Pacific National CEO resigns

David Irwin has stepped down from his role as CEO of rail freight group Pacific National, citing a desire to be closer to family.
“After 10 years predominantly working away from my home in regional NSW I have decided the time is right to put my family first,” Irwin told his staff in a note, adding that Pacific National is at the beginning of a “great new era of development as a stand-alone company.”
The Australian Financial Review (AFR) first revealed the leadership change, noting that Irwin had stayed in the role just six months after the company split of Asciano.
Irwin will remain in the role until a new CEO is found, and reportedly will then stay involved in an advisory capacity.
Irwin ran Pacific National’s coal haulage business for eight years, and was on the former Asciano executive team.
Global Infrastructure Partners’ Russell Smith is likely to take on many of Irwin responsibilities, the AFR reports.
Smith was part of the Global Infrastructure Partners team that bought a stake in Pacific National as part of a consortium of international funds last year. He sits of Pacific National’s board and has been appointed Executive Chairman on an interim basis.
 

GrainCorp contracts more grain trains

QR
 
GrainCorp has reached agreement with national transport and logistics company QR for the provision of main line trains to service the company’s Mackay, Gladstone, and Fisherman Islands (Brisbane) export grain port terminals.
 
GrainCorp managing director Mark Irwin said: “The contract with QR’s specialist bulk freight subsidiary Australian Railroad Group (ARG) secures three trains for a period of three years. One train will service our Mackay and Gladstone terminals, and two will service our Fisherman Islands terminal. GrainCorp will be responsible for deployment of rail assets and the coordination of the freight task for these contracted trains.
 
“Our agreement with ARG underpins a significant percentage of the transport requirement for Queensland grain exports. This provides certainty for growers at a critical time.”
 
GrainCorp general manager of storage and logistics Bruce Griffin said: “As a result of our contract with ARG, weekly rail capacity between Toowoomba and Brisbane will increase by 50%, providing a much-needed boost in haulage capacity for the southern Queensland grains industry. It also means fewer trucks on the road between those two cities, and more export capacity at our Fisherman Islands port terminal.
 
“In NSW last harvest, our management of rail assets led to a significant increase in rail efficiency. Per-train efficiency rose by 60% or more, compared to management of the same assets under the old single desk export monopoly. With the right management, coordination, and support from state and federal governments for maintenance of track, rail transport is both more environmentally sustainable and more efficient than road transport,” Mr Griffin said.
 
Pacific National
 
GrainCorp also confirmed the addition of two trains to its existing contract with Pacific National, bringing the total number of trains under that contract in NSW and Victoria to 10. Both new trains will service the GrainCorp Geelong (Victoria) port terminal, one running on the standard gauge and one on the broad gauge lines.
 
Mr Irwin said: “We have taken on the additional rail capacity in Victoria in response to demand from grain exporters and worked closely with exporters to forward sell a significant proportion of our rail capacity in both NSW and Victoria. We expect to do the same in Queensland.
 
“The demand for more rail capacity in Victoria comes at a time when crop prospects look positive in that region. We are anticipating a welcome return to a higher level of grain exports from Victoria this harvest, following two very disappointing seasons.”
 
The new Queensland rail contract, and additions to the existing Pacific National contract, bring the total number of trains under GrainCorp management to 17.
 
 

Pacific National no longer national

Freight train operator Pacific National is to exit its Tasmanian services. 

Tasmanian infrastructure minister Graeme Sturges told state parliament that Pacific National is selling its rolling stock and will cease to operate in Tasmania.

Amidst concerns over the future of the state’s rail industry, Mr Sturges said there are some companies interested in the company’s rolling stock, and the $120 million rail line upgrade project is progressing well.

While the minister’s announcement came as a surprise to the parliament, the company has publicly indicated its possible pull-out due to the poor performance of its Tasmanian services.

The company announced in December 2007 its possible market exit following a comprehensive review of operations.

Spokesperson for Asciano, which owns Pacific National, said the review has been finalised and the company is currently preparing the sales process and relevant documentation.

“We understand the importance of rail in Tasmania and we will continue to work with all relevant stakeholders, including the Tasmanian Government, to try and reach an outcome that ensures rail operations continue in the state,” the spokesperson said.

Pacific National bought the Australian Transport Network, which operates Tasrail, in February 2004.

Photo: www.pacificnational.com.au

Asciano shares crash, halts share trading

Pacific National.

According to media reports, Asciano is seeking to sell its coal haulage business. (Image courtesy of Pacific National)

Shares in Asciano have been put on a trading halt, after experiencing a dramatic fall of 60 per cent today.

The Australian port and rail operator said the securities would remain in pre-open until tomorrow pending response to a query from the stock exchange.

The company has reportedly played down the speculation that it was planning a capital raising in order to lessen its staggering debt of $4.5 billion.

“We are in the monetisation process, where we are looking at part or full sale of one of our assets. And we are well progressed in that,” a company’s spokesperson told Reuters.

“We understand the need to address our capital structure and that’s what we are in the process of doing.”

With its market value estimated at $1.5 billion, it is speculated the company was seeking to sell its coal business, which it holds a 50 per cent stake.

According to Merrill Lynch, the coal business could help the case-scrapped company up to $900 million.

The company has been persistently rejecting the takeover proposal from private equity consortium TPG.

The Texas-based consortium of TPG Capital and Global Infrastructure Partners recently put up a $1 billion share offer, as an alternative approach to its ill-fated $2.9 billion non-binding offer made in August.

Asciano, however, stood firm on the view that the offers underestimated its true value.

The company’s chairman Tim Poole previously said at the annual general meeting that: “The board absolutely believes that the current market price of Asciano securities in no way reflects the underlaying value of Asciano’s businesses.

“The board and management team are working to close the gap between the security prices and the underlying value of our business as soon as possible,” he said.

The company’s shares have been constantly plummeting since mid-2007, with their values now hitting below six per cent of the values recorded in the peak.   

Rail at the crossroads: Telford

Australasian Railway Association chairman Don Telford has urged the Australian Government to put an end to 50 years of under-investment in rail.

Mr Telford said the biggest obstacle to rail’s technological development was not the shrinking financial market, but persistent neglect and the lack of a national plan.

“Even the rail line that runs between Perth and Brisbane has four different owners that have four different ideas, and unfortunately they can’t coordinate that plan.

“To introduce new technology, which is certainly important with regard to signalling and making our trains more fuel efficient, we’re unable to do that because of this same break-up,” he said.

Mr Telford, also chief operating officer at Asciano with responsibility for Australia’s largest privately-owned freight rail operator Pacific National, said among bulk, intermodal and passenger rail components, bulk was especially at risk.

“With intermodal, there may be some slowdown, but I doubt it will be very much because most of the shipments are made from eastern states to Western Australia.

“There will be some lag time with many of those projects that have already started – I see that growth will continue,” he said.

With Australia’s transport growth exceeding GDP growth, he said upgrading rail was imperative in order to redirect Australians from the near-capacity road network to more efficient rail.

“The Building Australia Fund presents an excellent opportunity to rectify 50 years of under-investment in rail,” he said.

However, he said the fund alone would not solve the problem, and state governments, the Australian Rail Track Corporation, operators and developers should all provide input. 

He said rail was three times more efficient than road and while the continuing drop in oil prices might take away some competitive advantage of rail, other benefits were big enough to offset the fall.

“Rail is safer, cleaner and more labour-efficient. One train from Sydney to Melbourne replaces 70 B-doubles, saves 45,000 litres of fuel and 44 tonnes of carbon emissions.

Mr Telford said without including road transport in the emissions trading scheme, Australia would never be able to meet the emissions targets.

“We must take action now if we are going to meet the targets the Federal Government has set. Rail must be included in any agreements going forward.

“The green paper on the carbon pollution reduction scheme excluded road transport for 12 months. If that were to continue, I don’t think we’d ever meet the targets set by the government,” he said.

Asciano shares in freefall

Australia’s biggest port and rail operator Asciano Group Ltd said it cannot explain the recent fall in its stock price of almost 20 per cent, and is still expecting earning for this financial year.
 
“Asciano is not aware of any information concerning it which, if know, could be an explanation for recent trading in securities in Asicano,” the company said in a statement.
 
While Asciano securities sank 65 cent to $2.72 representing a 19.29 per cent fall, the company said earnings guidance for the year to June 30 this year has stated its EBITA excluding significant items of between $650 million to $660 million.
 
“Asciano continues to expect earnings for the financial year to June 30, 2008 to be within this range,” it said.

The company is expected to announce several significant items, including a writedown in the carrying value of Asciano’s rail subsidiary Pacific National export grain haulage assets, and demerger and establishment costs, the AAP reported.

 
A realised loss of about $100 million on the sale of its stake in pallets provider Brambles Ltd is also expected to be a significant item.
 
The company said it had advised the market of a number of growth initiatives, such as proposed entry into the Queensland coal haulage market and expansion of its Fisherman Islands container terminal in Brisbane.
 
“Asciano is aware of recent media speculation regarding the potential for Asciano to raise additional equity,” it said.
 
“No decision has been made in respect of any preferred funding option.”

Asciano loses tax fight

Pacific National.

Pacific National.

Asciano should pay duty on the lease of rail lines in NSW as the lease gave it the right to use the land surrounding railways, the High Court of Australia has unanimously ruled.

The court upheld the ruling of the NSW Court of Appeal in “Asciano v Chief Commissioner of State Revenue”, which found a rail access agreement fell under the Duties Act and therefore should be subject to stamp duty.

The legal battle started when Asciano’s rail business Pacific National refused to pay the State Rail Authority (SRA) duty of $0.6 million plus interest for the SRA’s land on which the company’s rail lines and infrastructure sit.

In 1996, Pacific National entered a rail access agreement with the Rail Access Corporation (RAC) and was granted access rights to railway lines and related infrastructure, which formed part of the RAC’s rail network in NSW. 

The chief commissioner of state revenue requested the amount, based on $162 million the company paid under the lease between 2000 and 2003.

The company argued that the agreement only conferred the right to use the physical items that comprise the NSW rail network, not the land itself. The chief commissioner, however, contended that the facilities including rail track, drainage works, tunnels, bridges, crossings and buildings were all land.

The High Court dismissed Pacific National’s arguments, saying the agreement provided for access to and consequential use of land by others.

Meanwhile, Pacific National has launched a new east-west rail service as part of its express business.

The new service will depart Melbourne late on Thursday night for arrival into Perth Sunday morning.

The company said the new Melbourne to Perth express service will compete directly with road on one of Australia’s most critical freight corridors.

“The need to create more rail capacity for freight customers is a sign for things to come. With fuel prices increasing and the continuing focus on reducing greenhouse gas emissions, rail mode share will only increase in the future,” Pacific National division general manager Paul Garaty said.

Asciano punts NSW, QLD governments

Port Botany

Port Botany

Asciano chief executive Mark Rowsthorn has lashed out at the New South Wales and Queensland governments, saying that backing another foreign terminal operator to enter major ports with government subsidy would be “bloody rude” to existing operators.     

Mr Rowsthorn said introducing a third operator to Sydney’s Port Botany and Brisbane Fisherman Islands would work against the current operators who struggle to protect themselves.

“I sit here as the only Australian stevedore and say that’s pretty bloody rude, because we do a good job and we’ve got a lot of Australians who work here,” he said.

“I’ll put the national cap on here and say fair’s fair, and any new operator should be subject to the same rentals and any subsidies that are suggested, we just go nuts over.”

The $1 billion Port Botany expansion project began last month, which will double the port’s capacity upon completion.

Asciano, which owns the sole Australian stevedore, Patrick, has reportedly invested over $120 million to upgrade the port’s terminal over the past three years.

Mr Rowsthorn has recently announced Port Botany moved a record of more than one million TEU in the 2007/08 fiscal year.

Amid speculations over a US consortium-led takeover, the company has also announced its 2007/08 full year results, which include an increase in operating revenue of five per cent to $2.9 billion, with earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 10.1 per cent to $677.7 million.

Assessing its operating business units as performing well overall during the year, with the Patrick ports business and Pacific National achieving strong outcomes, Mr Rowsthorn said the company expects another year of strong performance in the next fiscal year.

The company said that it will initiate a process starting this December to partially monetise one or more of its operating businesses, either by way of a partial sale or a structured transaction.

“We believe all of our business will continue to grow and generate attractive returns for our security holders,” he said.

Asciano dismisses $2.9 billion takeover approach

Asciano has dismissed a $2.9 billion takeover offer from a Texas-based consortium, saying it undervalues its business.

The rejection came shortly after the Australian rail and ports operator has announced that it has received “an unsolicited non-binding indicative proposal” from Texas Pacific Group (TPG) and Global Infrastructure Partners to acquire 100 per cent of the issued securities of the company through a scheme of arrangement.

“The proposal includes a cash alternative of $4.40 per Asciano security. There is a scrip alternative of unlisted securities in a bidding company,” the company said in an Australian stock exchange (ASX) statement.

Fuelled by speculations about the bid, the company’s shares sharply rose 68 cents to $4.83, surpassing the TPG-led consortium’s offer.

Responding to queries from the ASX on a dramatic increase in its share price, the company said: "Asciano remains aware of ongoing media speculation regarding the potential for Asciano to raise additional equity and/or to sell assets.

"Asciano continues to assess a range of options and consider a range of factors in determining the optimum financing strategy for future growth."

Analysts said the price proposed in the bid was too low, and the current price of the company’s stock does not reflect its potential value. 

Angus Gluskie, a portfolio manager at White Funds Management, said the TPG offer was “a very low ball bid.”

“On most analysts’ numbers you can also see the underlying assets are worth significantly more than the current share price. On our numbers, there is still several dollars in it,” he told The Sydney Morning Herald.

“As often happens when people lose sight of the fundamental value of the asset, an opportunity arises. It’s a minor surprise but it makes a lot of sense.”

The report on the company’s full year results is expected to be released on August 6.

TPG makes a $1 billion move on Asciano

Private equity consortium TPG has reportedly made a $1 billion share offer to Asciano, after its initial takeover proposal was thwarted three months ago.

According to The Australian Financial Review, TPG founder David Bonderman has recently flown from the US to Melbourne to put another proposal to buy more than $1 billion in Asciano shares.

The Texas-based consortium of TPG Capital and Global Infrastructure Partners (GIP) initially approached Asciano this August with a $2.9 billion “non-binding” offer, but the company rebuffed the proposal, saying the bid underestimated its true value.

At the company’s annual general meeting held two weeks ago, Asciano chairman Tim Poole had said: “The board absolutely believes that the current market price of Asciano securities in no way reflects the underlying value of Asciano’s businesses, in the same way that the indicative offer from TPG and GIP failed to recognise that true value.”

Asciano’s shares are now languishing at around $2.15, less than half of the takeover offer of $4.40 per security.

The paper said the cash-strapped company was likely to reject the new offer again as it intended to push through with its plans to raise $ 1 billion by asset sales or monetising.

It attempted to ease its debt burden through the underwritten security purchase plan in September, but secured only 10 per cent of the initial target.

Asciano, which owns some of Australia’s major transport assets including Pacific National, is reported to have a market value of $1.5 billion, while its debt amounts to almost $4.5 billion.

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