Investors warned of QR float's tax risks as Bligh launches $15bn listing

THE "mum and dad" investors targeted in Queensland's QR National float have been told to factor in taxes on carbon and mining profits.

THE "mum and dad" investors targeted in Queensland's QR National float have been told to factor in taxes on carbon and mining profits.

The investors were advised to take account of these factors before weighing into the fourth-largest share offering in Australian history.

The sale is the largest float after the three Telstra floats, the last of which raised $15.5 billion.

The Queensland government's decision to retain up to 40 per cent of the listed rail freight carrier was also cited in a series of key investment risks outlined yesterday, as Anna Bligh kicked off the monster float.

As unions renewed their criticism of the state's assets-disposal program -- built around the sale of QR National and designed to raise $15bn in a bid to restore Queensland's AAA credit rating -- the Premier conceded that privatisation of the "iconic" rail operator had been difficult for her embattled Labor government.

"The government, as everyone knows, did not take this decision lightly and it has not been an easy one," Ms Bligh said.

The Premier will be hoping that the listing of QR National next month will allow the government to put the bitter privatisation row behind it and rebuild support in the run-up to the state election due by early 2012. Primary vote support for Labor plunged to 29 per cent in the latest Newspoll, taken from July to last month, in the wake of the assets-disposal program being announced.

On the basis of a price range between $2.50 and $3 a share, capped at $2.80 in the initial public offering for individual investors, QR National will be valued at between $6.6bn and $7.8bn in enterprise terms, including pro-forma net debt.

QR National's revenue is forecast to grow from $2.9bn in 2009-10, to $3.36bn this financial year and $3.73bn in 2011-12, largely on the back of booming exports of coal in Queensland and iron ore out of Western Australia, where QR National already has a strong presence.

Profit after interest, tax, depreciation and other writedowns will surge from $628 million to $1.1bn in financial year 2011-12, according to the prospectus released yesterday.

While Ms Bligh and Treasurer Andrew Fraser were upbeat, the offer document spells out the potential pitfalls of investing in QR National, as well as the complications of the state retaining between 25 and 40 per cent of the listed company.

Ms Bligh insisted the government would be "hands off" in terms of management. But the prospectus points out that its intention to sell down its residual stake after 2012 could dilute the share price, and adversely affect QR National's ability to raise capital.

Mr Fraser played down concerns about the "overhang" factor, saying Queensland had a "very solid reputation" in managing divestment.

Potential investors are also warned, in the 148-page share-offer document issued yesterday, that the introduction of a carbon or similar tax for greenhouse emission abatement could reduce demand for coal, having an impact on QR National's bottom line.

The proposed mineral resources rent tax could increase mine operating costs and "impact the growth in volumes hauled by QR National", it warns.

Supply-chain choke points at the ports or in other key infrastructure outside the company's control posed an additional risk investors needed to take into consideration, along with the possibility of a slump in demand for coal in key export markets including China, India and Japan.

Mr Fraser said QR National would be a "durable" investment, and investors should focus on the long term.

"This is sort of a bottom-drawer investment," he said. "If you are thinking about your grandchildren's education, this is the sort of stock that you put in a portfolio . . . if you believe in the growth story of Asia, then you believe in this stock."