May 14, 2013

Aurizon ponders partial infrastructure sell-off

Written by  Mark Carter
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Aurizon ponders partial infrastructure sell-off Aurizon

FOLLOWING a review of its capital structure, Australia's largest railfreight operator Aurizon Holdings is to implement stand-alone debt facilities for both Aurizon and its subsidiary, Aurizon Network, and has also indicated that it would consider a partial sale of its infrastructure assets.

Previously Aurizon's capital structure consisted solely of bank debt facilities at the holding company level. The company says the move is a step towards creating a transparent and sustainable financial structure with debt placed against the regulated Central Queensland Coal Network (CQCN), which forms the bulk of Aurizon Network's assets.

The CQCN comprises 2670km of track serving four major Queensland coalfields, the Moura, Blackwater, Goonyella and Newlands systems. Aurizon holds a 99 year lease on the network following the 2010 privatisation of QR National and provides related services including construction and infrastructure maintenance. However, access charges are still subject to regulatory oversight by the Queensland Government.

New committed debt facilities of $A 3bn will be placed in Aurizon Network. Of this, $A 2.2bn is expected to be drawn immediately, with the balance available to fund committed expansion projects including the Wiggins Island Rail Project.

Additionally, new committed debt facilities of $A 600 million will be established at the group level through the company's finance vehicle Aurizon Finance, with $A 240m expected to be drawn initially by Aurizon.

Proceeds from the debt facilities will in part be used to repay debts which date from the QR National Initial Public Offering in November 2010. "As a regulated asset with stable long-term revenues, Aurizon Network is suited to bearing its own debt load," says Aurizon managing director & CEO Mr Lance Hockridge.

The new structure allows Aurizon to introduce a minority equity interest in Aurizon Network, allowing the company to redeploy capital from the regulated business into either capital management initiatives or to fund growth projects.

Analysts estimate the value of Aurizon Network's assets at around $A 7bn, although the proposed sale is expected to generate income of between $A 1.4bn and $A 2.1bn.

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