Bridget Carter in 'The Australian' below appears to be confusing rail operator Pacific National's plans to expand its container train and locomotive offerings with the AZJ East Coast Rail trade sale/demerger, as ECR's mooted opportunities lie in extra minerals traffic not the hauling of containers between interstate capitals or intrastate that PN offers.
That said, this is what she's written this morning:
Potential Aurizon suitors ‘baulking’ at price expectation
Aurizon’s update to the market on Tuesday about the sale of its East Coast Rail operation may have been scarce on detail.
But the talk in the market is that bidders are baulking at the price expectations of the Australian listed group.
Aurizon said at its annual general meeting that a decision on whether to sell the business would be made in November, but that decision has been pushed out to December, the company said in a statement on Tuesday.
One suggestion in the market is that suitors are not buying into the premium that Aurizon believes that they should pay due to the prospect of non-coal growth opportunities.
The sticking point is that rival Pacific National already has many of the non-coal related contracts that an East Coast Rail owner would be keen to capitalise on.
Pacific National is understood to be adding 50 new locomotives to its current fleet of 650, a further 110 new wagons and is outlaying hundreds of millions of dollars on real estate and terminals.
In total, it is understood that East Coast Rail has 46 locomotives by comparison.
East Coast Rail was part of One Rail Australia, which Aurizon bought for $2.35bn this year.
It had been marketed as having opportunities to diversify away from coal into other markets, taking on Pacific National.
The sale, through Goldman Sachs, is part of an undertaking that Auziron gave to the Australian Competition & Consumer Commission to gain approval for an acquisition.
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DataRoom earlier reported that the $5bn New Hope bid for East Coast Rail as part of a consortium with Oaktree Capital Management and Canadian private equity firm Brookfield.
A private family office was understood to have also lobbed an offer.
East Coast Rail was previously owned by rival coal miner Glencore, which remains a customer, and its contracts stipulate that the majority owner of the business cannot be a coal producer.
Glencore also has a veto right: if East Coast Rail is owned by a coal producer, it has the right to buy it back.
Glencore sold its GRail business to Genesee & Wyoming for $1.14bn in 2016.
That business was later sold to Macquarie and renamed One Rail Australia.
Should Aurizon not achieve the right price for East Coast Rail from a buyer, then a demerger is set to be on the cards.
Brookfield, based in Canada, and Oaktree, based in California, are open to investing in coal-related assets.
Ten parties had shown interest in East Coast Rail and Glencore is understood to have been among the bidders.
East Coast Rail has a steady income with 10-year regulated tariffs, servicing the needs of 40 mines. Thirty per cent of the volume hauled is thermal coal across NSW and Queensland.
It will carry about $500m of debt with a BBB- rating, including funds from the US private placement market.
For 2021, the unit generated $227m of revenue and $137m of underlying earnings and hauled close to 50 million tonnes.
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