The 98-year lease of the port shifted financial control of the port to a company called Port of Newcastle Investments, which is 50 per cent owned by a Chinese government company, China Merchants Group, and a Westpac subsidiary, Hastings Funds Management.

Westpac quietly appointed a US advisory firm, Berkshire Capital, in October last year to advise on a potential sale of Hastings, which has stakes in other infrastructure projects including airports and highways.

Hastings manages these businesses on behalf other investors, including superannuation funds, and Westpac had reportedly been seeking more than $500 million for the business, which it bought in stages between 2002 and 2005.

Two US entities, Massachusetts Mutual Life Insurance Company and the Teachers Insurance and Annuity Association, were reported as the most likely buyers.

But after a five-month process, Westpac has confirmed it is no longer in discussions with potential buyers of Hastings.

It said it would “consider its options carefully while continuing to support” the business.

The privatisation of the Port of Newcastle gave Port of Newcastle Investments, or PONI, control over almost all of the port’s surrounding public land, including leases on coal loaders and other wharves.

PONI created a controversy soon after it took over the lease when it lifted some fees levied on coal ships, leading to outcries from a number of coal companies.

More generally, the foreign ownership of Australian ports has become a political issue in recent months, with the United States objecting to the Northern Territory government’s decision to lease Darwin’s main port to a Chinese company, the Landbridge Group.

Landbridge paid $506 million for a 99-year lease on the Darwin wharves, one of the main exit points for Australian export beef. But the port is also home to important Australian defence facilities – as well as being an important part of US President Barack Obama’s “Asian pivot”.

Security concerns did not play a major part in the debate about the sale of the Port of Newcastle, despite the presence of the Williamtown RAAF base about 15 kilometres to the north.

The Darwin sale was not considered by the Foreign Investment Review Board (FIRB) but the Turnbull Government subsequently changed the board’s guidelines to give it the power to scrutinise the sale of government-held assets.

It was unclear last night whether a Hastings sale to a foreign pension fund would trigger FIRB interest.

Port of Newcastle Investments declined to comment on the potential sale of its 50 per cent shareholder, referring the Newcastle Herald to Westpac.

In a statement to the Herald, Westpac said: “For various reasons, including current external market conditions, Westpac and the relevant parties have elected to cease strategic conversations and due diligence with respect to a possible purchase of Hastings.

“Hastings is a high quality and unique business with a number of international strategic alliances and has a sound business strategy in place. The pipeline remain strong and includes leading consortiums looking to acquire assets being sold through domestic privatisations as well as international assets. 

For Hastings management the priority remains delivering for institutional clients who are seeking to gain greater exposure to ‘tier one’  infrastructure assets in developed markets.”

Maritime Union of Australia Newcastle secretary Glen Williams said ownership of the port was an issue of national importance, given Newcastle’s crucial role in the export coal trade as well as its proximity to Williamtown.

“The state government entered into this arrangement, supposedly, for the benefit of the people of NSW, but now we find that a process has been under way, quietly trying to sell a half stake in the port with very little in the way of public awareness,” Mr Williams said.