The Australian Competition and Consumer Commission has expressed concerns about Australian freight companies Aurizon or Pacific National acquiring Glencore Coal's Hunter Valley GRail coal haulage business and set a deadline for a decision on the matter for December 15, the ACCC said Thursday.
The competition watchdog is assessing proposals in the bidding process against the alternative scenario of a new player entering the market by acquiring GRail, it said.
"The Hunter Valley coal haulage market appears to have high barriers to entry, so we would expect the addition of a third competitor to have a significant effect upon the market," ACCC chairman Rod Sims said.
"In contrast, an acquisition by Aurizon or Pacific National would essentially be a continuation of the status quo where there are two active players in the Hunter Valley coal haulage market," he said.
Pacific National hauls the majority of the coal on the Hunter Valley Rail Network in the Australian state of New South Wales, with Aurizon hauling the second largest volumes and there has been little or no new entry before or since, Sims said.
"There are some examples of coal producers acquiring their own rolling stock, but Glencore Coal is the only Hunter Valley coal producer to have done so for a majority of its coal haulage requirements," he said.
"Coupled with the fact that Glencore Coal is the largest coal producer in the Hunter Valley, this is a platform for entry that is unlikely to be replicated in the foreseeable future," he said.
But, the ACCC said it also recognises that coal producers, generally well-resourced and sophisticated parties, may be able to protect their own interests, even if Aurizon or Pacific National acquires GRail.
"We are going to be exploring their ability to leverage competition between Aurizon and Pacific National or to bypass both haulage providers by acquiring their own rolling stock or by sponsoring new entry," Sims said.
US-based Genesee & Wyoming is also bidding for the network, Australian media reports say.
G&W has teamed up with Macquarie Infrastructure and Real Assets, according to the Australian Financial Review.
G&W is also the current operator of GRail's rolling stock.
The business unit has grown from three coal trains in 2010, to a modern fleet of nine locomotive units and is now the third largest coal haulage operation in Australia, Glencore says.
GRail has an estimated market value of A$1.1 billion-A$1.5 billion ($840 million-$1.1 billion) based on the unit's annual earnings before interest, tax, depreciation and amortization of A$100 million, according to industry sources.
