Government announces winning bid for Westrail freight business

30/10/00
Transport Minister Murray Criddle announced today the sale of Westrail's freight business to the Australian Railroad Group Pty Ltd (ARG) for $585 million and a commitment to invest a further $400 million in the State's rail system over the next five years.
Australian Railroad Group (ARG) is a consortium which includes Wesfarmers Limited and international rail operator Genesee & Wyoming Inc.
Mr Criddle said the offer put forward by ARG was considered to best meet the objectives of the Coalition Government for a dynamic and sustainable rail system in Western Australia.
"The plans ARG has put forward will result in significant regional development, employee opportunities and provide major benefits to the State," he said.
Key points:

• Westrail's freight rolling stock, terminals and customer contracts to be sold;

• the track network itself remains an asset of the State and will be leased to ARG for 49 years;

• the urban passenger and country passenger operations continue under State Government ownership; and -

• all net sale proceeds will be used towards retiring Westrail debt.

Mr Criddle said the Rail Freight Sale Task Force and its adviser, Deutsche Bank, recommended that the Government accept ARG's offer.
The task force members are Kevin Swan (chairman), John Langoulant (Treasury), Tim Sharp (Crown Solicitor's office),
Peter Conran (Department of Premier and Cabinet), Graeme Harman (Minister for Transport's office). Graham Baker is the project director for the sale.
"In addition to the up-front payment of $585 million, there is also an undertaking to invest $400 million in the track and rolling stock over the next five years - with $280 million of that amount being spent within the first three years," the Minister said.
"That is effectively a net benefit of $985 million to the State of Western Australia.
"I'm confident that Wesfarmers' business knowledge and long association with the WA rural and industrial community, combined with Genesee & Wyoming's world-class rail operating expertise, will build on the experience and skills of Westrail's existing employees to result in improved operating efficiencies, more competitive freight rates, and significant growth in the business."
ARG will be headquartered in Perth with operations in WA, South Australia and the Northern Territory. Genesee & Wyoming owns and operates the South Australian rail freight business and will operate the planned Alice Springs-to-Darwin railway.
Mr Criddle said the business plan ARG had put forward was positive and innovative, and clearly met the criteria the Government had established at the outset of the sale.
"We said from the start of this process that we were looking for a buyer who would introduce operating efficiencies, grow the business, and invest in the business to an extent not possible with the limited resources available to Government," he said.

"The ARG offer meets all those criteria."
Task Force Project Director Graham Baker said that more than 90 per cent of employees have accepted an offer to transfer to ARG, where there will be an increased emphasis on training and a profit sharing plan.
Mr Criddle said the ARG offer recognised the importance of regional WA and particularly addressed the needs of the State's grain growers. ARG had committed to continue the current program to improve logistics and provide competitive freight rates.
As part of the sale agreement, the grain line strengthening project, which was already begun, would be completed.
"I congratulate the Australian Railroad Group on their successful bid and look forward to a strong and productive relationship that will deliver real benefits to the WA community," the Minister said.
Media contact: Doug Cunningham 9321 7333