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Queensland competition watchdog rejects Aurizon's coal rail access undertaking

Brisbane — The Queensland Competition Authority late Thursday refused to approve coal rail operator Aurizon's latest undertaking on access, a move that could jeopardize some haulage capacity on its Central Queensland Coal Network in the eastern Australian state.

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After a protracted dispute, the QCA in its final decision on access to Aurizon's rail system used by coal producers gives the rail operator 60 days to amend its undertaking to align with the watchdog's view or face the prospect of the QCA preparing its own.

Aurizon's draft undertaking on rail access for coal producers that the QCA was responding to included detailed breakdowns on its maximum allowable revenue, maintenance costs and rail tariffs.

The QCA in its final decision cut the maximum allowable revenue that Aurizon could recoup from its rail business to A$4.12 billion ($2.98 billion) from the A$4.71 billion Aurizon wanted.

It also cut the amount of money Aurizon wants to set aside for maintenance to A$739 million from A$928 million and for operating costs to A$795 million from A$867 million, Aurizon said in a filing to the Australian Securities Exchange Friday.

The QCA also set Aurizon's rail user tariff at A$4.23/mt, down from the company's proposed A$4.90/mt.

However, the QCA did approve Aurizon raising its spending on depreciation to A$1.03 billion from A$936 million.

Aurizon said in its filing to the ASX it would review the decision and respond accordingly. Company officials were not available for immediate comment Friday.

Industry body the Queensland Resources Council said it welcomed the QCA's final decision and will review it in coming days.

"The QRC has always argued to uphold the role of the independent regulator to assess Aurizon Network's proposed access conditions, revenue and costs. It is essential that we maximize the returns to all Queenslanders by making sure our high-quality coal gets to market to supply the strong global demand," the council said in a statement.

The Central Queensland Coal Network comprises four major coal systems and one connecting system serving Queensland's Bowen Basin coal region: Newlands, Goonyella, Blackwater and Moura, with Goonyella Abbot Point Expansion the connecting system. It connects more than 50 mines to five major export ports plus domestic consumers.

Aurizon announced earlier in the year it would cut maintenance in response to the QCA's view in May that it should spend less on it, which Aurizon said at the time could lead to the loss of 20 million mt/year in coal capacity on the network.

--Nathan Richardson, newsdesk@spglobal.com

--Edited by Wendy Wells, wendy wells@spglobal.com