James am i right in understand the ECR Business???? (What is it) will need to be divested?

Yes the coal operations on the east coast are the issue.  Theyre going to be set up as an independent company and either sold off or listed.

I have to dig further (dont have time right now) but I think ACCC will be looking into the purchaser as part of this undertaking to make sure they meet the aims of the undertaking.  Ie Aurizon cant sell it to a party who is going to let it fail etc.

Just to clarify a couple of points.

a) it was Aurizon that came up with the plan to divest the East Coast Rail business and not the ACCC. It was in their original undertaking to the ACCC back in October 2021. The ACCC has just taken eight months to say "We'll be watching you".

b) East Coast Rail is just the former One Rail Australia coal operations in New South Wales and Queensland. It does not include Aurizon's existing coal haulage business in New South Wales or Queensland.

I'm pretty sure Aurizon's very earliest media releases regarding the purchase of One Rail it indicated an intent to sell One Rail's coal business. Aurizon has made statements previously that the One Rail purchase is all about acquiring more non-coal business for Aurizon's Bulk Division.

This decision by the ACCC also coincides with export thermal coal prices reaching record prices, and as a majority part of One Rail's coal business, I'd suggest Aurizon will work as fast as corporately possible to off load the East Coast coal business while demand remains high.

This decision by the ACCC also coincides with export thermal coal prices reaching record prices, and as a majority part of One Rail's coal business, I'd suggest Aurizon will work as fast as corporately possible to off load the East Coast coal business while demand remains high.

Or delay it as long as possible to reap the short term rewards?

I'm pretty sure Aurizon's very earliest media releases regarding the purchase of One Rail it indicated an intent to sell One Rail's coal business. Aurizon has made statements previously that the One Rail purchase is all about acquiring more non-coal business for Aurizon's Bulk Division.

This decision by the ACCC also coincides with export thermal coal prices reaching record prices, and as a majority part of One Rail's coal business, I'd suggest Aurizon will work as fast as corporately possible to off load the East Coast coal business while demand remains high.

I think anyone buying the coal haulage would know the market. The question neither side will know is how long the high prices continue. However coal will be exported in similar tonnages for at least another decade before the slow decline starts so plenty of options for a new operator to try and use One Rail sale as an option to enter the market. Down side for this is the growing number of businesses who are distancing themselves from coal.

I'm pretty sure Aurizon's very earliest media releases regarding the purchase of One Rail it indicated an intent to sell One Rail's coal business. Aurizon has made statements previously that the One Rail purchase is all about acquiring more non-coal business for Aurizon's Bulk Division.

This decision by the ACCC also coincides with export thermal coal prices reaching record prices, and as a majority part of One Rail's coal business, I'd suggest Aurizon will work as fast as corporately possible to off load the East Coast coal business while demand remains high.

I think anyone buying the coal haulage would know the market. The question neither side will know is how long the high prices continue. However coal will be exported in similar tonnages for at least another decade before the slow decline starts so plenty of options for a new operator to try and use One Rail sale as an option to enter the market. Down side for this is the growing number of businesses who are distancing themselves from coal.

Any chance one or some of the coal miners might buy it to keep their own coal chains viable in the log run?

Any chance one or some of the coal miners might buy it to keep their own coal chains viable in the log run?

A large percentage of the One Rail (ORA) coal task on the East Coast is contracted to Glencore.

At the time of the sale of the Glencore rail assets to Genesee & Wyoming/Macquarie in 2016 the following formed part of the sale.

"As part of the deal, the company will service most of Glencore’s coal haulage needs in the Hunter Valley over a 20-year contract. GRail provides haulage and logistics services for approximately 40 million tonnes per year of steam coal. Through the contract, GWA will hold rights to exclusively haul all coal produced at GC’s existing mines in the Hunter Valley to Port of Newcastle and will have minimum guaranteed volumes over the first 18 years."  

If ORA are running any other coal contracts in NSW they would be small fry compared to Glencore's 40mtpa.

There was a rumour floated in the business pages of the Oz or Fin four or five months ago that Glencore were considering the option of re-acquiring their rail assets. Not part of the rumour, and purely speculation on my part, is that they would then contract out the operations and crewing of the assets through a third party, and my guess is that would be Aurizon.

Any chance one or some of the coal miners might buy it to keep their own coal chains viable in the log run?

A large percentage of the One Rail (ORA) coal task on the East Coast is contracted to Glencore.

At the time of the sale of the Glencore rail assets to Genesee & Wyoming/Macquarie in 2016 the following formed part of the sale.

"As part of the deal, the company will service most of Glencore’s coal haulage needs in the Hunter Valley over a 20-year contract. GRail provides haulage and logistics services for approximately 40 million tonnes per year of steam coal. Through the contract, GWA will hold rights to exclusively haul all coal produced at GC’s existing mines in the Hunter Valley to Port of Newcastle and will have minimum guaranteed volumes over the first 18 years."  

If ORA are running any other coal contracts in NSW they would be small fry compared to Glencore's 40mtpa.

There was a rumour floated in the business pages of the Oz or Fin four or five months ago that Glencore were considering the option of re-acquiring their rail assets. Not part of the rumour, and purely speculation on my part, is that they would then contract out the operations and crewing of the assets through a third party, and my guess is that would be Aurizon.

Qube is doing the contracted crewing and operations for Glencore on the Mt Isa Line now, so it may also be in the frame if Glencore opted for the One Rail coal operations. The fact that Glencore invested in its own rollingstock on the Mt Isa Line last year to replace the previous PN operation does suggest it would have a interest in the outcome of its coal haulage contracts.

Several years ago now, I met with senior GWA people (as they were then) in a business context.

They told us that their competitive edge with Glencore and some other customers was that they “aren’t Aurizon”. Aurizon, it appears, had developed a “bad” reputation, at least with those names.

The idea that Glencore might buy back their contract doesn’t seem so far-fetched to me. And having Qube providing crew and operations also in the frame. There may well have been “change of ownership “ provisions in Glencore’s contract with GWA/1Rail.



Similar logic applies in banking - a high proportion of regional bank customers are there to escape the Big 4. Which is why ANZ will have a dikkens of a time preserving value in the Suncorp bank franchise. When Westpac bought Challenge Bank, each bank had a 12% share of the WA market. Within a couple of years, the market share of the “combined” bank was back at 12%.

Aurizon appear to have several potential buyers for the east coast assets they are required to divest. https://www.railpage.com.au/news/s/aurizon-reports-keen-interest-in-east-coast-rail-sale

Aurizon appear to have several potential buyers for the east coast assets they are required to divest. https://www.railpage.com.au/news/s/aurizon-reports-keen-interest-in-east-coast-rail-sale

That's what they say

Interesting that analysts value the East Coast Rail business at $1 billion, and Aurizon paid $2.35 billion for ORA which therefore would value the SA/NT ORA business at $1.35 billion, which would be total bollocks - it's worth nowhere near that!

GWA/Maquarie purchased the G-Rail business - which forms the bulk of what is East Coast Rail from Glencore in December 2016 for $1.14bn. Since then at least one more Hunter rake and several locos have been added to the business, plus the GWA/ORA start up business on the narrow gauge in Queensland. So someone will be losing out if the ECR business is only valued at $1 billion.  

Worth also noting from the Annual Report presentation - Aurizon commenced proceedings against G&W (Sept 2019) seeking damages and declarations for a breach of long-standing contractual rights held by Aurizon concerning G&W’s Australian assets (One Rail Australia). Matter is currently before the Supreme Court of New South Wales.

Aurizon appear to have several potential buyers for the east coast assets they are required to divest. https://www.railpage.com.au/news/s/aurizon-reports-keen-interest-in-east-coast-rail-sale

That's what they say

Interesting that analysts value the East Coast Rail business at $1 billion, and Aurizon paid $2.35 billion for ORA which therefore would value the SA/NT ORA business at $1.35 billion, which would be total bollocks - it's worth nowhere near that!

GWA/Maquarie purchased the G-Rail business - which forms the bulk of what is East Coast Rail from Glencore in December 2016 for $1.14bn. Since then at least one more Hunter rake and several locos have been added to the business, plus the GWA/ORA start up business on the narrow gauge business in Queensland. So someone will be losing out if the ECR business is only valued at $1 billion.  

Worth also noting from the Annual Report presentation - Aurizon commenced proceedings against G&W (Sept 2019) seeking damages and declarations for a breach of long-standing contractual rights held by Aurizon concerning G&W’s Australian assets (One Rail Australia). Matter is currently before the Supreme Court of New South Wales.

Good info, I was struggling to work out their valuations based on the $1b figure for ECR.

Aurizon appear to have several potential buyers for the east coast assets they are required to divest. https://www.railpage.com.au/news/s/aurizon-reports-keen-interest-in-east-coast-rail-sale

GWA/Maquarie purchased the G-Rail business - which forms the bulk of what is East Coast Rail from Glencore in December 2016 for $1.14bn. Since then at least one more Hunter rake and several locos have been added to the business, plus the GWA/ORA start up business on the narrow gauge in Queensland. So someone will be losing out if the ECR business is only valued at $1 billion.  

You have to also back out the depreciation of the purchased assets and also factor in the progressed years of the haulage contracts which lower future cashflows.  Of course there could be more contracts to factor in too which if cashflow positive increases value.  You've also got to factor in the profits that have been extracted over that time.  

Not saying the $1bn is right, or that you are wrong, but just that there are a few more curveballs in there.