Labor has accused the NSW government of a "stunning backflip" over the state's port privatisations after the Coalition agreed to scrap penalties on Newcastle developing a container terminal.
As reported in the Newcastle Herald on Tuesday morning, the government has agreed to remove restrictions on Port of Newcastle building a freight terminal if the private operator tops up its $1.75 billion lease payment to the state.
The Perrottet government reached an agreement with Lake Macquarie MP Greg Piper on Monday to back his legislation to scrap controversial financial penalties on the Newcastle port operator developing a rival container terminal to Port Botany.
Parliament is due to debate the amended bill at about 1pm on Tuesday.
The opposition was scathing in its assessment of the government's position after years of defending the privatisation deals.
"This is a full-scale admission that privatisation does not work and, in the end, it costs the taxpayers of NSW potentially billions of dollars," Labor said in a statement.
"They privatised the Port of Newcastle and now today will look at unwinding the deal and rip up the contract."
The statement did not say whether Labor would support the amended legisaltion.
The Coalition government under Barry O'Farrell then Mike Baird introduced secret container penalties when it privatised the Botany, Kembla and Newcastle ports in 2013 and 2014.
The provisions require the government to compensate Botany and Kembla operator NSW Ports for container movements in Newcastle above a set cap, initially 30,000 a year, until 2065.
The lease deal with Port of Newcastle requires the Newcastle operator to reimburse the government for any compensation payments the state must make to NSW Ports.
The payment provisions were kept secret from Parliament and the public until they were revealed by the Newcastle Herald in 2016.
Mr Piper's amended legislation, if approved, will extinguish the reimbursement provisions in the Port of Newcastle contract if the port operator pays the state the difference between the original $1.75 billion lease price and an independent expert's assessment of what the fair market price would have been without the container provisions in the original deed of agreement.
Labor leader Chris Minns criticised the government's record of privatising the ports, roads and power stations.
"Just yesterday the Premier was speaking about further privatisation in NSW, and today he's attempting to unravel a privatisation disaster," he said.
"They sold off the ports in a dud deal and now are backflipping, costing taxpayers millions. It was the worst privatisation deal signed by any Australian government.
"They sold off the toll roads, creating toll-mania for motorists, and now have to pay millions in compensation.
"They sold off Eraring and tried to buy it back as electricity prices went through the roof."
The Newcastle Herald understands the government will preserve the one-off Port of Newcastle top-up payment to compensate NSW Ports if container movements in Newcastle exceed the cap.
The state would be liable for compensating NSW Ports if and when the top-up money runs out.
Shadow Transport Minister Jo Haylen said Hunter residents deserved a chance to access secure, well paid and skilled jobs.
"After almost a decade of being held back by the Liberal party's bad port privatisation deal, the Hunter deserves the economic diversification that a container terminal will bring," she said.
Mr Piper hopes the amended bill will pass through the lower house on Tuesday and the upper house by the end of the week.
The opposition proposed its own amendments to the bill last month which left discretion for removing the penalties in the hands of the treasurer.
It remains to be seen whether Labor will support the Coalition amendments, but the minority government has the numbers with crossbench support to pass the bill regardless.
The port consortium, which includes The Infrastructure Fund and China Merchants as equal shareholders, plans to seek investors to help develop a $2.4 billion container terminal on former BHP steelworks land at Mayfield once the penalties are scrapped.
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