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Pacific National boss Dean Dalla Valle is on a mission to boost rail’s public and policy presence, saying an industry voice has been sorely lacking in a nation facing a surge in population and associated infrastructure challenges.
The former BHP chief commercial officer and coal boss joined Pacific National, the nation’s biggest rail operator, in July last year, 11 months after a $9 billion private equity takeover led by US-based Global Investment Partners saw parent Asciano taken off the ASX and its port business spun off.
Since July, Mr Dalla Valle has not only been working on how to improve performance at the coal and freight hauler, where he says some technology feels like it comes from the era of kerosene and candles, but on how to better plug the rail industry into a transport debate dominated by the trucking industry.
He says the real competition for Pacific National is road, not the likes of rival rail operator Aurizon Holdings.
“I tip my hat to the road lobby — they have been very effective at getting productivity concessions, at getting infrastructure built,” Mr Dalla Valle tells The Australian from Pacific National’s North Sydney office.
“We have to be in the policy space so that when the government is actually laying out corridors, planning where cities grow, where populations go, where industry goes, that rail will be part of that and that the true economics are understood.”
The small number of players in an industry built and run for most of its life by government has left rail behind when it comes to engaging in a policy debate, even with a case that should be easy to prosecute.
“The average person would be pleased to see more freight on rail, there is no doubt about that,” Mr Dalla Valle said.
“You’re certainly safer, there are 16 times fewer emissions than hauling on road, we are more efficient, there is less (road) congestion and, if we do it right, less infrastructure is needed.”
To help prosecute the case, he has become chairman of industry lobby, the Freight On Rail Group.
A trip to the US in February to view parts of the biggest and best rail freight system in the world showed stark differences to Australia.
“What struck me was the attitude towards rail freight and the high level of understanding of its benefits among policymakers,” Mr Dalla Valle said.
He said the difference was partly that rail had been owned and operated by wealthy industrialists like the Vanderbilts in the 19th century, from the start giving it a strong voice that senior rail executives have nurtured to this day.
“A lot of Australian policymakers just don’t understand the basic benefits rail freight offers a country with Australia’s growing population and urban distribution,” Mr Dalla Valle said.
The biggest part of the Pacific National business is hauling thermal coal (used in power stations) and coking coal (used in steelmaking) in the export rail networks of NSW and Queensland.
This makes up about half the business.
Internal company accounts seen by The Australian show that the rail group had a strong first half. Underlying net profit after tax for the six months through December was $117.4 million on revenues of $1.233bn, up from $99.1m a year earlier on revenue of $1.165bn.
Pre-tax profit grew from $122.6m to $165.7m.
“The result was mainly due to stronger coal volumes with the market benefiting from high thermal and metallurgical coal prices, stronger minerals volumes and growth in freight volumes,” the accounts said.
Mr Dalla Valle said the chance to boost Pacific National’s performance using technology was one reason he was attracted to the job. “At the moment, many of our controls are manual, they’re basically kerosene lamps and candles, they haven’t moved forward.
“Getting advanced management systems, where you have in-cab controls that can actually provide greater safety and efficiency, making sure freight gets to where it has to faster, more reliably at lower cost — that’s better for the country because it means we don’t have to go building more infrastructure.”
Pacific National is just the second company Mr Dalla Valle, who joined BHP as an electrical apprentice in the Illawarra coalmines in the late 1970s, has worked for.
He had widespread roles on the executive committee at BHP, which has spent the past five years on a productivity drive.
Under Mr Dalla Valle, Pacific National has been organised into two groups, coal and freight, and has been setting up a new national control centre at North Sydney similar to remote operations centres used by Rio Tinto, BHP and other miners in capital cities to run their regional mines and rail and port systems.
He rejected recent speculation that Pacific National had plans to relist on the ASX.
‘They (the GIP consortium) have just purchased us, they are very focused on working with the executives to make sure we grow safely, cost-effectively and productively,” Mr Dalla Valle said.
“I think we’ve seen from the investment they’ve backed into new kit, new locos, the Aurizon assets, Parkes and some other ones that they are very committed to this business.”
Last August, Pacific National agreed to buy Aurizon’s Acacia Ridge Intermodal Terminal and, in partnership with Linfox, Aurizon’s Queensland intermodal business in a $220m deal still waiting for competition clearance.
In October, Pacific National committed $35m to the development of the Parkes Logistic Terminal in NSW, which is where the planned Inland Rail corridor from Melbourne to Brisbane will cross the Sydney-to-Perth railway.
On thermal coal, the former BHP coal boss is bullish, expecting demand to grow as the energy source underpins growth in Southeast Asia and India.
This article first appeared on www.theaustralian.com.au
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