ARTC to be sold

 
Topic moved from News by bevans on 11 May 2015 09:37
  Sulla1 Chief Commissioner

Very little information, but the ABC news is reporting the sale of the ARTC will be announced in the upcoming Federal Budget. Sale price is expected to be around $4-billion.

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  JoppaJunction Chief Train Controller

Location: Banned
Falls of his chair laughing. around and around we go and we keep passing the buck and avoiding doing the hard yards with rail.

Take a look at the mess in Western Australia.  

I cannot imagine the state governments signing up to this as they have a major interest in the venture in terms of track and access.
  michaelgreenhill Administrator That's Numberwang!

Location: Melbourne
Very little information, but the ABC news is reporting the sale of the ARTC will be announced in the upcoming Federal Budget. Sale price is expected to be around $4-billion.
Sulla1
Source?
  freightgate Minister for Railways

Location: Albury, New South Wales
Abbott appears intent on setting this country back by 30 years.

I look foreard to a time which is  clearly approaching where the liberals will never be in power again.

Keating did ground breaking work on a national rail approach when in power.

Trust an under achiever like hockey to screw that up.
  michaelgreenhill Administrator That's Numberwang!

Location: Melbourne
Abbott appears intent on setting this country back by 30 years.

I look foreard to a time which is  clearly approaching where the liberals will never be in power again.

Keating did ground breaking work on a national rail approach when in power.

Trust an under achiever like hockey to screw that up.
freightgate
How about waiting for something more substantial than rumour (no disrespect intended, Sulla) before jumping off on a rant about how the gummint is screwing everything up yet again.
  djf01 Chief Commissioner

Very little information, but the ABC news is reporting the sale of the ARTC will be announced in the upcoming Federal Budget. Sale price is expected to be around $4-billion.
Sulla1

$4bil sounds like a lot.  I didn't think ARTC's perway had quite that much scrap steel.
  x31 Chief Commissioner

Location: gallifrey
There are references to the potential sale on this website. http://www.ncoa.gov.au/report/phase-one/part-b/10-1-privatisations.html which appears to be a list of Government owned organisations which are flagged for sale.

Australian Rail Track Corporation (ARTC) – the Commonwealth could privatise either all of ARTC, or just the Hunter Valley network. The monopoly characteristics of ARTC’s network can be adequately managed and regulated in the public interest, much the same as airport and electricity distribution monopolies. A scoping study could examine an appropriate access regime, implications for ARTC’s leases and wider considerations stemming from the intergovernmental agreement that established the ARTC.
Somebody

The website also mentions the Moorebank Intermodal Company as a possible sale target.

The sale of ARTC would lead to:

1. Increase in access charges
2. Selective maintenance to save money rather than maintenance across the network
3. A repeat potentially of the farcical situation in WA where terms are dictated rather than negotiated.

This must be avoided at all cost.
  x31 Chief Commissioner

Location: gallifrey
$4bil sounds like a lot.  I didn't think ARTC's perway had quite that much scrap steel.
djf01

Raises the question about what the investor would be buying into?  If projects post sale require capital hurdle rates which roads and highways do not appear to have placed upon them rail development on a national basis will come to a standstill which is probably in line with Aboott's think being stuck in a 1970's timewarp.
  speedemon08 Mary

Location: I think by now you should have figured it out
2. Selective maintenance to save money rather than maintenance across the network
x31
This probably happens anyway.....
  Draffa Chief Commissioner

Whoever it was on these forums that said when the ARTC posted a dividend that it was a sale signal seems to have been dead on the money.

Below-rail is infrastructure, and as a rule, infrastructure does not make money (how many roads make a profit?).  Who is going to be silly enough to buy into this given past experiences?
  Valvegear Dr Beeching

Location: Norda Fittazroy
Who is going to be silly enough to buy into this given past experiences?
"Draffa"
My sentiments exactly.
  x31 Chief Commissioner

Location: gallifrey
My sentiments exactly.
Valvegear

Especially with the current governments outlook and viewpoint on rail investment.
  a6et Minister for Railways

If sold as a single entity, the question would be how much of a devil is/will be in the detail of the sale docuement, in other words will the buyer have to fully maintain the whole current ARTC network as well as any future extensions to the network deemed as being necessary under its charter.  By that, if a new vital industry was formed that meant say a coal mine in the Walget district or a similar area that bounds the current ARTC boundaries would ARTC be then allowed or required to take over that new line, as they have done in the NW region of NSW.

If the sale would include its breaking up, which would suit the coal operators, such as Arizon, & PN, who would no doubt be wanting full control over the tracks they currently operate over, & provide restricted (very) access to competitors & for other than coal traffic.

For a private below wheel sale of the tracks & infrastructure, across the whole ARTC network to be in the best intersests in the country, rather than shareholders of an Australian or overseas owners, there would need to be some tight guidelines in this.
  bingley hall Minister for Railways

Location: Last train to Skaville
Reported by both The Australian and The ABC.

How do you sell a business that by its own admission cannot cover it long term capital replacement costs?
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE


I cannot imagine the state governments signing up to this as they have a major interest in the venture in terms of track and access.
JoppaJunction
They signed up for it years ago as most of the states dumped their own networks.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Reported by both The Australian and The ABC.

How do you sell a business that by its own admission cannot cover it long term capital replacement costs?
bingley hall
I think this and what ae6t said is probably the devil in the detail. Capital outlays like SSFL, NSFL, Inland etc may still fall back to the feds to fund and build, the private operator "may" just be paying for upkeep of the network and still receive a subsidy for sections that do not make a commercial profit.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE

I look foreard to a time which is  clearly approaching where the liberals will never be in power again.
freightgate
Cannot happen, ALP need the LNP to do their dirty work like introduce GST, raise retirement age, privatise govt assets ALP cannot sell, balance budgets and pay off ALP debt, which is why ARTC is being sold in the first place. Sir Isaac Netwon stated "for every action their needs to be an equal and opposite reaction". So true in Australian politics.

Anyway, the devil is in the detail of the sale.

Keating but some things in place for National Rail infrastructure, but he didn't build it or much at all. 20years of other govts since have done most of the work.
  Valvegear Dr Beeching

Location: Norda Fittazroy
Keating but some things in place for National Rail infrastructure, but he didn't build it or much at all. 20years of other govts since have done most of the work.
"RRT_Rules"
Whitlam also tried to get a national approach to rail, but the well known "States' Rights" reared its head - particularly in Queensland where Bjelke Petersen would not have a bar of any Federal initiative.
  x31 Chief Commissioner

Location: gallifrey
They signed up for it years ago as most of the states dumped their own networks.
RTT_Rules

Did the states sign up for their assets to be managed by a Company listed on the ASX or did they comply because it was and still is a federal government authority.
  djf01 Chief Commissioner

If sold as a single entity, the question would be how much of a devil is/will be in the detail of the sale docuement, in other words will the buyer have to fully maintain the whole current ARTC network as well as any future extensions to the network deemed as being necessary under its charter.  By that, if a new vital industry was formed that meant say a coal mine in the Walget district or a similar area that bounds the current ARTC boundaries would ARTC be then allowed or required to take over that new line, as they have done in the NW region of NSW.

If the sale would include its breaking up, which would suit the coal operators, such as Arizon, & PN, who would no doubt be wanting full control over the tracks they currently operate over, & provide restricted (very) access to competitors & for other than coal traffic.

For a private below wheel sale of the tracks & infrastructure, across the whole ARTC network to be in the best intersests in the country, rather than shareholders of an Australian or overseas owners, there would need to be some tight guidelines in this.
a6et

There are 3 basic businesses in ARTC's portfolio:
1) East/West, which AFAIK is profitable.
2) East Coast, which is still under capitalised, doesn't have enough volume and consequently runs at a loss.
3) Hunter Coal.

Selling each of these is problematic in one way or another.  

Whoever buys 1 gets a near monopoly on east-west freight.  Expect freight rates to climb.

Whoever buys 3 gets to clip the tickets of the coal industry.  If it's an above rail operator then they get to work over their operating competition too.  If it's a consortium of coal miners, then they get to block new miners and stifle competition there too.

2) is the only one that potentially makes any sense to me.  Rail doesn't have a high market share, and I think a vertically integrated operation would have the right incentives to grow tonnages while/by lowering prices.  The risk is they might just do what most privatised below rail outfits do: buy a big asset at well below replacement cost, cut back on maintenance and run down the inventory.

The other problem with selling (2) is getting a reasonable price, given it's loss making.
  x31 Chief Commissioner

Location: gallifrey
The question of course is what is the plan to grow the network and volumes.  Being listed on the ASX means:

1. You will have shareholders who expect a return on capital commensurate with like infrastructure businesses.  If this was to occur some projects whould not stack up.

2. You would need higher hurdle rates for investments commensurate with like investments which will kill the developmental side of rail off.

3. You would need a business plan to grow revenues.  Australian listed businesses don't now to do this other than cannibalising other operator business.  I don;t hold much faith in building the business on the east coast unless the government intends sweetening the deal with a commitment to the inland rail project as part of the listing?
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Did the states sign up for their assets to be managed by a Company listed on the ASX or did they comply because it was and still is a federal government authority.
x31
The states signed up to off load a rundown asset from their budgets that they were under funding and in some cases was falling apart.

Private or public what do the states care anyway?

PS: for the record I don't understand or fully support the privatisation of the ARTC based on the limited data available.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
There are 3 basic businesses in ARTC's portfolio:
1) East/West, which AFAIK is profitable.
2) East Coast, which is still under capitalised, doesn't have enough volume and consequently runs at a loss.
3) Hunter Coal.

Selling each of these is problematic in one way or another.  

Whoever buys 1 gets a near monopoly on east-west freight.  Expect freight rates to climb.

Whoever buys 3 gets to clip the tickets of the coal industry.  If it's an above rail operator then they get to work over their operating competition too.  If it's a consortium of coal miners, then they get to block new miners and stifle competition there too.

2) is the only one that potentially makes any sense to me.  Rail doesn't have a high market share, and I think a vertically integrated operation would have the right incentives to grow tonnages while/by lowering prices.  The risk is they might just do what most privatised below rail outfits do: buy a big asset at well below replacement cost, cut back on maintenance and run down the inventory.

The other problem with selling (2) is getting a reasonable price, given it's loss making.
djf01

Hunter Coal could be flogged off like CQ coal, like CQ coal it operates mostly as an island with some through traffic..

No operator owner could place unfair competition practices or rates for 3rd party operator for fear of being dragged through the courts by the ACCC or other body. Likely a infrastructure company would be formed in a JV venture by multiple customers and operators of the network probably led by a Venture Capital organisation to remain independent. My understanding is that the ARTC doesn't own the Hunter lines, rather leases them.

The monopoly of E-W traffic is sustained because the line has a huge advantage over sea or road. Raising access fees above commercial rates of return places this advantage at risk and the huge market share. Open the door and who knows what might walk through. The NT line is privately owned and has similar levels of market share, maybe more as E-W, yet there has been no attempt to drive up charges even though the line is less viable.

East Coast will probably get some form of subsidy or ongoing capital investment by the feds. The feds will still build the Inland, although maybe as a PPP.

The East Coast market share issue is well known and I assume understood. From a Private investment point of view it does potentially offer a huge opportunity when you have market share approaching single digits. Just to get 20% is doubling the freight task for S-B. Perhaps there are investors out there willing take on this challenge?
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Whitlam also tried to get a national approach to rail, but the well known "States' Rights" reared its head - particularly in Queensland where Bjelke Petersen would not have a bar of any Federal initiative.
Valvegear
All but two states wanted nothing to do with it and those two states had nothing to loose their systems were so run down and dying.
  8077 Chief Train Controller

Location: Crossing the Rubicon
It is almost impossible to work out how there is $4 billion of assets in the company.  I thought ARTC only leased the track from the states?

ASX listing might be good for the industry as wont more capital be available and easier to get?  Much needed rail networks can be expanded with available capital.

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