Aurizon: exports to fall by 20 million tonnes on QCA ruling

Aurizon’s customers say the monopoly railway owner needs to follow regulatory process, not disrupt exports.

Aurizon declared an interim dividend of 14c a share, up from 13.6c a year ago.

Coal rail owner Aurizon Holdings has said it will restrict 20 million tonnes or more of annual Queensland coal export capacity in response to a draft competition ruling, in a move that could cut annual export revenue by $4 billion and combined state and federal budget flows by $1bn.

The restrictions, to be brought about by changes to maintenance practices, have sparked criticism from Aurizon’s customers, who say the monopoly railway owner needs to follow regulatory process, not disrupt exports, if it disagrees with the Queensland Competition Authority.

In December, the QCA issued an unfavourable draft “UT5” ruling on maintenance of Aurizon’s monopoly railways that sent the former state-owned company’s shares tumbling.

Aurizon chief Andrew Harding said the decision was flawed.

Aurizon plans to act immediately by prioritising lowest-cost maintenance over flexibility, which it says is something the QCA ruling advocates.

“We estimate the net impact of initial changes could reduce system throughput by approximately 20 million tonnes annually,” Mr Harding said. “Further changes are likely to be implemented, with potential to further reduce volumes.”

The Queensland Resources Council estimates that for the sake of a $25 million maintenance ­allowance, Aurizon plans to restrict $4bn in export revenue and could slash $500m of royalty revenue from the state budget.

“The Queensland resources sector is extremely disappointed by Aurizon’s move to pre-empt the regulatory process by moving to change its maintenance program before the QCA process is completed,” QRC chief Ian Macfarlane said. “This shows Aurizon is willing to use its power as the monopoly operator and further highlights why the regulatory process needs to be followed.”

Deputy Premier and Treasurer Jackie Trad: “Aurizon’s decision is incredibly disappointing, especially as the QCA’s draft decision has not been finalised.

“I would encourage all stakeholders to make a submission to the QCA and to work productively for the best outcome, instead of attempting to hold the independent regulator to ransom.’’

Ms Trad said the figure of 20 million tonnes was Aurizon’s.

On top of royalty losses, federal corporate tax takings could also be hit by around $500m if coking coal prices remained strong, analysts said.

Mr Harding said he was taking action because the ruling would be made retrospective to last July.

“If you look at the history of the difference between QCA draft decisions versus QCA final decisions, irrespective of submissions made by anyone, the difference is minimal,” he said.

“I will continue to work to get a sensible outcome, but I can’t ­assume, based on history, that I will get a sensible outcome.”

Glencore, Australia’s biggest coal exporter, appeared to back the draft ruling on restricting ­Aurizon’s maintenance spend.

A spokesman said: “To the extent that Aurizon Network disagrees with the draft conclusions of the QCA’s assessment of maintenance costs, then we believe it must engage constructively with the QCA to have these resolved.”

BHP Billiton ­didn’t comment.

Submissions on the QCA ruling are due by March 12. The authority declined to comment.

Aurizon reported a $281.5m first-half net profit, up 52 per cent from $185.8m a year ago, when impairments were booked.

Underlying earnings before interest and tax dropped 5 per cent to $485.3m and Aurizon kept full-year underlying earnings guidance at between $900m and $960m. Aurizon declared an interim dividend of 14c a share, up from 13.6c a year ago.

Aurizon shares rose 9c, or 2 per cent, to $4.69, but remain down 13 per cent since the QCA’s ruling.