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Aurizon cancels EAs, may give back to investors

Coal wagons Aurizon. Photo: Aurizon

While headlines point to a potential bigger dividend from Aurizon in coming months, the rail operator has cancelled enterprise agreements with roughly 3500 workers.

The Queensland-based operator is in the middle of a prolonged bargaining saga with a number of unions. 12 expired agreements are still in dispute.

Under the Fair Work Act, expired enterprise agreements remain in place until they are replaced with new agreements.

But in what Aurizon boss Lance Hockridge at the time called “a landmark decision,” the Fair Work Commission in mid-April ruled that Aurizon could terminate the 12 agreements.

Hockridge had agreed to wait until an appeal by the unions had been heard by the Federal Court, but with that hearing taking place last week, the operator announced the termination of expired EAs on May 21.

Workers who were under the cancelled deals will now be covered only by the Rail Industry Award (2010), the National Employment Standards and individual contracts, which the operator describes as “less favourable” to workers.

“The termination of these old agreements means a range of legacy conditions that are a hangover from government ownership and restrict Aurizon from making changes in a competitive market, will disappear,” Hockridge said.

Aurizon says it has offered employees a 4% per year wage increase over three years, in return for the introduction of a range of work practices and productivity measures “already widely accepted in Australian industry”.

The sides can’t come together, but Hockridge says they are getting closer.

“We are pleased with progress in our negotiations with unions since the [Fair Work] Commission’s decision in April,” he said.

“That decision has certainly been a catalyst for renewed focus around the bargaining table on the outstanding issues.”

Meanwhile Aurizon is also reportedly considering a boosted dividend in its upcoming 2014/15 results, in an effort to address investor concerns over weak growth prospects.

“Aurizon’s strong balance sheet continues to offer capital management opportunities,” a company spokesperson was quoted as saying by the Australian Financial Review this week.

“Any further capital management opportunities will be considered by the board as part of the 2014/15 financial results.”

Confidence in the operator has also dipped after it acquired a share of a major iron ore project just months before the commodity’s price took a significant hit.

Aurizon now holds an exclusive contract to develop a railway for the West Pilbara Iron Ore Project, after it joined forces with Chinese steelmaker Baosteel to acquire Aquila Resources in a $1.1 billion bid in 2014.

But after averaging US$100.56 a tonne in May 2014, the iron ore price has dropped to roughly US$60 a tonne so far in May 2015.

On May 11, the operator announced a formal push-back of the Pilbara plans, but key shareholder Perpetual has expressed its desire to see the project permanently shelved by Aurizon.

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