WICET stoush could cost Aurizon $27M

A DISPUTE between coal mine owners and Aurizon over the cost of a rail link to the Wiggins Island Coal Export Terminal in Queensland could bite into the rail group’s earnings by up to $27 million.

Lou Caruana

Aurizon Network, has received notices, the validity of which it disputes, from seven of the eight Wiggins Island Rail project coal mine customers.

Those notices purport to exercise a right under the relevant agreements to reduce the financial exposure of those customers to Aurizon Network in respect of the Wiggins Island Rail project.

Aurizon Network and eight coal companies are parties to Wiggins Island Rail Project Deeds, which Aurizon announced on 5 September 2011.

Under the Project Deeds Aurizon Network was to receive payments, which would deliver an above regulatory return on its investment in the $831 million Wiggins Island Rail Project, in return for Aurizon Network agreeing to develop the project on time and for a lower than forecast cost.

Aurizon claims both of these conditions have been achieved.

“The effect of the notices, if valid, would be to substantially reduce the above regulatory return component of project revenue that Aurizon Network will receive under the Project Deeds,” Aurizon said.

“The exact impact would be dependent upon a number of variables by which the above regulatory return component is calculated, some of which are yet to be determined. Accordingly, at this point in time Aurizon can provide guidance that the annual impact would be in a range from $0 to $27 million in Earnings Before Interest and Tax per annum over the 19.5 year life of the above regulatory return component.”

The impact of the notices, if valid, in this financial year is more limited, at a maximum of $10 million in EBIT, the company said.

Aurizon Network delivered first rail for the project in April 2015 and trial coal shipments began in May 2015.

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