Brookfield delay causes rail speculation

22 Dec, 2015 01:00 AM
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A decision on Brookfield's play for the Fremantle Port has been delayed sparking questioning the infrastructure giant could be giving up its WA rail stakes.
A decision on Brookfield's play for the Fremantle Port has been delayed sparking questioning the infrastructure giant could be giving up its WA rail stakes.

BROOKFIELD has sought to delay a competition decision on its bid for Asciano Ltd, sparking speculation it could give up the WA freight rail network.

The Australian Competition and Consumer Commission (ACCC) was scheduled to announce its decision on the $8.9 billion bid for control of port and logistics company Asciano on Thursday last week.

On its website it said the decision had been "delayed at the request of Brookfield".

It said it would announce a new decision date "in due course".

Brookfield had earlier submitted court-enforceable undertakings on its WA freight rail and Queensland Dalrymple Bay Coal Terminal operations in an attempt to alleviate ACCC concerns about the potential for the Asciano acquisition to reduce commercial competition.

In an unusual preliminary announcement two weeks ago, the ACCC said it did not accept those undertakings.

Farm Weekly understands Brookfield Asset Management has since provided further information to the ACCC regarding its intended operations if a consortium bid headed by Brookfield Infrastructure Partners (BIP) for Asciano is successful.

That information was provided with the request to delay the ACCC's decision on whether the bid can proceed.

Farm Weekly has been unable to confirm whether the additional information expanded on the initial undertakings or whether it involved new proposals with commitments to divest assets, including the WA freight rail network.

A Brookfield spokeswoman said she would consult with the corporation's legal team on what could be said in light of the on-going ACCC consideration.

But Brookfield had not responded by the time Farm Weekly went to press.

The potential impact of a declining iron ore price on Brookfield Rails' revenue streams, plus the lack of a long-term contract for grain trains with CBH Group, has fed speculation BIP could be prepared to give up the WA freight rail network to ease the way for its Asciano bid.

Four of Brookfield Rail's major customers are mid-level iron ore miners, with two railing ore to Geraldton Port on the Perenjori line.

A price per tonne below $40 has placed those mine operations under considerable pressure with potentially reduced production and rail tonnages.

Cliffs Resources, which rails ore to Esperance from Koolyanobbing, has announced it plans to pull out within 3.5 years and Mineral Resources has indicated it may switch from railing ore to Kwinana to railing it to Esperance to reduce costs.

WAFarmers president Dale Park said he suspected a scenario of Brookfield having to divest the WA freight rail network in order to alleviate AAAC concerns was "on the money".

"We've been saying for a long time that they will eventually kill the golden goose and it looks like they might have," Mr Park said.

However, the prospect of Brookfield Rail giving up the WA freight network was not likely to bring farmers much joy, he said.

"As far as we are concerned, one shareholder company controlling a vital State asset like the rail network is as bad as any other shareholder company controlling it.''

Mr Park said there was ample evidence with the closure of the Tier 3 grain lines last year that the State government was unlikely to step in and take the freight rail network back again.

The ACCC flagged concerns about the Asciano acquisition in an issues paper on October 15.

It was particularly concerned with potential vertical integration of Asciano-owned freight rail operator Pacific National and BIP's Brookfield Rail and Dalrymple Bay Coal Terminal assets to the detriment of other users.

The ACCC indicated it did not believe WA and Queensland rail access codes were robust enough to ensure competition.

Last month Qube Holdings, Australia's largest import/export logistics provider, in conjunction with Global Infrastructure Partners and Canada Pension Plan Investment Board, made a conditional counter bid for Asciano.

That bid also requires ACCC approval.

BIP responded to the Qube counter bid by buying Asciano shares and announced a formal take-over bid to Asciano shareholders, coupled with a statement it would not quit its shareholding in Asciano.

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Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly

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