Aurizon's biggest shareholder warns on Pilbara line: report

UK hedge fund TCI says returns on infrastructure investment are not guaranteed.

The United Kingdom hedge fund that owns the largest stake of Aurizon Ltd has cautioned the Australian group from constructing a new rail network in the Pilbara, saying the drop in commodity prices made returns on the investment required unsure, The Australian Financial Review reports.

According to the newspaper, Philip Green, partner at The Children’s Investment Fund Management (TCI) – which holds an 11% stake in Aurizon – said there was no guarantee of returns on investment infrastructure in the long term, particularly as junior miners in the area risk going under if iron ore prices soften as expected.

"My fear is that if the majors wanted to flood the market with supply at the same time as demand declines, the iron ore price is only going one way and that’s down," Mr Green told the AFR.

"Infrastructure such as rail lines and new ports, these are not regulated assets as in Queensland, they are quasi regulated but they are higher risk assets."

Aurizon chief executive officer Lance Hockridge confirmed over the weekend, the construction of a stand-alone, open access railway in the Pilbara was the "principal option" under consideration by the group as it eye increased exposure to iron ore.

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