Port of Darwin’s struggling Chinese operator Landbridge Infrastructure warns it could go into insolvency

The Chinese company which runs the Port of Darwin has expressed concerns about its financial position, raising the prospect of the Northern Territory Government terminating its controversial lease of the facility.

The Chinese company which runs the Port of Darwin has expressed concerns about its financial position, raising the prospect of the Northern Territory Government terminating its controversial lease of the facility.

Landbridge Infrastructure Australia is yet to make a profit since 2015, when it signed a 99-year lease with the NT Government to operate the port, in a deal that prompted a furious response from the United States.

The company’s latest directors’ report, submitted to the Australian Securities and Investment Commission this month, reveals it made a $34 million loss in the 2024 financial year.

The report, independently audited by PwC Australia, says Landbridge Infrastructure Australia’s ongoing operations are reliant on its parent company, Shandong Landbridge Group, owned by Chinese billionaire Ye Cheng.

But the report also notes concerns about the parent company, which is in the process of restructuring its debt, including a $107 million bond that is overdue and in default.

“In the event that the Directors of Shandong Landbridge Group Co Ltd are unable to restructure its debt including the refinancing of the overdue bond and secure the financial status of the Parent Company an insolvency event could occur, potentially resulting in a change of control event,” the report says.

“This would constitute an event of default entitling the financiers to step in and endeavour to cure the default.”

Darwin Port. Picture: Che Chorley

If this could not be achieved within 60 days, a third party would be assigned to sell the port’s assets for the benefit of the financiers.

“In the event a sale could not be secured within 18 months under the terms of the Financier Deed the Northern Territory can terminate the Port Lease and pay the financiers an amount, calculated in accordance with the syndicated finance agreement,” the report says.

“As a result of these matters, there is a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business.”

Northern Territory Treasurer Bill Yan said he had raised the matter with the Federal Government.

“I’m actually flying to Canberra for the national treasurers’ meeting (on Thursday) so whilst I’m there I’ll be meeting with Catherine King the federal infrastructure minister to discuss the Darwin Port and what’s taking place here at the moment,” he said.

Mr Yan said he had also written to Landbridge seeking further detail about its financial position.

He said he was unable to say if the NT Government would consider terminating the lease until he had that information.

“Once we get that back and we hear from Landbridge, we’re expecting a reply from them in late December, the Territory will be in a better place to determine what’s going to take place with the port,” he said.

Darwin Port

Landbridge’s Darwin Port non-executive director Terry O’Connor said the company’s on-paper losses were driven by non-cash accounting entries associated with intercompany debt which was due to be refinanced.

“The underlying operations of Darwin Port have improved significantly year-on-year,” he said.

“Landbridge was pleased with Darwin Port’s successful FY2024 operational performance, achieving a record $34.012 million in EBITDA, which is a significant increase from our FY2023 result of $23.285 million in EBITDA.

“This result is mostly due to increased activity through Darwin Port.”

Mr O’Connor said he was confident Landbridge’s parent company would refinance its overdue bond by the end of this calendar year or early next year.

“Landbridge in China has a portfolio of large infrastructure assets, and it is looking to moderate its debt which will likely see the sale of some assets across the Group. Importantly, Darwin Port remains a key asset of the Group noting its recent performance, continued strong growth prospects as a gateway to Asia, and its positive contribution and engagement with the local economy,” he said.

“The Darwin Port remains in a strong financial position due to the significant headroom between its operating cashflows and debt service requirements along with its long-dated external debt position.”

Chairman Landbridge Group Ye Cheng and former Mayor of Rishao, Liu Xingtai with former Chief Minister Adam Giles in Darwin.

The former Giles Country Liberal Party Government signed the 99-year lease of the port with Landbridge in 2015.

The decision caused disquiet all the way to Washington, where then US President Barack Obama raised his concerns about the deal with Prime Minister Malcolm Turnbull.

The US had concerns that Chinese port access in Darwin would enhance intelligence gathering on nearby US and Australian military forces.

About 2500 US Marines rotate through Darwin each year for training exercises.

After winning in office in 2022, the Albanese Government announced a review of the lease.

But last year it announced it would not cancel the deal.

“Australians can have confidence that their safety will not be compromised while ensuring that Australia remains a competitive destination for foreign investment,” it said in a statement at the time.