Glencore, partners in Australian port face heavy cost of boom era bet

MELBOURNE (REUTERS) - Glencore and five other miners backing the world's most expensive coal port in Australia face extra annual charges of A$150 million (S$154 million) after the restructuring of one of their partners this month, the latest to buckle under slumping commodity prices.

The additional charge will deal a blow to the remaining backers of the A$2.6 billion Wiggins Island Coal Export Terminal (WICET) in east Australia at a time when they are grappling with floundering coal markets.

Mining and trading giant Glencore and seven partners began negotiations to build WICET in 2008 near the height of a coal boom, but prices have plunged 75 per cent since then on global oversupply, China's slowing economy and competition from natural gas.

Expecting coal markets to remain strong, the partners had agreed to pay port fees for 27 million tonnes whether they shipped that volume or not - setting themselves a tonnage charge as much as five-times higher than other coal ports.

The project currently charges around A$20 a tonne, several people familiar with the terms said. Neighbouring RG Tanna coal port at Gladstone charges about US$5 (S$6.8) a tonne. WICET Chief Executive Marcus McAuliffe declined to comment on the charge.

But adding to the partners' woes - and those of their 19 lenders, owed more than US$3 billion - coal prices have now pushed two of WICET's original owners, Cockatoo Coal and Bandanna Energy, into administration.

Both were stung by port charges for capacity they were never able to produce after coal prices crashed to nine-year lows and funding for their projects dried up. "The world didn't unfold, the coal mining sector didn't unfold, and the mine development didn't unfold the way everyone was hoping for. Then they were left paying four times what they could pay shipping through the terminal next door," said Stephen Longley at PPB Advisory, the administrator for Cockatoo, which emerged from a restructuring this month.

The grand hope when it was planned was that WICET would eventually ship 120 million tonnes a year, fed by what would have been Australia's biggest coal mine, Xstrata's Wandoan. But Glencore shelved Wandoan in 2013 after taking over Xstrata.