After threatening to withdraw from Victorian and NSW grain rail transport and taking the ball with it, Asciano (Pacific National) has signed a grain haulage contract with GrainCorp on which it cannot lose.
Asciano Group has finalised agreements with GrainCorp to provide export grain rail haulage services "that will deliver commercially viable outcomes for Asciano for the next five years". This is after Asciano said it would abandon its grain services in NSW and Victoria but refused to sell its specialised rolling stock to other operators in Australia.
Under the new agreements, Asciano’s rail subsidiary, Pacific National, will contract to GrainCorp eight trains that will service GrainCorp’s export haulage requirements in NSW and Victoria on a ‘take or pay’ basis. ‘Take or pay’ means that the trains will be at GrainCorp’s disposal even when not required, as it will have to pay for them even if there is no grain to be moved. Pacific National will benefit further through additional variable payments for export grain volumes moved.
“Securing a ‘take or pay’ contract with GrainCorp reduces Asciano’s risk in its grain segment and will ensure an acceptable rate of return for our dedicated grain assets”, Mr Rowsthorn said. “We are very pleased to have reached a conclusion that drives supply chain efficiency and satisfies the needs of the grain industry and of Asciano security holders.”
Mr Rowsthorn commented, “the Australian Bureau of Agricultural and Regional Economics is predicting a bumper winter grain crop this year. Asciano will be well placed to benefit from any upside while ensuring the grain business remains viable in the event that drought conditions persist”.
In concert with these new arrangements, Asciano has resolved its Broadacre obligations with the NSW Government and will, as was originally intended, invest in the future of the export grain rail haulage market in NSW.
This $70 million Broadacre obligation will reduce by $30 million upon the transfer of a number of ‘branch line’ rail assets that Asciano no longer intends to operate beyond the date of transfer. These assets will be transferred from Asciano to an entity nominated by the NSW Government. Certain elements of ongoing maintenance capital expenditure on main line locomotives used in the NSW export grain business will be credited against the remaining obligations. As a consequence, Asciano expects its obligations under the Broadacre agreement to reduce to zero within 5 years.
GrainCorp Managing Director Mark Irwin said, “GrainCorp and Asciano have entered into a deal that secures a commercially viable future for grain transport in NSW and Victoria.
“The dedicated trains are an investment that underpins our core business of storing and handling grain upcountry, and providing export opportunities for wheat, barley, sorghum and other grains through our ports. The trains will also be used for domestic transhipment of grain, a key part of our business,” Mr Irwin said.