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Success of rail giant's $4bn deal would create monopoly

Aurizon has confirmed it is in early discussions to acquire Wiggins Island Coal Export Terminal.
Aurizon has confirmed it is in early discussions to acquire Wiggins Island Coal Export Terminal. Mara Pattison-Sowden

RAIL giant Aurizon could have the monopoly on coal transport if a rumoured $4billion offer for a debt-laden Gladstone terminal goes ahead.

As part of a consortium proposal, which is said to also involve Macquarie Group and Canadian investor Brookfield, Aurizon has confirmed it is in early discussions to acquire Wiggins Island Coal Export Terminal.

In the offer, the company has promised to lower port charges, which has long been one of the main concerns at the terminal.

It said this could also incentivise expansion tonnages from existing and new mines.

The expensive port charges, which stem from the original take-or-pay agreement, have driven a dagger through small struggling miners, with three original owners of WICET now collapsed.

The agreement was made when coal prices were more than double what they are now.

Demonstrating the rising costs for WICET's owners, a Caledon Coal administrator's report said the terminal's handling charge rose from A$14.16/t in 2016 to A$21.83/t in 2017.

Aurizon, which operates rail infrastructure and train haulage services for coal customers in Queensland's Bowen Basin, said it saw "strategic alignment" with acquiring WICET.

CQUniversity professor John Rolfe said if the deal went ahead, Aurizon would have the monopoly on coal transport from mines to export.

Prof Rolfe worried the acquisition would mean Aurizon would have enough market power to dictate transport charges.

"It wouldn't stop the deal, but it would be something that would need to be looked at more carefully ... It would need State and Federal Government oversight," he said.

The professor of regional economic development described WICET as "one of the final hangovers of the boom" and said this deal sounded like a "win win" for miners.

"It looks like they're promising a deal that resolves those problems (with the original take-or-pay agreement)," he said.

"For Aurizon it's about integrating that transport network through to the port."

The restructure offer could be the saviour for WICET and the mines that export out of it.

The terminal project owes about $3.9 billion in senior debt to a lending syndicate along with $US375 million of junior debt.

The deal is expected to also mean Macquarie Group would buy up some of the coal terminal's source mines, which would be those operated by WICET's owners Glencore, Aquila Resources, Wesfarmers Yancoal and New Hope Group.

In a statement released yesterday, mining giant Glencore said there was "strong interest" from a number of parties for its Bowen Basin-based Rolleston Mine, but an official agreement had not yet been made.

"We welcome the reported interest from Macquarie Capital, Brookfield and Aurizon and are open to receiving a proposal from them and all other interested parties," the company said.

"We will assess bids as they are received in line with the process timetable," the statement read.

Topics:  aurizon deal gladstone terminal monopoly



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