The price was well above the forecast sale price of about $1 billion despite the coal industry in the Hunter Valley struggling with low coal prices.

The Port of Newcastle, which handles 41% of all Australian coal exports, is expected to be expanded by the new owners who bought it at 25 times its 2013-14 earnings.

It is forecasting $69 million earnings before interest, tax, depreciation and amortisation in the 2014 financial year.

Under the deal the NSW government will still keep regulatory oversight of the Port of Newcastle as well as responsibility for maritime and safety and security functions.

“This momentous result exceeds all expectations,” NSW Premier Mike Baird said.

He said there were job guarantees for workers and the sale would not affect existing lease arrangements at the port.

“In the 30-year period of the opening up of the Australian economy to international competition, perhaps no other city has been asked to make more painful adjustments than Newcastle,” he said.

Funds from the sale would be allocated to the “right kind of infrastructure structure” and to improving the city of Newcastle, Baird said.

The sale of the Port of Newcastle comes after the government sold Port Kembla and Port Botany in a $5.1 billion deal.