Rail operator signals September prospectus

In what has been billed as the country's biggest float since the first tranche of Telstra shares, T1, listed in November 2007, the QR National sales team rolled into Sydney yesterday attempting to stoke interest and ward off concerns about investor appetite for initial public offerings.

Volatile equity markets claimed the $1.3 billion offering of Australia's second-biggest civil construction company, Valemus, three weeks ago. But QR insisted yesterday that its float scheduled for the fourth quarter of this calendar year remained on track.

However, the float is still dependent on a decision by the Queensland government on a competing $4.85 billion bid from coalminers for the state's coal rail network.

QR National's chief executive, Lance Hockridge, said institutional investors had not raised concerns about the state of the market for floats during recent briefings.

They had, in fact, been surprised about the "extreme reaction" to the Valemus float being pulled, and its impact on sentiment towards other offers, he said.

"Notwithstanding the volatility out there in the market ... the appetite is there," he said yesterday. "Short of putting them in bond markets, essentially what people are looking for is quality."

QR has had more than 100 briefings with institutional investors in Australia and in the US, Europe and Asia over the past six months as part of the pre-marketing campaign.

Mr Hockridge attributed interest to the "sheer scale and quality" of the business, its exposure to the booming resources industry and potential growth from the privatisation. More than 80 per cent of its business is exposed to the resources sector, with coal haulage making up about three-fifths of its work.

In attempting to stoke interest in rail freight, he emphasised Warren Buffet's purchase of the Burlington Northern Santa Fe railway company in the US for $US26.3 billion ($29.3 billion) early this year.

Mr Hockridge said he expected retail investors to make up a "very high component" of the offer, but he declined to put a definitive figure on it.

QR was officially separated on July 1 from the Queensland Rail passenger business, which will remain in state government hands.

Mr Hockridge said investors preferred to buy into a business such as QR that had been owned for more than a century by government than a company "picked over" by private equity.