Article: Is Queensland Rail up for sale?

[ozbob]

From Courier Mail click here!

Is Queensland Rail up for sale?

Is Queensland Rail up for sale?
Article from: The Courier-Mail

James McCullough

April 19, 2008 12:00am

QUEENSLAND Rail is starting to behave very unlike a government-owned corporation.
A recent two-day trip around QR's operations in Sydney, Newcastle and Mackay had all the hallmarks of a company preparing to float, or at least privatise some of its assets.

About half a dozen senior transport analysts and media had a first-hand look at the group's innovative CRT logistics operations, QR National Hunter Valley coal set-up and its Jilalan complex and feeder routes to Dalrymple Bay.

Although QR's chairman, John Prescott, and newish CEO Lance Hockridge deny it, at first glance it looks like the Government is clearing the decks to partially privatise the carrier or at least split the above and below rail operations.

Fuelling speculation this week, Premier Anna Bligh revealed her Government would reap a badly needed $1 billion from the sale of the Mackay and Townsville airports and a majority stake in Brisbane Airport.

Certainly any sale or partial sale would generate several billion dollars for the Government. QR last year pulled in revenue of $3.25 billion and announced plans to spend between $8 billion and $10 billion on infrastructure in the next five years.

Treasurer Andrew Fraser yesterday denied the Government had any plans to sell QR although analysts say a spin-off or joint venture with some of the group's assets made perfect sense.

When talk turns to privatisation, Prescott and Hockridge say nothing could be further from the truth.

They maintain their role, which has the unanimous backing of the Bligh Government, is to transform the carrier into a viable commercial company capable of competing with anything the private sector can throw at it.

They say the group is actively looking at acquisitions or seeking partners via joint venture after unveiling a voracious expansion plan.

Prescott said the group had an open mind in terms of forging partnerships "but they need to make commercial sense".

A new senior management team has been employed along with several new interstate directors. Prescott and Hockridge are even so bold as to suggest their task is to turn QR into the best transport and logistics company in the country and a true national player.

Sitting back in inviting lounges at the chic Peppers resort at Pokolbin in the NSW Hunter Valley, Prescott, the former tough man of mining in his previous role as BHP CEO, explains where he and Hockridge want to take QR.

"This is a company in transformation," he says as the Hunter shiraz flows and half a dozen major Sydney and Melbourne-based analysts and some media look on.

Prescott said QR was making substantial future capital commitments and had restructured the board with two interstate directors for the first time.

"Our objective is to be the leading national logistics and transport company in the country," he said. "So the name QR hides a national business."

Hockridge, like Prescott, a former senior BHP executive who has been in the QR role just five months, is equally enthusiastic.

He highlights safety within the group as a priority along with improved customer relations.

"We do not believe safety is anywhere near where it needs to be," he said, adding that QR had signed a contract with the giant Du Pont group to oversee safety issues.

The pair talk of an overdue transformation of QR, a process many in government admitted was long overdue to take on the likes of Paul Little's Toll Holdings and Asciano, the owner of the country's second largest coal haulage company, Pacific National.

Asciano is spending $529 million expanding into coal transport in Queensland but QR is hardly worried at the new entrant.

"We do not think we have anything to fear from competition," Hockridge said. "We believe we can be out in the marketplace competing with the best."

Prescott talked openly about future acquisitions on the heels of the company's 100 per cent-owned Sydney subsidiary, the national logistics and service group CRT, paying about $10 million to acquire dangerous goods group Golden Brothers last September.

CRT, itself acquired three years earlier for $100 million from the Sydney Rees family, is busy expanding and moving into new areas of business.

CRT chief executive Cameron Dunn cites a metal circular object known as a pod trailer as an example of the company's innovation.

The trailer moves powder and grains and has been patented internationally by CRT.

In the background, a machine is busy stuffing 25kg bags full of polypropylene pellets on behalf of Basell, a giant international group owned by a Russian billionaire.

"We are not just your average trucks and transport company and we are about giving our customers value-added solutions," said Dunn. The company's customers include Dow Chemicals, Cement Australia and Sugar Australia.

Further up the coast in the Hunter Valley, QR is challenging Toll head-on.

QR National began haulage in the Hunter in March 2003 and has experienced 500 per cent growth over three years, capturing 18 per cent of the export market.

The rail group boasts six long-term customers ? BHP Billiton, Felix Resources, Xstrata, Muswellbrook Coal, Centennial and Gloucester Coal, moving 18 million tonnes of coal in the year to date.

The financials of the group look like improving, QR forecasting revenue rising from $3.25 billion to up to $4 billion this year and after-tax profit rising "substantially" from $183 million last year.

As CFO Deborah O'Toole puts it: "There is so much improvement potential across the board. We have set up a capital allocation program and it is not just about writing blank cheques."

She is not alone. With up to $10 billion in cheques to be written in the next few years, Queensland taxpayers will be hoping there aren't too many blanks among them.

[Derwan]

Food for thought....

Perhaps the highly government-subsidised Passenger Services (or at least what we know as "Citytrain") will transfer to the TransLink Transit Authority and the TTA will pay QR for the use of their infrastructure.

This would allow QR to focus on the business side of things and making a profit.

[ozbob]

There will be a separation of the various groups of QR - Freight, Passenger, Network and Services businesses.
Full privatisation as such I don't think is on the agenda, wouldn't be surprised to see some partial capital raising deals though.

I have some real concerns  for the future of the QR Heritage Section.  In a pure business model that has lost sight of its broader community and social role it might just get the chop.

I expect some rural freight services cutbacks to be announced in the forthcoming state budget.
I hope they leave the right of ways intact, as when the energy crises hits big time we will need them again.