Queensland Selling A$806 Million Aurizon Stake, AFR Says

Queensland’s state government is selling half its stake in Aurizon Holdings Ltd., Australia’s biggest transporter of coal by rail, for about A$806 million ($839 million), the Australian Financial Review reported.

UBS AG is offering the shares at A$4.03 each, the newspaper said without revealing where it got the information. The stake represents 9 percent of Aurizon, the report said. The Brisbane-based company, formerly known as QR National Ltd., listed on the stock exchange in 2010 in Australia’s second-biggest initial public offering. The stock closed at A$4.04 yesterday in Sydney.

Queensland, Australia’s most indebted state, is aiming to return its budget to surplus in 2014-15 as Premier Campbell Newman attempts to win back its AAA credit rating. Queensland has benefited from cutting its investment in Aurizon as the shares climbed 58 percent from their November 2010 listing, compared with a 11 percent advance on the S&P/ASX 200 Index, the benchmark equities gauge.

“Now is not a bad time to be raising funds with confidence coming back with markets having rallied,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages about $126 billion, said in a phone interview today. “There might not be a better time to do it. Presumably they have a got a better use for the money somewhere else.”

The government sold a stake in Aurizon worth about A$500 million in October, reducing its 34 percent stake in the previously state-run company, the newspaper reported. Mark Hairsine, a spokesman for Aurizon, and Edmund Burke, a Queensland government spokesman, didn’t immediately respond to voicemails left on their mobile phones.

Credit Rating

Queensland lost its top credit rating in 2009 after the then Labor state government spent A$54 billion to fix ailing infrastructure. Liberal party leader Newman, who won power at an election last March, has cut jobs and services to curb spending that he said risked turning Queensland into an Australian version of Spain. Resource-rich Queensland depends on higher commodity prices to drive growth in the state, which accounts for about one-fifth of the Australia’s A$1.4 trillion economy and is the third-biggest state by population.

January Floods

The northeastern state suffered flooding in January for the second time in about two years. The Reserve Bank of Australia said Feb. 8 that the inundation “is having a noticeable impact on the transport of coal to ports, but at this early stage it appears that the effect on exports will be much less than was the case in 2011.”

Aurizon signed a pact March 11 with GVK Group, an Indian developer of a $10 billion coal mine in Australia part-owned by billionaire Gina Rinehart, to jointly develop a rail line and port in Queensland state. The two parties will update the market when they execute final agreements on all terms of the proposal, according to a statement.

Sydney-based JPMorgan Chase & Co. analyst Scott Carroll upgraded Aurizon shares to “overweight” yesterday, citing attractive long-term earnings growth with cost savings and higher revenue from coal.

Aurizon shares climbed 8 percent this year, compared with a 10 percent advance on the S&P/ASX 200 Index.