National rail freight network closer

A CONSOLIDATION of Australia’s national rail freight network is closer following the $585 million purchase of Westrail’s freight business by the Australian Railroad Group.

The group, a joint venture between Wesfarmers Limited and internat-ional rail operator Genesee & Wyoming, has bought Westrail’s freight rolling stock and entered into a 49-year track lease.

Wesfarmers paid $120 million for its share of the group.

A cohesive national rail freight network will help reduce costs for many Australian companies.

Genesee & Wyoming’s Australian operations, including South Austral-ia’s rail freight business and the planned Alice Springs to Darwin railway, will be rolled into the ARG.

The group will be based in Perth and have regional offices in Kalgoorlie and Adelaide. There are plans to establish offices in Melb-ourne, Sydney and Darwin.

Genesee & Wyoming Australia CEO Charles Chabot, who will be chief executive of ARG, said the group wanted to “play a significant role in the future of the Australian rail industry”.

“We look forward to expanding the business in WA and developing a strong national rail freight enter-prise,” Mr Chabot said.

Wesfarmers managing director Michael Chaney said his company had a long association with WA’s rural community and operated one of the State’s biggest trucking businesses.

“This is a good combination. Genesee & Wyoming have a lot of railroad experience and they did a terrific job in South Australia,” he said.

“Given Wesfarmers’ position in the State, there are some useful synergies.

“They would include carriage of fertiliser by rail, and road and rail links through our existing transport business.

“We have been talking to G & W for a year and a half and we like their style. You could say this is a case of two and two make five.”

He said the investment, that represents just more than nine per cent of Wesfarmers assets, would “be earnings-per-share positive” for Wesfarmers from the outset.

ARG has committed to spend a further $400 million on WA’s rail system during the next five years – $280 million during in the first three.

Westrail’s urban and country passenger operations will continue under Government ownership.

Net proceeds from the sale will be used to retire Westrail debt.

ARG has committed to continue the current program to improve logistics and provide competitive freight rates.

The grain line strengthening project will be completed.

Wesfarmers’ next quarterly profits are due to be announced at the annual meeting on Monday.

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