Brookfield Rail, Australia
– Strategically positioned regulated monopoly of rail infrastructure
Interest: 100%
Description
Brookfield Rail is a rail infrastructure owner and rail access provider operating in Western Australia (“WA”) with a long-term arrangement to lease track from the WA Government. Brookfield Rail operates approximately 5,100 km of standard, narrow and dual gauge rail infrastructure in the southwest of WA which serves as a crucial transport link in the region.
Regulatory Environment
Brookfield Rail is a regulated monopoly with largely stable revenue streams through long-term access agreements with its customer base. Regulation is based on revenue floors and ceilings for line segments. The next floor and ceiling review is due in June 2012.
Stable Revenue Stream
Revenue is derived from access charges paid by rail operators or directly by underlying customers. Stability of revenue is underpinned by:
- Rail transport being a small yet essential component of the overall cost of the commodities transported.
- The critical nature of the minerals and grains industries to the WA economy overall, which ensures strong governmental support.
- Long-term contracts with customers to ensure adequate access to the rail network including some take-or-pay arrangements.
Customer Base
Access agreements with strong blue-chip customers (including long-term agreement with Queensland Rail). Top nine customers contribute 90% of revenue with contracts ranging from 2009 to 2016. The majority of customers are leading commodity companies whose WA projects are among the lowest cost in the world.
Dominant Position
- Only rail line in southwest region serving the mining and agricultural industries.
- Exclusive rail connections to government-owned ports which transport over 90% of the freight in the state.
Growth Opportunities
- Well positioned to benefit from increased economic activity.
- Opportunities for growth to support expansions of the mining industry and provide access to export markets.