Release Date:
Release ID: 541

QR closes national rail freight deal

Australia is one step closer to having a new national rail freight force with QR finalising its purchase of the above rail operations of Western Australian based company ARG.

Press Release

The $446.5 million purchase includes rollingstock; depots, yards and terminals in Western Australia, some parts of New South Wales and South Australia; 820 staff (predominantly traincrew) and annual haulage contracts of approximately 50 million tonnes. QR also has a set of long term service agreements with Babcock and Brown Infrastructure who have acquired the below rail business, WestNet Rail.

QR CEO Bob Scheuber said ARG's above rail business is ready for day one operations as a QR subsidiary company.

"We have successfully completed all separation activities with Babcock and Brown Infrastructure, including the transfer of senior managers, employees and assets to the relevant parts of the business," he said.

Mr Scheuber said the deal was good news for customers.

"All ARG customers are continuing with their contracts. Bringing QR and ARG together provides additional capacity, access to a greater pool of resources and capability."

Mr Scheuber confirmed Mr Murray Vitlich would continue as the interim CEO of ARG for the next six months.

"By December this year, we are aiming to combine the best of ARG and QR to form an integrated, highly competitive and commercially viable national bulk freight business.

"We have identified opportunities for cost, efficiency and service improvements. For example, this deal provides us with a greater ability to cascade rollingstock to better tailor rail solutions and pursue business growth in WA.

QR Chairman Bronwyn Morris said QR's acquisition of ARG was an industry shaping transaction that would help cement QR's position as one of the two major players after the consolidation of the national rail freight industry.

"To secure a long term future in the fiercely competitive national freight market, we need to quickly increase market share and service offering across all streams, including general freight.

"This deal secures 70 percent of the contestable bulk market in Australia and builds on QR's position as the nation's number one bulk and coal transport and logistics business," Ms Morris said.

Mr Scheuber said he believed that a major alternative was required in the general freight market to facilitate healthy competition.

"We know that if we are to provide an attractive service alternative to customers in this market we have to provide national integrated logistics solutions from Cairns to Perth," he said.

"The ARG acquisition gives us access to rollingstock, terminals, depots, crew and maintenance capability from which to grow our general freight business. We will be building our capability, capacity and geographic reach in this market through further acquisition, joint venture and alliance opportunities."

Mr Scheuber said the ARG acquisition was a critical step in QR's national freight strategy and builds on initiatives undertaken since 2002 including:

Increasing volumes and containerised freight services on the Brisbane-Melbourne market with five return container services operating five days per week

Acquisition of strategic terminal assets in Sydney and Melbourne through the $100 million purchase of freight forwarder CRT in June 2005

Launch of coal operations in the Hunter Valley where QR's market share is now about 13% of coal tonnage in NSW

The Federal Court decision to return the Acacia Ridge interstate terminal to QR's control, which QR in conjunction with P&O is operating as a multi-user freight facility.

Mr Scheuber said QR was interested in pursuing opportunities with major transport companies that fit with the corporation's growth strategy.

"We are involved in discussions with potential partners in the industry."

The Australian freight market is growing strongly on the back of increasing domestic consumption and the continuing global resource export boom.

The land-based general freight and logistics market alone is expected to double in the next 20 years from its current estimated value of $9.76 billion per year (Bureau of Transport and Regional Economics).

"Rail is a vital part of the national supply chain and is well positioned to capture growth and increase its modal share," Mr Scheuber said.

"Our freight strategy is designed to ensure we are in a prime position to take advantage of the opportunities that come with the growth in the market and the revival of rail as a viable freight alternative."
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