Australian coal rail operator Aurizon Holdings (AZJ.AX) said on Monday it was in talks to buy the Wiggins Island Coal Export Terminal (WICET) in Queensland, which urgently needs to restructure $3 billion in debt.
A successful deal would be a huge relief for mining giant Glencore (GLEN.L) and its four partners who face a September 2018 deadline to start paying down the debt on the world’s most expensive coal port.
Aurizon said it was in preliminary discussions with undisclosed parties for a deal that would see it acquire the coal terminal and “other consortium members” acquiring one or more of the coal mines that use the port.
Macquarie Group (MQG.AX) is the other consortium member, the Australian Financial Review reported. A Macquarie spokesman was not immediately available to comment.
The deal could involve Macquarie taking over Glencore’s Rolleston mine and Wesfarmers’ (WES.AX) Curragh mine, both of which use the port and are up for sale, a person familiar with the situation said.
The source declined to be named as talks are confidential.
WICET was a boom-time port plan at Gladstone agreed in 2009 to service a consortium of eight coal producers, funded entirely by debt backed by port fees on 27 million tonnes a year, whether that volume was shipped or not.
The port is exporting much less than that as three of its original eight users have folded over the past two years, hit by a slump in coal prices and the burden of paying the “take-or-pay” port fees for volumes they were never able to produce.
Under the WICET agreement, the remaining five partners – Glencore, Wesfarmers, New Hope Corp (NHC.AX), China’s Yancoal Australia Ltd (YAL.AX) and Baosteel arm Aquila Resources – have to shoulder all of the port’s debt and port fees.
As a result, Glencore and its partners are now paying about $25 a tonne of coal at WICET, including financing charges, or about five times the $5 per tonne port fee at the adjacent RG Tanna coal terminal.
One of the aims of Aurizon and Macquarie’s deal is to bring down port charges in line with nearby ports.
“Through restructuring and the proposed introduction of lower, market-competitive port charges, there would be incentive for miners to increase throughput at the port,” Aurizon said in a statement.
If the port is not refinanced by September 2018, loan terms require Glencore and its partners to pay off the full $3 billion over the following decade.
Source: Reuters.com