The NSW government is to sell off its largest remaining port - at Newcastle - in a move that will raise a conservative estimate of $700 million, with about half the proceeds to be used to revitalise the city's infrastructure.
Following the success of the sale of Botany and Port Kembla ports, the Newcastle port will be leased for 99 years.
Announcing the strategy as part of the NSW state budget on Tuesday, Treasurer Mike Baird said about $340 million of the proceeds would be spent on a revitalisation project for Newcastle, including light rail. The government would also tip an extra $120 million from other sources into the project.
The proposed light rail line will link Wickham and Newcastle, and is expected to be extended in the future. The government will spend $10 million to explore the potential for this link to spread to surrounding suburbs and beaches.
Superannuation funds had expressed "lots of interest" in the Newcastle port lease, Mr Baird said.
Mr Baird said the venture was "a fantastic opportunity for Newcastle off the back of this budget".
The 2013-14 budget will invest a total of $60 billion in infrastructure throughout the state.
NSW Opposition Leader John Robertson said the O'Farrell government's decision to privatise the port was a "bad deal" that would cheat the Hunter out of its key asset. "The O'Farrell government is selling off the biggest coal port in the world to replace a heavy rail line with a light rail line," he said. "That's not a win for the Hunter - it's a gun to the head.
"Hunter residents and businesses already contribute more than $1 billion in royalties and taxes to Sydney - why couldn't the money have come from there?"
Mr Robertson said Newcastle port generated revenue of $70 million per year.
"Once privatised, that revenue stream is gone forever - a stream worth much more than just $340 million."
General manager of the Tourism Industry Council NSW Andrew Jefferies said Newcastle's revitalisation was a critical step for tourism in the Hunter.
"I'm glad to see the government renew its focus on our state's second-largest city," he said.
Chief executive of Infrastructure Partnerships Australia Brendan Lyon said privatising Newcastle port made sense.
"When you've got economic and social infrastructure requirements and an inflexible budget and a high level of debt, it would be hard to understand the case against privatisation," he said. "There is clearly a global appetite from investors who are wanting exposure to important economic assets like ports and electricity, so governments in other places around Australia should be paying close attention."
Mr Baird announced in April that Port Botany and Port Kembla would deliver $5.07 billion to the government, to be spent on infrastructure projects including the planned WestConnex motorway and an upgrade of the Pacific Highway.
He said the NSW Ports consortium had agreed to pay $4.31 billion for Port Botany and $760 million for Port Kembla for a 99-year lease.
The result was well above the $3 billion expected from the sale, which was announced in last year's budget.