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Regulation to cut Queensland coal rail volumes: Aurizon

12 Feb 2018 02:39 GMT
Regulation to cut Queensland coal rail volumes: Aurizon

Sydney, 12 February (Argus) — Australian rail firm Aurizon has cut its forecast coal haulage volumes to 210mn-220mn t for the 2017-18 fiscal year ending 30 June from 215mn-225mn t, as it changes its maintenance plans in Queensland to compensate for lower regulator-approved revenues in its networks business.

The change in maintenance planning could cut Queensland coal haulage capacity by 20mn t/yr or more out until 2021, Aurizon told investors at its half-year results today.

Aurizon has written to its coal mining customers in Queensland to advise that it will be less flexible in its maintenance programme to reflect a draft Queensland Competition Authority (QCA) decision that it only be allowed to earn A$3.9bn ($3.05bn) in revenue between 1 July 2017 and 30 June 2021. This is $1bn less than Aurizon believes it should be allowed and the firm intends to save money by carrying out maintenance at fixed times rather than when it suits its coal mining customers. This rigid maintenance regime will cut the coal haulage capacity of Aurizon's rail network and could affect the capacity of other third-party coal haulage firms that use Aurizon's network in Queensland, and ultimately the amount of coal that can be shipped from Queensland ports. Australian rail firm Pacific National and coking coal mining joint venture BHP Mitsubishi Alliance (BMA) both run trains on Aurizon's Queensland coal network. Aurizon owns and operates the Goonyella, Blackwater, Moura and Newlands rail networks in Queensland. It does not operate the West Moreton network, which feeds into the Port of Brisbane and is operated by QueenslandRail.

Aurizon is appealing the QCA draft decision, but says it must implement the changes to its maintenance regime progressively to align its business practices with the initial decision.

Total haulage across Aurizon's Queensland network by all rail operators was 116.6mn t for July-December, up from 112.9mn t in July-December 2016 and from 97.9mn t in January-July 2017 when Cyclone Debbie closed the Goonyella line for almost a month. The network has a nominal capacity of 225mn t/yr, but this could be cut by at least 20mn t/yr to 205mn t/yr following the QCA decision, according to Aurizon.

Aurizon's trains hauled 107.8mn t of coal during July-December, up from 103.5mn t in the same period of 2016. Queensland accounted for 77.8mn t for July-December and New South Wales 30mn t. This compared with 76.6mn t and 26.9mn t respectively in July-December 2016 and 66.9mn t and 27.8mn t in January-July 2017 when Cyclone Debbie cut into deliveries in Queensland. The firm's contract utilisation rate rose to 95pc during July-December from 93pc in the year-earlier period, as firmer prices led to stronger customer demand. This high utilisation rate gives the firm little room to deliver on its contracts and manage its new maintenance regime in Queensland.

Aurizon reported earnings before interest and tax for its coal business of A$222.5mn for July-December, up from A$218.1mn in the same period last year and from A$201.8mn during January-June.

Around 52pc of the coal hauled by Aurizon was thermal coal and 48pc coking coal in July-December, which was in line with the mix delivered in 2016-17.