Bailout may keep Darwin on trackFont Size: Decrease Increase...

Bailout may keep Darwin on trackFont Size: Decrease Increase Print Page: Print Robin Bromby | May 20, 2008
GOVERNMENT ownership may end up being the only way to keep the Darwin rail line open as a going concern.

Rail experts said yesterday that while the freight train service was seen as a success and profitable, the task of servicing the huge debt raised to build the line would hobble any operator.

This fatal financing flaw is what is pushing the bankers to sell off FreightLink, the operator of the Adelaide-to-Darwin rail service.

The line cost $1.2 billion to build, of which $560 million was provided to FreightLink's parent -- Asia Pacific Transport Consortium -- by the federal, South Australian and Northern Territory Governments. But the rest of the cost and other spending is an enormous burden for a rail operator to carry on the back of five freight train services a week between Adelaide and Darwin, as well as mineral traffic from two mines and track fees for The Ghan tourist train, which operates two return services a week over the line.

A number of scenarios are possible.

One of the more compelling would be for Queensland Rail and Babcock & Brown Infrastructure to work as partners, as they do in Western Australia -- QR running the trains, with B&B looking after the track.

Or QR, which is branding itself as a national operator, could go it alone. It operates the trains and owns the track in its home state.

Another touted buyer is Asciano, operator of Pacific National. But this company is unlikely to be willing to buy the track; after all, Pacific National lost patience with looking after 4000km of rail lines in Victoria and handed them back to the state Government.

John Hoyle, an editor at Railway Digest, said one thing was certain: none of the governments that helped finance the railway would allow it to close.

"If there's no suitable buyer, there remains a possibility of government intervention."

And that would most likely to be through the Australian Rail Track Corp, which operates the country's interstate network and collects fees from train operators.

ARTC owned the southern Tarcoola-Alice Springs section, built back in the 1970s, and this was handed over to FreightLink as part of a sweetener to build the rest of the line to Darwin.

ARTC has a pre-emptive right to buy that section back if the whole line is put up for sale.

But the corporation was being non-committal yesterday about owning the Darwin line.

"We haven't given it any consideration at this time," chief executive David Marchant said.

Mr Hoyle said that, contrary to many claims that the line had been a failure, it was regarded as a success in the rail industry.

FreightLink now carries 85 per cent of the goods being transported between Adelaide and Darwin, against a road transport industry that uses publicly built roads.

"They took on an entrenched road transport industry and fought it tooth and nail."

Mark Carter, editor of industry journal Rail Express, said the problem would be finding someone prepared to pay what the banks wanted for the line and rolling stock.

"The rail operator is making money but the infrastructure isn't. So it may have to be sold at a heavily discounted price," he said.

Mr Carter also believes that ARTC ownership may be one way to resolve the problem.

The line is due to revert to public ownership in 46 years' time. FreightLink has survived several disappointments.

One was the failure of the land-bridge concept: that is, imports from Asia being landed at Darwin and taken by train to the rest of Australia, rather than being shipped around the coast.

Imports are still largely landed at Sydney and the other southern ports. This means that many of the containers filled with consumer goods that come up the line to Darwin now go back empty to Adelaide.

Another is the delays that have plagued the mine projects, which were to have provided much needed revenue.

So far, only two mines are using the line -- the daily iron ore train for Territory Resources and the manganese traffic from the Bootu Creek mine.

However, Arafura Resources is planning to move 800,000 tonnes a year by rail from its rare earths-phosphate project in the Northern Territory to either Darwin or Port Pirie (either option meaning good revenue for the rail operator). Oxiana and IMX Resources are looking at sending concentrates from deep in South Australia north to Darwin by rail, a haul of more than 2000km that would be the longest train journey for ore in Australian history.

There are other phosphate, coal, gas and metals projects scattered within truckable distance of the rail line in both South Australia and Northern Territory that have factored in using the Darwin railway line.

All indications are that the line will work: it is just taking longer than the banks expected.