AusRAIL, Market Sectors

Aurizon ?disappointed? by maximum revenue decision

<span class="" id="parent-fieldname-description"> Queensland-based rail operator Aurizon has expressed its disappointment at a draft decision by the Queensland Competition Authority regarding the amount of revenue the company is able to earn off its coal network in the Sunshine State. </span> <p>Last week the competition authority said in a draft decision that for the four year period of the next Access Undertaking, Aurizon will have an overall unsmoothed maximum revenue of $4.02 billion each year, including a weighted average cost of capital of 7.17%.<br /><br />The maximum allowable revenue (MAR) is the total revenue Aurizon Network is able to earn each year over the access undertaking period by providing regulated access to the Central Queensland Coal Network.<br /><br />The competition authority’s draft figure is substantially less than the one proposed by Aurizon in April 2013 of $4.86 billion, and the revised financial model submitted in December 2013 of $4.75 billion.<br /><br />“Aurizon Network is disappointed by the draft revenue decision,” the rail company said last week.<br /><br />“Aurizon Network is concerned about the negative signal this draft decision will send for future investment in the Central Queensland Coal Network, together with the impact it could have on the level of maintenance activities required to provide a safe, reliable and high-capacity network for customers.”<br /><br />Aurizon has disputed a number of the methodologies and assumptions used by the authority in the calculations to arrive at the MAR for the period of the Access Undertaking, and says it will be making a “robust case for changes” during the consultation period, before a final decision is made.<br /><br />“We believe Aurizon Network’s MAR proposal is consistent with the pricing principles in the QCA Act,” the rail provider said, adding that the relevant act says an operator “can charge a price for access that at least provides a return on investment commensurate with regulatory and commercial risks involved.”<br /><br />Aurizon says its estimates for a fair MAR reflect “the efficient costs of developing, maintaining and operating a highly reliable world class rail network with safety as its core value.”<br /><br />The Queensland Competition Authority’s consultation process on the MAR Draft Decision is open for 10 weeks with submissions due on 12 December 2014.</p>