The Federal Court has dismissed the ACCC’s proceedings against rail companies Pacific National and Aurizon, which related to control of Acacia Ridge Terminal, a key asset in Australia’s intermodal rail network. Read more
Australia’s largest rail freight operator has set in motion “a plan to revolutionise freight movements across the length and breadth of the country,” said Pacific National CEO Dean Dalla Valle.
Mr Dalla Valle said Pacific National’s future goal is to offer its customers, including regional exporters, more efficient and productive connections to rail heads, ports, and intermodal freight terminals where trains and trucks meet.
“The spine of this network will comprise of the key freight hubs of Port Botany, Penrith, Parkes and Perth – what we like to call at Pacific National the ‘Four Ps’.
“Once the north-south Inland Rail is completed, the east-west spine at Parkes will have a faster and more efficient connection to the ports of Melbourne and Brisbane,” said Mr Dalla Valle.
Pacific National is currently constructing inland regional Australia’s largest logistics terminal at Parkes (to run 1,800-metre freight trains double-stacked with containers to Perth), whilst also proposing the development of a major freight hub at St Marys, near Penrith.
Mr Dalla Valle said the proposed St Mary’s Freight Hub is located within Sydney’s biggest catchment area for many of the country’s largest national distribution centres and warehouses which service Western Sydney – one of the most populous and fast-growing regions in Australia.
“St Marys is located within close proximity to the key industrial and commercial estates of Eastern Creek, Erskine Park, Wetherill Park, Arndell Park, and Marsden Park; not to mention the future Western Sydney Airport at Badgerys Creek,” said Mr Dalla Valle.
Mr Dalla Valle said the proposed St Marys Freight Hub is a stone’s throw from the M4 and M7 motorways and Great Western Highway and has direct access to the T1 Western Rail Line allowing for a 58-kilometre shuttle run between Port Botany.
“With up to five train shuttle services each day, Pacific National will rail a total of 300,000 containers between Port Botany and St Marys each year, removing between 70,000 and 80,000 truck movements from Sydney’s heavily congested road network,” said Mr Dalla Valle.
Mr Dalla Valle said in the future, Pacific National’s St Marys Freight Hub will receive 1,200-metre regional trains from Parkes to be broken into 600-metre port shuttles to better access stevedoring terminals at Port Botany.
“The Penrith region will act as a conduit for regional freight between Western Sydney and Western NSW and further afield to Australia’s second largest port at Botany,” said Mr Dalla Valle.
Pending local and state government planning approvals, Pacific National aims to start construction of St Marys Freight Hub this year. First stage of the proposed freight hub development will support 60 full-time construction jobs.
When operational, the freight hub will create 150 new full-time jobs in Western Sydney.
“Parkes is known as the Elvis capital of Australia, but in the future, it will also be known in freight circles as the ‘Memphis Down Under’,” Pacific National CEO Dean Dalla Valle said.
Australia’s largest rail freight operator, Pacific National, has welcomed the NSW Government’s announcement establishing a ‘special activation precinct’ to help streamline the continued development of Parkes Shire Council’s National Logistics Hub.
“Companies like Pacific National will have the added investment confidence to help create the largest freight and logistics precinct in inland regional Australia; akin to the major freight hub of Memphis in the interior of the United States of America,” Mr Dalla Valle said.
Pacific National has committed an initial $35 million to develop the company’s Parkes Logistics Terminal, located within the National Logistics Hub, and acquire rollingstock like freight wagons.
Mr Dalla Valle said Pacific National’s terminal will act as a future facility to consolidate hundreds of thousands of cargo containers, including boxes filled with regional commodities destined for overseas markets, to be hauled by rail across the length and breadth of Australia.
“Once the Melbourne to Brisbane Inland Rail project is complete, regional enterprises can use Parkes as the launching pad to haul goods and commodities by rail more efficiently between the ports of Botany, Brisbane, Melbourne and Fremantle,’ said Mr Dalla Valle.
Located at the intersection of the main western railway line running from Sydney to Perth, the future Inland Rail corridor from Melbourne to Brisbane, and the Newell Highway, Parkes is the perfect place to establish an intermodal freight terminal – a place where trains and trucks meet.
Construction of Pacific National’s terminal commenced in October 2018. Freight trains 1,800-metres in length are expected to be hauling freight from the terminal to Perth later this year.
Mr Dalla Valle said once fully operational, Pacific National’s Parkes Logistics Terminal will have the capacity to process approximately 450,000 cargo containers each year, including the ability to haul double-stacked containers from Parkes to Perth.
“Pacific National is proud to be part of Parkes. Terminal construction is currently generating about 40 jobs, while the future terminal will have a workforce of 100 people,” said Mr Dalla Valle.
Mr Dalla Valle said today’s announcement by the NSW Government represents a ‘tripling-down’ on great ideas.
“Parkes Shire Council’s National Logistics Hub, Australian Government’s Inland Rail project, and NSW Government’s special activation precinct – three great ideas,” Mr Dalla Valle said.
The ACCC has instituted proceedings in the Federal Court against Pacific National and Aurizon, and their related entities, for allegedly reaching an understanding in relation to Aurizon’s intermodal business that had the purpose and/or would be likely to have the effect of substantially lessening competition in the supply of intermodal and steel rail linehaul services.
“The ACCC alleges that in July 2017 Pacific National and Aurizon reached an understanding that would lead to Aurizon exiting its intermodal business through a combination of closure and transactions with Pacific National. The effect of the understanding was that Aurizon would stop competing with Pacific National to supply intermodal and steel rail linehaul services throughout Australia,” ACCC chairman Rod Sims said.
The ACCC also alleges that Pacific National’s proposed acquisition of Aurizon’s Queensland intermodal business and the Acacia Ridge Terminal, as well as an agreement for Pacific National to operate the interstate side of the Acacia Ridge Terminal, would separately each have the likely effect of substantially lessening competition.
The ACCC is seeking declarations, pecuniary penalties, orders restraining Pacific National from acquiring the Acacia Ridge Terminal and Aurizon’s Queensland intermodal business, and costs. The ACCC has also applied for an injunction to prevent Aurizon from closing its Queensland intermodal business while the case is being determined.
Aurizon intermodal sale process
During the first half of 2017, Aurizon engaged in a sales process for its intermodal business. That business consisted of several interconnected components, including the Acacia Ridge Terminal, and its interstate intermodal and Queensland intermodal businesses (which both depend on access to the Acacia Ridge Terminal).
The ACCC alleges that, in late July 2017, Pacific National and Aurizon reached an understanding and Aurizon terminated its sales process with other bidders.
The ACCC alleges that the understanding involved Pacific National obtaining control of Acacia Ridge Terminal, either by PN acquiring the terminal or, if that was prevented by the ACCC, by a long term contract appointing it as operator of the interstate side of the terminal, commencing 1 December 2018.
The ACCC also alleges that the understanding involved Pacific National becoming the exclusive bidder for Aurizon’s Queensland intermodal business, but that if Pacific National did not acquire that business, Aurizon would close it.
The ACCC alleges that Pacific National and Aurizon gave effect to this understanding by executing formal contracts including contracts for the sale of the Acacia Ridge Terminal and the operation of the Acacia Ridge Terminal (the Terminal Services Subcontract), and to negotiate exclusively for the sale/purchase of the Queensland intermodal business. Subsequently, Pacific National and Aurizon entered into an agreement for Pacific National to acquire the Queensland intermodal business.
In addition, Aurizon announced the closure of its interstate intermodal business on 14 August 2017. The business was closed by December 2017.
Earlier this year, Aurizon announced that it would close its Queensland intermodal business if the ACCC opposed the proposed acquisition by Pacific National.
The ACCC alleges that the closure of Aurizon’s interstate intermodal business and the planned closure of the Queensland intermodal business is a direct and expected consequence of the understanding reached with Pacific National.
The ACCC’s competition concerns
“Pacific National and Aurizon are the only providers of intermodal rail linehaul on the North Coast Line servicing northern Queensland. The ACCC alleges that the understanding, the proposed acquisitions by Pacific National and the agreement appointing Pacific National as operator of the Acacia Ridge Terminal would have the effect of creating a monopoly on that route,” Mr Sims said.
“Further, Pacific National and Aurizon were, at the time of the understanding, two of only three competitors on interstate routes. We consider that Aurizon’s closure of its interstate intermodal business substantially lessened competition on those interstate routes.
“At all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive. The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business,” Mr Sims said.
“However, the evidence makes it clear that it was more lucrative for Aurizon to agree to sell parts of its intermodal business to its closest competitor, and close other parts of that business, than it was to sell the whole intermodal business to a potential new entrant.”
“Given Aurizon’s announcement that it will close its Queensland intermodal business if the Pacific National acquisition is opposed by the ACCC, in circumstances where there is at least one alternative purchaser, the ACCC is seeking an interlocutory injunction to prevent Aurizon from closing this business until the matter is determined by the Court,” Mr Sims said.
During the ACCC’s review, Pacific National sought to address the ACCC’s concerns relating to its proposed acquisition of the Acacia Ridge Terminal by offering a court enforceable undertaking that it would not discriminate in providing access to the Acacia Ridge Terminal.
“The ACCC is of the view that the long term behavioural undertaking offered by Pacific National is not capable of addressing the ACCC’s concerns about the loss of competition resulting from the alleged understanding or Pacific National’s proposed acquisitions of Aurizon’s Queensland intermodal business and the Acacia Ridge Terminal,” Mr Sims said.
Further information is available at Pacific National Pty Ltd / Linfox – proposed acquisitions of Intermodal assets from Aurizon.
The ACCC has raised preliminary competition concerns about Pacific National’s proposed acquisitions of Aurizon’s Queensland intermodal freight haulage business and intermodal rail terminal at Acacia Ridge in Brisbane.
Currently, Pacific National and Aurizon are the only providers of intermodal rail linehaul services in Queensland and compete closely with each other.
“Aurizon’s decision to sell its Queensland intermodal operations and the Acacia Ridge Terminal to its closest competitor, while shutting down its remaining intermodal business, will fundamentally change this market. We are concerned about the impact on competition in the freight industry,” ACCC chairman Rod Sims said.
The ACCC has published a Statement of Issues outlining concerns about the reduction of intermodal rail linehaul providers from two to one in Queensland, raised barriers to entry for rail companies if Pacific National controls the Acacia Ridge terminal, and the reduction in options for freight-forwarders on most interstate rail routes from two to one.
Although freight services company SCT Logistics will remain on interstate rail routes, it is vertically integrated with freight forwarding and does not generally haul many containers for other freight forwarders.
The ACCC has received extensive feedback from interested parties who say there is no close alternative to rail for many types of freight, particularly to and from far north Queensland.
“We are concerned the proposed acquisitions would lead to increased prices and reduced service for freight hauled between Brisbane and Far North Queensland,” Mr Sims said.
The ACCC is also concerned about Pacific National’s proposal to acquire the Acacia Ridge Terminal.
“The Acacia Ridge Terminal is an important infrastructure asset, and would be a key component in the strategy of any potential supplier of intermodal rail freight that wants to compete with Pacific National.”
Pacific National has offered a section 87B undertaking that it would not discriminate in providing access to the Acacia Ridge Terminal if the acquisition went ahead.
The ACCC is consulting on the proposed undertaking as part of the Statement of Issues consultation.
“The ACCC’s preliminary view is that a section 87B undertaking won’t resolve the concerns arising from the dominant provider of intermodal rail linehaul services nationally also owning the Acacia Ridge Terminal,” Mr Sims said.
“We welcome feedback from all interested parties on the issues we have outlined.”
The ACCC is inviting further submissions from interested parties in response to the Statement of Issues by 3 April 2018. The ACCC’s final decision is expected to be announced on 24 May 2018.
The Statement of Issues and the s 87B undertaking are available on the public register here: Pacific National / Linfox – proposed acquisitions of Intermodal assets from Aurizon.
Pacific National is the largest provider of intermodal rail freight services in Australia. Currently, Pacific National and Aurizon are the only providers of intermodal rail freight services within Queensland. Aurizon previously also competed with Pacific National and SCT on interstate routes.
The interstate rail network is a standard gauge rail track, while the rail network north of Brisbane is narrow gauge and requires specific locomotives and wagons.
The Acacia Ridge Terminal has both a standard gauge terminal (supporting interstate transport), which was used by both Pacific National and Aurizon, and a narrow gauge terminal (supporting transport within Queensland) used only by Aurizon. Pacific National’s Queensland rail operations currently use a separate terminal at Tennyson, which is owned and operated by Pacific National.
Linfox has entered into a consortium with Pacific National to purchase the containerised freight haulage and end-to-end freight forwarding capability on Queensland’s northern freight line. The two companies are purchasing separate parts of the Aurizon rail assets.
Forming a consortium with Pacific National is the first step towards purchasing these strategically significant assets that are currently owned by Aurizon Queensland Intermodal.
This acquisition will enable Linfox to improve the scale and scope of the freight forwarding services it offers to national and large Australian freight forwarding customers, including those delivering freight to Northern Queensland.
If the Pacific National transaction is cleared by the ACCC, Linfox will acquire and use the rail haulage capacity supplied by Pacific National to supply intra-state and interstate freight forwarding services to customers in Queensland and Northern Queensland.
The acquisition will also include pick-up and delivery and warehousing services, but exclude standard gauge haulage to and from Acacia Ridge and hook-and-pull contracts for train services.
Pacific National has signed a binding agreement to buy the Aurizon Queensland Intermodal business as part of a consortium with Linfox.
This transaction includes the transfer of approximately 350 Aurizon employees, as well as assets, commercial and operational arrangements to the Linfox and Pacific National consortium.
The parties are aiming to finalise these transaction by the end of FY2018, both transactions are subject to:
- Approval by the Australian Competition & Consumer Commission
- Approval by the Foreign Investment & Review Board
Separately from Linfox, Pacific National has also signed a binding agreement with Aurizon to purchase the Acacia Ridge Intermodal Terminal in Brisbane.
This transaction includes the transfer of 30 Aurizon employees, as well as assets, commercial and operational arrangements.
The Acacia Ridge Terminal will supplement Pacific National’s national network of terminals and provides security for Pacific National’s interstate operations out of the terminal for the long term.
Rail operator Aurizon has announced the closure of its intermodal business, following a tough financial year where the company posted a loss of $188 million. A consortium of Pacific National and Linfox will take over its Queensland facility, and Pacific National has purchased its Acacia Ridge terminal, with the transactions bringing in a total of $220 million. Aurizon’s remaining intermodal business, outside of Queensland, will be closed by December.
“The decision to exit Aurizon’s Intermodal business is in response to the continued losses in this business and market dynamics, with sale proceeds and future capital able to be recycled into other profitable parts of the company,” said Tim Poole, Chairman, Aurizon. “The exit will allow Aurizon to focus on creating shareholder value through its core strengths and capabilities of heavy rail haulage operations and rail infrastructure management.”
Andrew Harding, Managing Director and CEO at Aurizon, added: “Following the review of our Freight business, we have made the decision to exit Intermodal by closing down our interstate operations and selling Queensland Intermodal and Acacia Ridge terminal. Initiatives are in place to turn around the performance of our Bulk business following significant impairments in July.
“Going forward, we will leverage our operational and commercial capability in heavy haulage operations and rail infrastructure to create value and certainty for shareholders.”
In a message to employees, Harding explained the decision to close the company’s Intermodal division.
“Unfortunately, over the years we ave continued to see significant financial losses in this part of the business,” he said.
“The reality is that in a market serviced by a number of well established transport providers, we have been unsuccessful in establishing a significant scale and customer base to make it profitable.
“Exiting the Intermodal business is clearly not a decision we have taken lightly but one we had to make if we are to provide certainty and value for our shareholders.”
Transport and logistics provider Northline has opened a new purpose-built $23 million, 10,440m2 facility in Adelaide, with a direct access cargo link to rail operator Pacific National.
The facility is strategically positioned alongside the Kilburn railhead, in close proximity to Adelaide’s north-south road corridor, which is currently being upgraded with a $2.5 billion Federal and State government investment
The new Adelaide depot facilitates B-double movements, and will be a customs-compliant Quarantined Approved Premises (QAP).
Northline’s investment in Adelaide is the final stage of a three-year, $98 million investment in new transport and logistics facilities in four states and territories.
The company has also opened new depots in Darwin, Brisbane, Townsville and Sydney as well as moving into a dedicated depot in Mackay.
Craige Whitton, CEO, Northline, said the new state-of-the-art Adelaide transport and logistics facility is an investment in the efficiency and effectiveness of our customer’s supply chain.
“Northline recognises the need for a multi-modal solution to meet customer’s needs which has led us to bringing road and rail closer together as well as ensuring easy access to Australia’s major seaports for import/export.
“With investments made over the last three years, Northline now has one of the most modern networks of transport and logistics depots across mainland Australia.”
Pacific National, a partner of Northline, welcomed the company’s investment, recognising the need for greater collaboration between road and rail transport providers.
“Northline’s facility represents the first intermodal cargo link operation in South Australia, said Andrew Adam, General Manager of Pacific National Intermodal.
“The benefits of the direct movement of rail containers between the rail terminal and Northline’s facility is already being shown with a reduction of trucks on the road and an overall improvement in supply chain efficiency.”
Northline is also seeing increasing demand for warehousing space within its facilities, and the new Adelaide facility boasts 3,500m2 of warehousing space with modern high-bay racking, along with a 440m2 wash bay and container servicing area. The facility is also located on a 30,000m2 hard stand.
The facility is the third such development facilitated for Northline by the Gibb Group.
Dean Dalla Valle has been appointed CEO of Pacific National.
Dalla Valle brings with him four decades of experience with BHP Billiton, most recently as its Chief Commercial Officer with responsibility for marketing and distribution of commodities, the global Health Safety and Environment program, technology and the Samarco recovery project in Brazil. Prior to this, Dean was President of BHP Billiton’s international coal business.
“With his depth of background in the successful management of large, capital intensive businesses, his knowledge of supply chain dynamics and his extensive hands-on operational knowledge and experience, Dean is an excellent fit for Pacific National,” said Russell Smith, Executive Chairman, Pacific National.
“As CEO, Dean will be extremely well placed to lead Pacific National as we continue to deliver on the company’s plans to strengthen and grow the business, leveraging the expected expansion in the national freight task over coming years.”
Dean will commence his role at Pacific National on 17 July 2017 and current Pacific National CEO David Irwin will step into an advisory role with the company, supporting the Board and Dean.
“I would like to express my gratitude to David Irwin for his many years of service with Pacific National,” Smith added. “The company is stronger for his leadership and I know we will continue to benefit from his deep knowledge of the freight and logistics sector in future.”
The Australian Logistics Council (ALC) welcomed the appointment.
“At a time of considerable change in the Australian freight logistics industry, Dean Dalla Valle’s will be a welcome addition to the policy debate around supply chain efficiency and safety and the requirements of the National Freight and Supply Chain Strategy,” the ALC said in a statement.
Rail freight operator Pacific National has welcomed the Federal Government’s commitment to fund the Inland Rail project.
“More than thirty years since the ambitious rail link was first suggested, the 1,700km rail line is now well on track to become a reality following the $8.4 billion commitment in last night’s Federal Budget,” the company said in a statement.
“Pacific National believes the Inland Rail project will be transformative for Australia, helping revitalise regional communities and providing a boost in national productivity that will deliver for generations to come.”
Pacific National CEO David Irwin said, “Australia has a growing problem that can’t be ignored – we are trying to move too much freight on our increasingly congested road and rail networks along our Eastern seaboard.
“Inland Rail is a true game changer and we commend the Government for its commitment to such an important nation-building project.
“We look forward to working with the Government and all the communities along the route to see Inland Rail become a reality and ensure it’s a huge success once operational.
“We want a swift and smooth construction program and a clear path to the day the first freight trains can start using the route – and this will ensure potential investors and rail operators can plan for the future with greater certainty,” he added.