Logistics, Ports & Terminals, Mining and Heavy Industries

WICET relying on Aurizon-Macquarie bailout

The Wiggins Island Coal Export Terminal at the Port of Gladstone in Queensland is doing enough to stay in business in the short term, but will likely not survive a $3.5 billion debt repayment due by September 2018, the company’s annual report has indicated.

Rail operator Aurizon confirmed earlier this month it was in talks with consortium partners – believed to include Macquarie and Brookfield – to buy WICET, along with a selection of coal mines that feed the port, for roughly $4 billion.

In the process of acquiring those assets, the consortium would refinance the outstanding debt, allowing the export terminal and the mines to continue operations in the medium term.

But if that doesn’t occur, WICET’s existing ownership could be in serious trouble.

WICET’s annual report, released last week, described a “material uncertainty” over the terminal’s future due to the looming debt repayment.

It said the terminal is generating the positive cash flows in needs to stay afloat – delivering $368.8 million in operating cash in FY17.

But the report “significant doubt over the entity’s ability to continue as a going concern” due to the $3.5 billion repayment.

Several reports earlier this month said the prospective bid from Aurizon, Macquarie and Brookfield would see WICET’s remaining senior lenders repaid within 10 months by the consortium. Without such a move, major banks – including ANZ and NAB – may be forced to write down as much as $1 billion of that debt.

“As part of a consortium proposal, Aurizon would acquire WICET and other consortium members would acquire one or more of WICET’s source mines,” Aurizon told the ASX.

“The consortium proposal would secure long-term volumes for WICET. In addition, through restructuring and the proposed introduction of lower, market-competitive port charges, there would be incentive for miners to increase throughput at the port.

“This could also incentivise expansion tonnages from existing mines and new mines.”

The bold move was the latest in a string of major steps taken by Aurizon since former Rio Tinto executive Andrew Harding became its chief executive in December 2016.

“Aurizon, which operates rail infrastructure and train haulage services for coal customers in Queensland’s Bowen Basin, sees strategic alignment with the acquisition of WICET,” the company said.

“If successful, the consortium’s proposal would provide a long-term, sustainable and economic solution for this important state and national infrastructure asset.”

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