Aurizon to buy One Rail Australia for $1.75 billion to cut coal exposure

An Aurizon coal train travels through the countryside in Muswellbrook, north of Sydney, Australia, April 9, 2017. REUTERS/Jason Reed/Files

(Reuters) -Aurizon Holdings Ltd said on Friday it would buy One Rail Australia (ORA) for A$2.35 billion ($1.75 billion) from Macquarie’s funds, as it looks to diversify from coal and add bulk capacity.

Aurizon, Australia’s largest rail freight operator, said the deal gives it greater exposure to commodities that would support the transition to green energy.

More than a third of Aurizon’s core earnings came from coal in fiscal 2021 and the company transports more than 200 million tonnes of metallurgical and thermal coal a year, according to its website.

“The One Rail acquisition delivers a step change for Aurizon Bulk as a new entrant in the SA (South Australia) and NT (Northern Territory) region, and supports the ongoing growth of non-coal revenue in the Aurizon portfolio,” Chief Executive Officer Andrew Harding said in a statement.

Aurizon plans to either sell or spin off ORA’s New South Wales and Queensland business.

The company’s bulk business will account for around 40% of its haulage revenue after the deal and the divestment, taking share off coal, it said.

The purchase of ORA, which is expected to report A$220 million of core earnings in 2021, will complete by April and be funded through existing debt facilities.

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