Queensland coal freight stoush heats up as Aurizon tipped to challenge QCA’s final call

Aurizon’s bitter dispute with Queensland’s coalminers could intensify as analysts tip legal action against a fresh QCA ruling.

An Aurizon train hauls coal.

The row engulfing central Queensland’s coal freight monopoly, Aurizon, could intensify with analysts predicting the rail network will launch new legal action against the state’s competition regulator.

Aurizon has been locked in a bitter dispute with the state’s biggest coalminers after the Queensland Competition Authority last December proposed to cap the company’s four-year revenue at $3.88 billion — almost $1 billion less than Aurizon had proposed — as well as cutting its maintenance allowance and rate of return to investors.

The privatised company (AZJ) subsequently launched a cost-cutting drive that mining companies warned would halt up to 20 million tons of coal exports each year, blowing $2 billion hole in state budget forecasts.

QCA’s final decision last night gave some ground to Aurizon, lifting the company’s proposed revenue cap from $3.88bn to $4.1bn. The rate of return was raised from 5.4 to 5.7 per cent.

CLSA analyst Anthony Moulder said QCA’s final decision was a “better outcome than expected” for Aurizon, but said the company was “likely” to seek judicial review.

“Despite the more positive outcome it is difficult to come to a view that the regulatory process for the CQCN is anything but deeply flawed,” Mr Moulder said.

“Consequently, Aurizon should seek a judicial review of the process for the final decision to ensure the uncertainty over pricing of key infrastructure does not continue.”

Aurizon said it had 60 days to respond to QCA and “all available options will be considered”.

“Aurizon remains committed to working with industry on an outcome. Discussions are ongoing but no agreement has been reached,” the company said in a statement.

The Queensland Resources Council said it would review the decision.

“The QRC has always argued to uphold the role of the independent regulator to assess Aurizon Network’s proposed access conditions, revenue and costs,” it said.

“It is essential that we maximise the returns to all Queenslanders by making sure our high-quality coal gets to market to supply the strong global demand.”

Wood Mackenzie principal analyst Viktor Tanevski expected “common sense will prevail” and Queensland coal exports would increase by 6 million tons next year.

“Our growth expectations could however be at further risk should the QCA final decision result in further changes by Aurizon to rail capacity or maintenance procedures,” Mr Tanevski said.

Aurizon had asked for a 7.1 per cent rate of return, noting the 5.4 per cent proposed by QCA was well below the 6.4 per cent granted to NSW’s Hunter Valley Coal Network by its regulator. The final decision upped the rate of return to 5.7 per cent.

Queensland Treasurer Jackie Trad called on the parties to resolve their dispute.

“At all times the government has encouraged the respective parties to work together,” she said.

“I encourage all parties to continue to work together to finalise the access undertaking quickly, and provide certainty for industry.”