Aur­i­zon tipped to push for re­view

The Weekend Australian - - BUSINESS - JARED OWENS

The row en­gulf­ing cen­tral Queens­land’s coal freight mo­nop­oly, Aur­i­zon, could in­ten­sify, with an­a­lysts pre­dict­ing the rail net­work will launch new le­gal ac­tion against the state’s com­pe­ti­tion reg­u­la­tor.

Aur­i­zon has been locked in a bit­ter dis­pute with the state’s big­gest coal min­ers af­ter the Queens­land Com­pe­ti­tion Au­thor­ity last De­cem­ber pro­posed to cap the com­pany’s four-year rev­enue at $3.88 bil­lion — al­most $1bn less than Aur­i­zon had pro­posed — as well as cut­ting its main­te­nance al­lowance and rate of re­turn to in­vestors.

The pri­va­tised com­pany sub­se­quently launched a cost-cut­ting drive that min­ing com­pa­nies warned would halt up to 20 mil­lion tons of coal ex­ports each year, blow­ing $2 bil­lion hole in state bud­get fore­casts.

QCA’s fi­nal de­ci­sion on Thurs­day night gave some ground to Aur­i­zon, lift­ing the com­pany’s pro­posed rev­enue cap from $3.88bn to $4.1bn. The rate of re­turn was raised from 5.4 to 5.7 per cent.

CLSA an­a­lyst An­thony Moul­der said QCA’s fi­nal de­ci­sion was a “bet­ter out­come than ex­pected” for Aur­i­zon, but said the com­pany was “likely” to seek ju­di­cial re­view.

“De­spite the more pos­i­tive out­come it is dif­fi­cult to come to a view that the reg­u­la­tory process for the CQCN is any­thing but deeply flawed,” Mr Moul­der said.

“Con­se­quently, Aur­i­zon should seek a ju­di­cial re­view of the process for the fi­nal de­ci­sion to en­sure the uncer­tainty over pric­ing of key in­fra­struc­ture does not con­tinue.”

Aur­i­zon said it had 60 days to re­spond to QCA and “all avail­able op­tions will be con­sid­ered”.

“Aur­i­zon re­mains com­mit­ted to work­ing with in­dus­try on an out­come. Dis­cus­sions are on­go­ing but no agree­ment has been reached,” the com­pany said.

The Queens­land Re­sources Coun­cil said it would re­view the de­ci­sion.

“The QRC has al­ways ar­gued to up­hold the role of the in­de­pen­dent reg­u­la­tor to as­sess Aur­i­zon Net­work’s pro­posed ac­cess con­di­tions, rev­enue and costs,” it said. “It is es­sen­tial that we max­imise the re­turns to all Queens­lan­ders by mak­ing sure our high­qual­ity coal gets to mar­ket to sup­ply the strong global de­mand.”

Wood Macken­zie prin­ci­pal an­a­lyst Vik­tor Tanevski ex­pected “com­mon sense will pre­vail” and Queens­land coal ex­ports would in­crease by 6000 tons next year.

“Our growth ex­pec­ta­tions could how­ever be at fur­ther risk should the QCA fi­nal de­ci­sion re­sult in fur­ther changes by Aur­i­zon to rail ca­pac­ity or main­te­nance pro­ce­dures,” he said.

Queens­land Trea­surer Jackie Trad called on the par­ties to re­solve their dis­pute.

“At all times the gov­ern­ment has en­cour­aged the re­spec­tive par­ties to work to­gether,” she said.

“I en­cour­age all par­ties to con­tinue to work to­gether to fi­nalise the ac­cess un­der­tak­ing quickly, and pro­vide cer­tainty for in­dus­try.”

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