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GVK sells 51% in Hancock to Oz firm

Aurizon, Australia's largest rail freight company, has agreed to acquire 51% interest in Hancock Coal Infrastructure (HCI), which owns GVK Hancock's projects worth $10 billion with assets like infrastructure for coal mining, rail and ports.

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Aurizon, Australia’s largest rail freight company, has agreed to acquire 51% interest in Hancock Coal Infrastructure (HCI), which owns GVK Hancock’s projects worth $10 billion with assets like infrastructure for coal mining, rail and ports.

Under the proposed framework, Aurizon would acquire 51% interest in HCI and would invest through upfront consideration at the completion of the transaction and deferred consideration at the financial close of each phase of the projects.

The total value of the Aurizon investment and the value of the deal have not been disclosed.

Collectively, the proposed development of the rail and port infrastructure is expected to deliver export capacity of 60 million tonne per annum (mtpa), and could represent a $6 billion investment in Queensland.

GVK Hancock and Aurizon are seeking development of a potential 60 mtpa port and rail project that would underpin the opening of reserves in the Galilee Basin and continued growth of the Bowen Basin.

GVK Hancock and Aurizon would jointly manage the proposed rail and port projects.

These projects comprise a greenfield rail project and a development right for a coal terminal at Abbot Point.

GVK Hancock received the primary state and commonwealth environmental approvals for its greenfield rail project in May and August 2012, respectively. GVK Hancock’s port project received commonwealth environmental approval in October 2012.

Following completion of the transaction, Aurizon would gain the rights to operate and jointly manage with GVK the rail infrastructure and to exclusively provide rail haulage from GVK Hancock’s Alpha and Kevin’s Corner mines for up to 60 mtpa of coal.

Aurizon and GVK Hancock have signed a non-binding term sheet to jointly progress the development of rail and port infrastructure to unlock Galilee Basin coal reserves, including GVK Hancock’s Alpha, Kevin’s Corner and Alpha West coal mines.

GVK has been evaluating various options to raise resources to complete the $10-billion project by diluting equity.

However, following the dilution in favour Aurizon, the board of GVK Hancock will change. Aurizon and GVK will have equal representation on the board which will now be chaired by GVK group chairman G V Krishna Reddy.

In 2001, the Hyderabad-based GVK group had acquired a 79% stake in the Alpha Coal and Alpha West Coal Project and a 100% stake in the Kevin’s Corner Project in Queensland from Hancock Coal.

These projects hold estimated reserves of about 8 billion tonne and a capacity of more than 80 mtpa. GVK also has a 100% stake in the 500-km rail line and a 60 mitpa port as part of the ‘pit-to-port’ logistics solution which envisages an investment of $10 billion.

@ramanakv

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