between Macquarie Asset Management and the Chinese state-owned China Merchants Group – needed to come up with an effective strategy to diversify its revenue base, which it did in 2019.

Chief executive Craig Carmody has set an overarching aim to lift revenue from non-coal trade from 28% in 2021 to 50% by 2030, as coal export volumes remain relatively consistent over the same period.

In the meantime, three initiatives will be rolled out – a $2.4bn-plus deepwater container terminal, a clean energy precinct for hydrogen and ammonia production and 1.5GW of renewable electricity transmission, and an environmental, social and governance (ESG) strategy.

The proposal for a container terminal is underpinned by 220ha of vacant land available for development, along with a deepwater channel which is only using half of its total capacity of 10,000 ship movements a year.

According to PoN, the aim of the clean energy precinct is to position the Hunter and the port as the epicentre of Australia’s clean energy economy, with the help of a $100m funding commitment from the Federal Government.

Once the hydrogen and ammonia facilities are in place, the ambition is to scale the industry with 1.5GW of renewable energy within five years.

PoN has targeted a 50% reduction in Scope 1 and Scope 2 emissions by 2030 from a baseline of 2018, and a 50% decline in Scope 3 emissions by 2040.

In 2021, PoN’s diversification options opened up when it achieved financial stability with a $666m refinancing facility from a consortium of banks, anchored at the time by a $595m sustainability-linked loan where NAB acted as sustainability coordinator.

Mr Livesey stressed that the purpose of the facility was to support the diversification of PoN, not the coal trade.

“So even though the banks are supporting the transition, they might still get some criticism,” he said.

“But if you think about it, Newcastle is the second-largest city in NSW and the health of Newcastle and the port are very intertwined – if the port is failing, the whole Hunter region is affected.

“We’ve seen it before when BHP gave 10 years’ notice that its steelworks on the port site would close in 1999 and Newcastle nearly fell into a depression because there was very little to take the steelworks’ place.

“Coal is going to decline at some point in the future so we need to be making investments now rather than scratching around at the last minute.”

The port’s diversification strategy has started to yield some early fruit, with growth in wheat, meals and grains exports, as well as increased roll-on-roll-off (ro-ro, or wheeled cargo such as cars), fuel and project cargo, including clean energy components.

While volumes in 2024 were up almost 3% to just over 158 million tonnes, diversified trade was pegged at 5% of exports.

Mr Livesey said PoN would be investing heavily over the next 2-3 years and beyond, and it would be a further 2-3 years before the infrastructure started delivering the expected boost in non-coal revenue.

“You could do ro-ro relatively quickly in a year’s time, but at the end of the day there’s about 600,000 vehicles a year coming to NSW and they all go to Port Kembla at the moment,” he said.

“So you can pick up a percentage of that and it’s nice revenue to have but it’s not going to really push the dial on the coal revenue – containers will do that although you’re probably looking at two years before you start seeing any significant volumes.

“In the same way that Sydney needed a second airport, because Sydney is still growing and so is NSW, the state is also going to need a second container terminal.”

The best way to test the viability of a Newcastle container terminal, as opposed to locating it at Port Kembla, was to start small, according to Mr Livesey.

PoN would therefore make a relatively small investment of about $50m over the next 18 months at the Mayfield site, which has been extensively remediated after once being part of the BHP steelworks.

The new infrastructure would turn around 30,000-50,000 containers a year and could then be extended and connected to the rail loop if the concept stacks up.

“We do think one of our competitive advantages will be containers increasingly going on to rail and we have the rail facilities already in place,” Mr Livesey said.

“If you prove that it works, that the supply chain all works and you can service the Sydney basin from Newcastle, and then you show that the demand is there, that’s when the larger investment starts to become more plausible.”