Queensland State Continues Rail Talks With Coal Group

The Queensland government remains in talks with a group, including BHP Billiton Ltd., which the Australian’s newspaper reported today has raised its bid for the state’s coal freight network to A$5.2 billion ($4.8 billion).

“The government is not going to comment on ongoing commercial negotiations,” Andrew Fraser, treasurer of Queensland, the nation’s biggest coal exporter, said today in a statement. The state is pressing ahead with its planned initial public offering of QR National in the fourth quarter, he said.

BHP, the world’s largest mining company, Xstrata Plc and the 11 other producers are seeking control of the tracks as demand from Asian steelmakers expands and congestion crimps exports. The group, which increased its initial offer from A$4.85 billion, wants Queensland to allow it to study the rail unit’s books before the federal election scheduled Aug. 21, the Australian reported, without saying where it got the information.

“The government is determined to secure the best deal for taxpayers and the long term interests of the Queensland economy,” Fraser said. “As such, preparations continue for an IPO in accordance with our original timetable.”

Talks with the government are continuing, the producer group said today in an e-mailed statement.

Rail Provider

State-run rail provider QR Ltd., with assets worth A$12 billion, last month split into Queensland Rail, comprising passenger trains and services, and QR National, the nation’s largest transport and logistics business, including coal and freight train services, ahead of the planned IPO. The initial share sale may raise A$3 billion, the Australian reported.

Queensland Premier Anna Bligh today declined to confirm details of any increased bid, saying it wasn’t “helpful” to give daily comment, Australian Associated Press reported.

“We are in the middle of intense and complex commercial discussions with these coal companies,” Bligh told reporters, AAP said. “We are of course taking them seriously, respectfully and working through issues with them.”

Queensland Rail has met with about 60 potential initial sale investors in the U.S., Canada and Asia, the company said last month. The Queensland government’s planned IPO is for Queensland Rail’s tracks and trains, while the mining companies’ bid is for the rail network only.

The mining group, which accounts for 98 percent of Queensland’s export coal industry, plans to spend A$2.05 billion on the railroad and has arranged a loan of A$1.35 billion for the bid, Greiner said May 26. The network operates in a “sub-optimal” way, he told reporters. Taking control by the group would eliminate the risks of an independent operator raising fees on the monopoly asset.

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 a report.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE