The 50:50 joint venture formed by Hastings Funds Management and China Merchants has won the auction for the 98-year lease of the Port of Newcastle, an asset the New South Wales state government had valued at A$700 million.

The consortium will pay a total of A$1.75 billion which represents a multiple of 27 times EBITDA.

New South Wales said that US$340 million from the sale proceeds will be invested into Newcastle's central business district, while the remaining US$1.5 billion will be invested in NSW infrastructure.

Morgan Stanley managed the sale on behalf of the government. Law firm Minter Ellison and accounting firm PwC were also retained by NSW government after advising on earlier privatizations.

The contract will include a 98-year lease of Newcastle port's precincts where three coal terminals sit. They are owned and operated by Port Waratah Coal Services (PWCS) and Newcastle Coal Infrastructure Group (NCIG). In 2012, Newcastle port's three terminals together shipped around 132.5 million mt of coal - 105.8 million mt for PWCS and 26.7 million mt for NCIG.

The port of Newcastle is the world's largest coal terminal and forecasting $69 million earnings before interest, tax, depreciation and amortisation in the 2013-14 financial year.

The lease will include more than 700 hectares of land owned by the Newcastle Port Corporation (NPC), as well as all road and rail infrastructure and wharves owned by NPC within the port boundary.

NSW Government indicated that NPC will retain a number of important maritime functions and services, including the Harbour Master, dangerous goods approvals, emergency response and administration of the existing coal chain Capacity Framework Arrangements.