Australian coal rail operator Aurizon Holdings said on Monday it
was in talks to buy the Wiggins Island Coal Export Terminal
(WICET), which urgently needs to restructure $3 billion in debt.
A purchase would mark a change in strategy under new Chief
Executive Andrew Harding for Australia's largest rail freight
operator, which runs nearly 2,700 kms (1,680 miles) of rail lines
transporting millions of tonnes of coal a year.
A successful deal would also be a relief for mining giant
Glencore and four partners who face a September 2018 deadline to
start paying down the debt on the world's most expensive coal
"It is strategically sensible for Aurizon to be considering the
acquisition of WICET," said Morgans Stockbroking analyst Nathan
Lead. "It's already providing the rail logistics into the
terminal, so an acquisition would be a vertical integration
Aurizon said it was in preliminary discussions with undisclosed
parties for a deal that would see it acquire the coal terminal,
while "other consortium members" would acquire one or more of the
coal mines that use the port.
Macquarie Group is another consortium member, the Australian
Financial Review reported. Macquarie declined comment.
The deal could involve Macquarie buying Glencore's Rolleston mine
and Wesfarmers Ltd's Curragh mine, both of which use the port and
are up for sale, a person familiar with the situation told
The source declined to be named as talks are confidential.
Glencore said in a statement emailed to Reuters that it was
seeing "strong interest" from a number of parties for the
WICET was built to service a consortium of eight coal companies.
It was funded entirely by debt backed by port fees on 27 million
tonnes of coal a year, whether that volume was shipped or not.
The port is exporting much less than that as three of its
original eight users have folded, meaning the remaining five
partners must shoulder all of the port's debt and port fees.
As a result, they pay about $25 a tonne at WICET - about five
times the port fee at the adjacent RG Tanna terminal.
One of the aims of the Aurizon deal is to bring down port
"Through restructuring and the proposed introduction of lower,
market-competitive port charges, there would be incentive for
miners to increase throughput at the port," Aurizon said.
If the port is not refinanced by September 2018, loan terms
require Glencore and its partners to pay off the full $3 billion
over the following decade.
Since Harding took over in December after 24 years with Rio
Tinto, Aurizon has quit its loss-making freight business,
allowing it to focus on coal haulage.
(Reporting by Sonali Paul and James Regan, additional
reporting by Rushil Dutta; Editing Stephen Coates and Richard