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= UPDATE: Australia's AWB Tumbles; Focus On Monopoly(Comtex Business Via Thomson Dialog NewsEdge)(Updates with comments by legislators, analysts) By Ray Brindal Of DOW JONES NEWSWIRES CANBERRA, Feb 07, 2006 (Dow Jones Commodities News via Comtex) --The sell-down of Australian wheat exporter AWB Ltd. intensified Tuesday as investors focused on the possible loss of its monopoly and the government agreeing to broaden an inquiry into AWB payments to Iraq to include mining giant BHP Billiton Ltd. (BHP). AWB shares closed down 9.7% at a 7-month low of A$4.19 taking the total loss to 34% since Jan. 16, the beginning of an inquiry into whether the company breached Australian law by paying US$221.7 million in kickbacks to the deposed regime of Saddam Hussein under a U.N. oil-for-food program. As requested by inquiry head, former state judge Terence Cole, Attorney-General Philip Ruddock agreed to expand the inquiry's terms of reference to examine BHP Billiton Ltd.'s (BHP) dealings in Iraq, BHP-linked Tigris Petroleum Corp. and related companies and people. BHP Chief Executive Chip Goodyear previously said widening the inquiry would provide an opportunity to ensure the facts surrounding BHP's financing of a 1996 shipment of grain to Iraq are aired publicly. The inquiry has heard evidence about a BHP-funded wheat shipment to Iraq in 1996 and concealment of a related debt to Tigris Petroleum, which Cole said might have breached U.N. sanctions against Iraq. The inquiry and a swirl of news about AWB has focussed attention on its wheat export monopoly, which has exported wheat worth up to A$4.5 billion a year, making the company a major global supplier. In a research note, JP Morgan Securities Australia Ltd. said the political fallout from the Cole inquiry will lead to changes to the system of wheat exports with a "worst possible scenario" being a loss of the monopoly by AWB and punitive damages. Under this scenario, JP Morgan's valuation of AWB would fall to A$2.14 a share, reflecting the loss of the significant benefits the company derives from the monopoly. "Given the regulatory risk surrounding the company, we expect (the) stock to fall to below A$4.00 in the near term," JP Morgan said in an analysis issued Monday. Others, including some legislators, are calling for some relaxation of AWB's monopoly that would allow competitors to export bulk wheat. However, Prime Minister John Howard told a meeting of the governing Coalition members that any question about the future of the export monopoly needs to be kept separate from the current inquiry and that it would be "crazy" to surrender the monopoly unilaterally, according to a spokesman. Pressed on the matter, the spokesman wasn't clear whether Howard also supported AWB's operation of the export monopoly. Growers Back Export Monopoly The Grains Council of Australia, the national lobby, supports an export monopoly, whether or not it's operated by AWB. Macquarie Research Equities said AWB likely will have greater restrictions on the operation of the monopoly, including a possible loss of a power of veto on applications from other concerns to export bulk wheat. If AWB loses the export monopoly, Macquarie would value it at A$3.45 a share. Later, under questioning in parliament, Deputy Prime Minister Mark Vaile reiterated that the U.N. had responsibility for wheat contracts under the oil-for-food program. After wheat contracts were certified and signed off by the U.N. then "we issued export permits," he said. Late Tuesday, Treasurer Peter Costello said "our loyalty lies to Australian wheat producers (and) we want to see them able to export their product around the world." However, that would never justify breaking U.N. economic sanctions or paying bribes, he said in a radio interview. In a report issued Oct. 27 on the oil-for-food program, Paul A. Volcker, former chairman of the U.S. Federal Reserve Board, found AWB paid US$221.7 million to Jordan-based Alia Transportation to transport wheat through Iraq, but the funds were channeled to Saddam's regime. The report didn't claim outright that AWB knew it was paying kickbacks to the regime but it maintained AWB should have known what was happening. Before the hearings began AWB denied knowingly being involved in paying money to the regime through Alia and said it could have been an unwitting participant in an elaborate scheme of deception devised by the Iraqi regime. The inquiry has taken evidence and produced company documents that point to AWB executives knowing they were paying kickbacks and devising elaborate schemes to disguise such payments, which breached U.N. sanctions against Iraq. The inquiry has also heard AWB discussed such payments with the Department of Foreign Affairs and Trade. -By Ray Brindal, Dow Jones Newswires, 612 6208 0902; [email protected] -Edited by Graham Morgan (END) Dow Jones Newswires 02-07-06 0307ET |