Queensland details asset sale plans

Queensland’s government has unveiled detailed plans as to how it will monetise several large state-owned infrastructure assets, including a public listing, long-term leases and an outright sale.

The sales, first announced in June 2009, are part of an effort by the Australian state to raise cash in order to avoid raising taxes or cutting essential services. Queensland expects to lose A$15 billion (€9 billion; $14 billion) from its budget over the next four years due to the impact of the recession, according to the government’s asset sale website. It wants to make up the difference by monetising “five established commercial businesses” that “have a bright future in private ownership”.

The five businesses are toll road operator Queensland Motorways; the Port of Brisbane; timber producer Forestry Plantations Queensland; Queensland Rail’s coal haulage and non-passenger businesses and the Abbott Point Coal Terminal. Queensland Rail’s passenger service assets will remain under state control.

Queensland Rail: awaiting initial public offering

Queensland said it would lease the Queensland Motorways road network for a period of up to 50 years. The lease will invite a private operator to get the tolling rights on motorways in exchange for an upfront payment. The network is 61 kilometres long and serves 76 million motorists a year, according to the Queensland Motorways website. A deal is scheduled to be complete by the end of 2011.

Queensland will also lease the Port of Brisbane, though for a significantly longer period of 99 years. The lease will be awarded through a competitive bidding process that will commence in the second quarter of next year and reach financial close by the end of 2010. The port’s wharves serve 2,600 ships each year and handle about 32 tonnes of cargo, according to the Queensland government website.

Forestry Plantations Queensland, on the other hand, will be sold outright. Queensland said it is seeking a full sale of the business because “it is not the government’s role to own and operate a timber business”. The business made A$72.4 million in timber sales during its 2008 to 2009 financial year based on 1.55 million cubic metres of plantation timber removals, according to the government. Indicative bids for the business are due by late January and a sale is set to be finalised by June 2010.

Queensland Rail will be split into two entities: core public passenger service and commercial freight haulage. The passenger service business will remain with the government, while the commercial haulage business, which moved 59 million tones of freight last year, will be sold via an initial public offering on a stock exchange. However, the Queensland government will initially retain 25 percent to 40 percent of the company. Queensland Rail employees will also be given a stake in the company, whose listing is being targeted for the final quarter of 2010.

The Abbott Point Coal Terminal, Australia’s most northerly coal terminal, will be leased through a competitive bidding process for 99 years. The bidding process is expected to start in the last quarter of 2010. The coal terminal has the capacity to handle 50 million tonnes of coal per year.
The Queensland government cautioned that, while it is committed to the asset sale programme, it was not a “fire sale. These businesses are only for sale at the right price,” the state said in a document about the plans. The goal is to get A$15 billion in proceeds, or about the same as the projected four-year budget shortfall.

A consortium of banks comprising Rothschild, Merrill Lynch and the Royal Bank of Scotland had previously been selected as lead and commercial advisors for the project.

Australian investors reacted positively to the government’s announcement.

“We are pleased to see that the Queensland Government have remained committed to privatising these assets and from the details made available today, we support the sale structure for the four remaining assets,” Peter Doherty, chief executive officer of CP2, an Australian infrastructure asset manager, said in a statement.