Queensland’s government opened the initial share sale of its coal freight network, an offer that may be worth about A$7 billion ($6.5 billion) and become Australia’s largest since Telstra Corp. in 2006.
“QR National is a growth story - it is Australia’s largest rail freight company and the world’s largest rail transporter of coal from mine to port for export markets,” Treasurer Andrew Fraser said in Brisbane yesterday at a pre-registration for retail investors.
Queensland, the third-most-populous Australian state, is selling assets to prop up finances after the recession crimped government revenue. State Premier Anna Bligh said in December she’ll put other assets up for sale in the next two years, including a road network, a coal terminal and a port.
The sale of the non-passenger assets may fetch A$7 billion, Bligh said in June last year. Australia’s government in 2006 sold A$15.5 billion of shares in Telstra, the nation’s largest telephone company.
The government formed QR National in July when state-run rail provider QR Ltd., with assets worth A$12 billion, split its passenger train and freight operations ahead of the planned listing for the fourth quarter.
“The climate for IPOs hasn’t been too good recently,” Peter Chilton, fund manager at Constellation Capital Management Ltd. said by phone from Sydney yesterday. The network “will require a lot of investment for maybe quite a low return on capital. That is an issue.”
Aston Resources Ltd., an Australian coal developer, had to cut the price of its IPO last month as markets tumbled. The cut in Aston’s offer price follows a 5.9 percent drop this year in Australia’s benchmark S&P/ASX 200 index of stocks.
Bilfinger Berger AG, Germany’s second-largest building company, pulled the IPO of Australian unit Valemus Ltd. after investors balked at the price.
The state government, which is spending A$15 million on the IPO marketing campaign, will initially retain 25 percent to 40 percent of the floated entity, it said previously.
QR National is in talks with as many as 10 lenders for a A$3 billion loan it seeks to complete later this month, according to two people familiar with the matter. The loan will be used for ongoing investments into the network.
“You need to invest a lot of money in the rail and actual track to sustain the growth,” Chilton said. “If you fail to invest then you end up in trouble.”
QR National’s freight network is a “high quality business” that will help meet growing demand for resources in Asia, Fraser said yesterday. Public offer documents for the IPO will be available from Oct. 10, he said, declining to indicate how much the government was hoping to raise in the IPO.
If the state keeps 25 percent of QR National and maintains Bligh’s A$7 billion valuation of the freight network, the sale would be the largest stock offering in Australia since Telstra.
QR National transported more than 198 million metric tons of coal during the 2009-10 financial year and employs about 9,000 people, with a heavy-haul coal network of more than 2,300 kilometers, according to a presentation on its web site.
The government in March appointed Credit Suisse Group AG, Goldman Sachs & Partners Goldman Sachs Australia Pty, Bank of America Corp.’s Merrill Lynch unit, Royal Bank of Scotland Plc and UBS AG to manage the sale.
Commonwealth Bank of Australia Ltd. and Wilson HTM Investment Group were named in July as co-lead managers and Ord Minnett Group Ltd. and Patersons Securities Ltd. were appointed co-managers.
Prices for coking coal, a steelmaking raw material, will peak in eight years after which a market deficit will be plugged, Metal Bulletin Ltd. said in June. China and India, the world’s most-populous nations, will account for 70 percent of coking coal demand by 2020, Metal Bulletin said in a report.