Perth train passengers most satisfied rail commuters in Australia: survey
Rail sounds spectator safety alert
Hunter workers in running to build new train fleet
Rail access deal on arbitration track
Manage grain on rail issue: WAFarmers
Growers fear January rail access issues
West Australian rail network operator says state government investment needed to reopen Tier 3 rail freight lines
FMG mulls railway expansion
Western Australia needs a state-wide infrastructure plan to support mining and resources growth, says peak industry body
Historic Golden Mile Loopline Railway from Kalgoorlie to Boulder in WA Goldfields set to live again
FORTESCUE Metals Group could net up to $8 billion from the sale of a stake in its multi-billion-dollar rail and port network if the miner is then charged commercial rates to use the infrastructure and opens it to third-party access.
The debt-laden miner said two weeks ago that it was reviewing the sale of a minority interest in its wholly owned subsidiary, The Pilbara Infrastructure (TPI), which houses FMG's rail and port assets.
Analysts widely estimated FMG could fetch up to $5.1bn for a 49 per cent stake in its infrastructure assets, which would put a significant dent in its estimated $10bn debt.
Credit Suisse's resources team says the sale of a 40 per cent stake could fetch about $4.4bn.
But its analysts have also suggested that an infrastructure investor could conservatively pay $8bn if TPI charged commercial rates for port and rail, as value would transfer from the mines to the infrastructure assets.
Matthew Hope, leading the analysis in a recent client note, said that if FMG were charged to use the infrastructure at an "arm's-length" tariff -- which he calculates could be about $US28 a tonne for port and rail -- the infrastructure vehicle would be more valuable than the iron ore mines.
"The optimal gearing structure for an investor would see the debt held in the infrastructure vehicle, TPI," he said.
"If TPI was geared up to 50 per cent, FMG could net almost $11bn after tax, thereby shifting its entire debt to TPI."
The resources analyst said that a payment of around $8bn would generate an internal rate of return of almost 20 per cent for an infrastructure fund.
He said this was an "exceptional" return, with further upside possible if TPI began to haul third-party iron ore.
But Mr Hope said that investors would not pay a premium for a stake in infrastructure that serviced only FMG at its preferred price.
"Investors would only pay a premium for TPI operating at arm's length from FMG and benefiting from commercial rates for access, with potential for growth through third-party ore haulage," he said.
Industry talk has recently suggested that FMG is now more open to third-party haulage deals.
The Credit Suisse team believes FMG has tested the water and found strong appetite for infrastructure investments, rather than an outright sale.
The Australian reported that several parties were believed to have looked at the infrastructure assets since FMG opened a data room four weeks ago.
The Ontario Teachers Pension Fund and Canada Pension Plan Investment Board, both of which have a history of investing in infrastructure assets and both of which would be attracted to the annuity-like earnings the network would generate, are said to be among the parties looking at the assets. Several Chinese parties are also likely to be interested.
Mr Hope said that FMG could gain the optimal benefit by setting a high usage charge for the infrastructure and maximising the sell-down of the value, as that would have the greatest impact on debt. He said greater returns could be made by allowing third parties to use the rail.
"If a high tariff is charged for use of the infrastructure, then the financial benefits for the TPI investor is greater and they can offer a higher price to buy in," he said.
This article first appeared on www.theaustralian.com.au
About this website
Railpage version 3.10.0.0037
All logos and trademarks in this site are property of their respective owner. The comments are property of their posters, all the rest is © 2003-2021 Interactive Omnimedia Pty Ltd.
You can syndicate our news using one of the RSS feeds.