(Reuters) – Aurizon Holdings, Australia’s largest rail freight operator, said on Friday it will sell its East Coast Rail (ECR) business to Magnetic Rail Group for A$425 million ($284.71 million) in cash.

Aurizon said in a statement the sale was in accordance with its agreement with the country’s competition regulator, following its $1.75 billion acquisition deal for One Rail Australia (ORA) that was finalised in July 2022.

The ORA deal is expected to help Aurizon diversify from coal and add bulk capacity, aiding its transition to greener energy. More than a third of Aurizon’s core earnings came from coal in fiscal 2021.

“The (ECR) sale provides the best outcome for Aurizon and its shareholders, delivering a strong sale price and certainty in completing the divestment,” said Managing Director and Chief Executive Officer Andrew Harding.

In October, a consortium including private equity firms Oaktree Capital Management and Brookfield bid for Aurizon’s ECR operations.

Sales proceeds from the ECR deal will be used to reduce Aurizon’s debt, while Magnetic Rail Group will assume ECR’s existing debt.

Aurizon is not expected to make any capital tax gains from the deal, as a big chunk of it, about A$125 million will be deferred for 12 months.

($1 = 1.4928 Australian dollars)

(Reporting by Navya Mittal in Bengaluru; Editing by Shinjini Ganguli)