QR float unveiled

THE Queensland Resources Council is concerned the Bligh government’s plans to privatise the coal and freight divisions of Queensland Rail and sell the Abbot Point Coal Terminal lease could burden the state’s coal industry.
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Queensland Rail.

Blair Price

Yesterday the debt-laden Queensland government announced its plans to publicly float the non-passenger service divisions of QR and market the 99-year leases for Abbot Point Coal Terminal and the Port of Brisbane in 2010.

These are part of a series of public asset sales, flagged mid-year, through which the Queensland government aims to reduce debt by up to $A15 billion and regain its AAA credit rating.

The float of QR’s coal and freight divisions will go under the name QR National and will include some parts of the rail network.

The initial public offering is expected in the 2010 December quarter.

QRC chief executive Michael Roche sees the float as perpetuating a business model that previously locked competition out of the state’s coal freight business.

“The approach highlights a preference for political expediency over the economic benefits of efficiency and transparency that would arise from a separation of the coal freight and coal track operations,” he said.

“Under the Queensland government’s model, private investors are being offered monopoly control of the track and ownership of one of the competing freight services needing to access that track.

“This is the same model that effectively locked competition out of the coal freight business in Queensland for the past 12 years.”

Roche lamented the timing of the move, as Asciano subsidiary Pacific National has made considerable inroads into the state’s coal haulage market this year, winning contracts for several mines.

“Just as the market is being prised open by a haulage competitor, the government is proposing to hand the QR keys to a private operator whose sole interest will be maximising profits and minimising competition,” he said.

“In the long run, the state and taxpayers lose out as Queensland’s attractiveness for new investment and royalties dwindle because rail charges will be driven by how much can be extracted in the shortest possible timeframe.”

Roche also noted Queensland’s haulage market contrasted starkly to that in New South Wales, where the track is owned by an independent third party.

“The government should have had the courage to ignore the short-term, ‘do the deal’ push from their merchant bank advisers, and instead accepted industry’s recommendation to break the QR coal business up.

“Under that scenario, the government would have encouraged ownership options aligned to industry’s needs around performance, investment, cost and reliability.”

He said the coal industry would be demanding the state government guarantee strict regulatory protections before the QR National float.

“There will need to be heavy-handed regulations to protect industry customers from the worst aspects of a vertically integrated monopoly.

“Formal obligations for the new company to invest in critical export infrastructure will now be essential for industry to avoid further unnecessary project delays, characterised by the Goonyella-Abbot Point expansion project.”

On APCT, Roche sees a repeat of what happened with the sale of the Dalrymple Bay Coal Terminal to Prime Infrastructure, with former premier Peter Beattie calling himself an “idiot” for excluding industry interests from the process back in 2007.

Meanwhile, the Queensland government is rebuking “myths” about the public asset sales through a dedicated website: www.qld.gov.au/assetssale.

Queensland Premier Anna Bligh says the QR National float offers an opportunity for Queenslanders to own their own piece of the state icon.

She anticipates QR National will be a top 50 ASX company and Australia’s biggest coal transport and freight business.

QR chair John Prescott expects the sale to create more avenues for growth and opportunities for new jobs.

QR chief executiveLance Hockridge did not have issues with the new rail plans.

“The reality is that around the world, the most vibrant and successful freight railways are private owned and vertically integrated,” he said.

“Competition on these railways is strong and driven by market forces with access facilitated and regulated by legislated access regimes.”

Under the plans to float QR National, existing QR coal and freight workers will be given $1000 worth of shares.

The state government will initially hold 25-40% of QR National, but Queensland Treasurer Andrew Fraser said the government would not remain a shareholder over the longer term.

The Port of Brisbane lease is expected to be marketed in mid-2010 while the APCT lease is slated for December 2010.

Major Australian port and rail operator Asciano is already interested in Queensland’s asset sales, according to the Australian Financial Review.

The company’s Pacific National operations dominate the coal haulage market of New South Wales.

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