Published in the December 2010 Australia’s Mining Monthly

“That’s ambitious.” That was pretty much the call from pundits looking at the $6.2 billion float of the Queensland Government’s rail freight group.

However, the rail freighter hit the market at $2.54 and finished its first day at $2.65. Not a bad windfall for the retail investors that paid $2.45 a share to collectively take 34% of QR.

The Queensland government also has 34% of the company.

It has reaped $4.6 billion from the float, which will help it repay debt and regain its AAA investment-grade credit rating.

It was Australia’s biggest float since the third tranche of Telstra shares were sold by the Howard Government in 2006.

There were several concerns in investors minds. Not least of these was the suggestion BHP Billiton and Xstrata would move towards their own freight operations in Queensland.

This would be a blow to QRN, as it holds the bulk of the Queensland coal market at this stage. Losing two major customers such as BHP and Xstrata would surely hurt.

BHP has previously ruled out setting up its own freight business.

At its annual general meeting, BHP chief executive Marius Kloppers said: “QR as well as its competitors have been good suppliers to us in the Bowen Basin and elsewhere.

“In the past we would have not looked at our own haulage business, but it is not an option I would like to rule out forever.”

BHP has its own rail freight operation in Western Australia’s Pilbara region.

Xstrata, meanwhile, has started its rail freight business in New South Wales.

An Xstrata spokesman told Australia’s Mining Monthly’s sister publication International Longwall News there was no set timetable for introducing Xstrata Rail to Queensland.

However, he added that a launch in the state would be of most benefit if it hauled coal from Xstrata’s Wandoan project in the Surat Basin.

Another competitor is Asciano, which has won some business from QR.

It is interesting in a way that the float is the largest since Telstra 3.

In many ways QR has been compared to the once government-owned telecommunications giant.

Many critics of QR say the company has a public service mentality rather than a customer service focus.

This could be quickly found out should competition increase in Queensland’s rail freight haulage business.

That could be tough though.

Like Telstra, another concern is the fact that the privately owned company will own the lion’s share of the rail freight infrastructure in the Sunshine State.

This could pose a problem for any competitor looking to use the QRN rail lines to service customers.