Opportunity knocks for third-party players

Many other companies, from Australia and offshore, are eyeing investments in varied port and rail projects in the state.

When the chief executive officer of a major Toronto-based infrastructure player is bandying around names like Geraldton, Kwinana and Esperance in a February analysts’ teleconference, it helps to clarify just how significantly the opportunities to invest in Western Australia are viewed by the global market.

Brookfield Infrastructure boss Sam Pollock said the company’s foothold in WA, via its rail investments in the southern half of the state, could potentially grow to include ports as well.

“There are a number of port opportunities in that part of the world,” said Mr Pollock, ahead of a recent visit to Perth.

“The big one, which we haven’t concluded whether or not it makes sense for us to participate in, is the Oakajee project.

“But there also requirements to upgrade the ports in the southern part of Western Australia: Kwinana, Esperance, probably, just name two of them. 

“And we are, in fact, currently evaluating ways to work with the port authorities and some of the mining companies on partnering to expand that capacity. 

“So, those are part of our organic initiatives, our shadow pipeline I would call it, that we are trying to move forward.”

Brookfield’s port interests include a long-term lease over Dalrymple Bay in Queensland.

Many other infrastructure groups are also operating in the state.

QR National, for instance, is already actively involved in hauling iron ore in parts of WA, spending around $300 million upgrading its infrastructure in the Yilgarn and Mid West regions. (See rail story, page 19). 

ASX-listed logistics and stevedoring group Qube has committed $50 million into expanding capacity at its yards at Utah Point in Port Hedland, which it operates for Atlas Iron, and has won haulage and port services contract for Sandfire Resources’ DeGrussa project, which will export out of Geraldton. 

Another broad-based infrastructure company from Canada, ATCO, owns gas pipelines here.

Toll Holdings is also already in the north-west. It has a supply base joint venture at Broome with listed WA group Mermaid Marine. 

Nearby, a company linked to Azure Capital called Point Torment Supply Base has been set up to examine the viability of building a facility close to Derby to service the Browse Basin oil and gas developments. 

Another local consortium that has put its hand up is Westralia Infrastructure, which wants to be involved with the development of Anketell Point port near Cape Lambert.

Such projects are not cheap. This is also complex, due to the players involved: a consortium, including Aquila Resources, has led the port development. 

While Westralia Infrastructure might be new, the players behind it are not. They include: chair George Gear, a former federal Labor government minister; Cameron Edwards, former managing director of infrastructure and energy player Mercuria Energy Group; Mark McKeon, an investment banker; and Ian Williams, the former chairman of the Port Hedland Port Authority.

Westralia claims to have 30 staff with all the experience and access to funds required to deliver on such a project, though it has not been established for Anketell alone and sees opportunities in water and power generation.

Anketell is often viewed via the third-party prism because Premier Colin Barnett last year raised the possibility of such a player developing the port – an initiative he hopes would remove the problems which beset his pet project, Oakajee, the port near Geraldton which was to be built by a Japanese-funded miner but also used by its Chinese-backed rivals.

Due to its size and importance in liberating many of the Pilbara’s more westerly deposits, Anketell attracts the headlines. 

But some view ports as further down the track for third party infrastructure than other possibilities.

Investment bank UBS, for instance, believes that a third-party investor, namely QR National, is a very likely candidate to develop a fourth Pilbara rail network costing of $3.5 billion, over two stages commissioned in 2016 and 2018, with a further $1.4 billion in rolling stock.

 “We believe there is an opportunity for QRN to invest in a multi-user solution in the Eastern Pilbara. The potential scenario we have explored within involves QRN co-funding the 340km rail network proposed by Hancock and extending the network to service planned expansion by Atlas and Brockman,” UBS said in a recent investment note.

And Atlas Iron executive chairman David Flanagan has reportedly been in Beijing this week scouting for Chinese investors for projects, including rail and port ventures.

Macquarie Capital executive director, resources infrastructure, Kate Vidgen, acknowledges there is significant appetite to investigate these opportunities but is a little more cautious in how she believes it will unfold.

Apart from the obvious issues around funding, Ms Vidgen believes the landscape has changed for several reasons, including the key fact that governments have become averse to providing funding for infrastructure.

But there is also the massive change in iron ore, for instance, which was once the domain of a few major producers with monopoly infrastructure funded from their own balance sheets.

The Pilbara is now cluttered with small to medium sized players, who are legitimately developing their own projects and have squealed very loudly to the state about the issues surrounding access to export markets via railways and ports.  

This atmosphere has led to the prospect of independent or third-party players but such a move is innovative in iron ore and comes with big risks that traditional infrastructure funders have yet to grapple with.

Ms Vidgen, who leads a sizeable team that Macquarie has devoted to this field, anticipates a more limited involvement at first, in more secure areas of knowledge such as power, water and smaller brownfield expansions such as Esperance and Bunbury.

She also believes that miners will struggle to completely remove themselves from the development of port or rail infrastructure in the initial stages of a project’s development because of the inherent risk in having just one or two customers, as is often the case.

While she could also envisage the involvement of strategic players, such as Indian energy player GVK in east coast coal, some off-take partners and dedicated infrastructure operators, Ms Vidgen thought that the state would need to play a role in assisting smaller companies to overcome the financing hurdles.