Coal terminal primed for offload list

WICET chairman John Massey said the industry-owned coal terminal, which thanks to a cooling in Queensland construction markets and a change in project management looks set to achieve the rare feat of being built under budget, could be sold once construction is complete.

“There’s nothing that says this is going to continue to be owned by the consortium of coal companies,” Mr Massey said. “They got together to get the thing built but whether they continue to have the same exposure in the long term is debatable … you’ve got a whole lot of international investors who want Australian infrastructure; it’s likely they will want to invest (in WICET) one way or another.”

Mr Massey said there had already been interest, and Grant Samuel had been employed to look at refinancing and other options once the plant had reached full capacity and project finance conditions had been met.

He said no decision had been made by the project’s eight owners, which include Glencore, ­Aquila Resources, Wesfarmers and Yancoal, and pointed to a ­decision by the Newcastle Coal Infrastructure Group Terminal to keep ownership of its recently completed terminal.

WICET is now 85 per cent complete and targeting first exports early next year. It is running about seven months behind its original schedule because of delays to project financing and weather-related problems, but Mr Massey says it looks like the original budget will be met.

Easing construction heat and WICET taking over project management from WorleyParsons in July last year have helped reverse earlier cost rises, he said.

WICET is being built to export 27 million tonnes of coking and thermal coal a year.

Slumping coal prices make it unlikely all that capacity will be quickly taken up, but Mr Massey rejected speculation the terminal may have trouble meeting its debt obligations. He said the take-or-pay contracts the terminal had locked in with its owners, and an ability to spread contracts across other operators if one went under would ensure it met the obligations.

While this is good for the banks, the project is likely to put further pressure on coal prices by bringing on more production under the contracts, under which miners pay for rail and port fees whether they use them or not. The widespread industry contracts, which mean miners keep producing after prices fall below their costs because they are liable for freight and port fees, are being blamed for keeping coal prices low.

Morgans analyst Nathan Lead estimates WICET take-or-pay contracts are about $13 a tonne, or two or three times the cost of exporting out of Gladstone’s existing RG Tanna terminal. Leaving aside extra rail take-or-pay contracts, this means prices would have to fall to $13 lower than a miner’s cost before it was better off shutting down production