December 3, 2012

Two developments that will substantially improve the flexibility and international competitiveness of the company's bulk grain port terminals were welcomed by GrainCorp.

 

The ACCC has announced that it will not object to GrainCorp offering long-term agreements (LTAs) to exporters for access to its ports. LTAs will be offered under revised port terminal services protocols (Port Protocols) that come into effect next month.

 

In addition, federal parliament last night passed the Wheat Export Marketing Amendment Bill 2012, which provides for an industry code of conduct to replace the existing Port Access Undertaking arrangements from 2015.

 

GrainCorp Managing Director and Chief Executive Officer Alison Watkins said the developments were a significant step forward for all participants in the eastern Australian grain industry. Together, these developments are central to delivering the port flexibility initiatives included in the target of US$110 million of additional underlying EBITDA that was announced at GrainCorp's fiscal year 2012 result and strategy update on November 15, 2012.

 

"GrainCorp's revised Port Protocols will make the grain in our network more internationally competitive. They allow longer term planning by exporters and far more flexible port operations," Watkins said.

 

"These changes have benefits across the industry. Our exporters can plan and respond more effectively to the challenges of the increasingly dynamic international grain market; growers get more competition for their grain, particularly from international markets; and the major customers of Australian grain in Asia and the Middle East will have greater certainty that they will have a reliable supply of high quality Australian grain," Watkins said.

 

Currently, all port capacity can be made available only one year ahead. Under the new arrangements, 60% of port capacity will be made available for three-year LTAs - substantially expanding the grain accumulation and export planning horizon for exporters.

 

The revised Port Protocols also reduce the substantial supply chain costs caused by the 10-15% of vessels that fail survey, by minimising port block-outs and related transport cancellations. It will provide GrainCorp and other exporters with port access certainty over a longer period, encouraging additional investment in rail capacity and improving rail utilisation, while also facilitating longer-term supply agreements with international customers; Improve operational flexibility during periods of supply chain disruption caused by force majeure events; Smooth port earnings variability for GrainCorp by locking in US$8/tonne "take or pay" commitments.

 

GrainCorp's revised Port Protocols come into effect on December 27, 2012 and GrainCorp intends to invite long term capacity nominations for the following three shipping years in February 2013.

 

Watkins said GrainCorp would also continue to be a constructive participant in industry discussions regarding the code of conduct, following the passage of the Wheat Export Marketing Amendment Bill 2012.