Aurizon Network receives Wiggins Island rail project notices

Aurizon’s wholly-owned subsidiary, Aurizon Network, and eight coal companies are parties to Wiggins Island rail project deeds. Under the project deeds, Aurizon Network was to receive certain payments, which would provide an above regulatory return on its investment in the AUS$831 million rail project, in return for the company agreeing to develop the project on time and for a lower than estimated cost.

Subsequently, notices from seven of the eight Wiggins Island rail project customers have been sent to Aurizon Network. The notices claim to exercise a right under the relevant agreements to reduce the financial exposure of those customers to the company in respect of the project.

The outcome of the notices, if valid, would be to significantly reduce the regulatory return component of revenue that Aurizon Network will receive under the project deeds. The exact impact would be dependent upon a number of variables by which the above regulatory return component is calculated, some of which are yet to be determined.

At this point in time Aurizon can offer guidance that the annual impact would be in a range from AUS$0 – AUS$27 million in earnings before interest and tax per annum over the 19.5 yr life of the above regulatory return component.

The impact of the notices, if valid, in this financial year is more limited, at a maximum of AUS$10 million in earnings before interest and tax.

Aurizon Network's regulatory return on the project will not be impacted.

Edited from press release by Harleigh Hobbs

Read the article online at: https://www.worldcoal.com/coal/07102015/aurizon-network-receives-wiggins-island-rail-project-notices-2974/