Interested parties eye Asciano's freight rail business

Article from www.theland.com.au

 

As Asciano talks with Chinese conglomerate China Merchants over the potential sale of a stake in its Patrick ports business drag on, it's understood some American groups are eyeing parts of the company's freight rail business.

North American railroad companies like Union Pacific and Burlington Northern Santa Fe – which is owned by Warren Buffett's Berkshire Hathaway investment group – are considered world-class operators that know how to run large networks efficiently.

Asciano's rival, Aurizon, has not been shy of its admiration for the North American companies, with Aurizon chief executive Lance Hockridge frequently citing the "Class 1" railroads as the kind of company he would like to create.

While Asciano chief executive John Mullen has made great strides with the ports and rail group over the past few years by cutting costs and improving efficiency, the company's intermodal business continues to struggle.

Intermodal haulage volumes, as measured by net tonne kilometres, dropped 2.4 per cent in the first quarter of fiscal 2015 due to falls in freight transported from the west to the east coast. This is partially because rail freight has been losing market share to container shipping, which is cheaper.

But Asciano's bulk haulage division, which moves grains and other commodities, has also been battling falling volumes, which were down 7.7 per cent in the first quarter.

With Asciano's coal haulage business performing well, an American operator such as Genesee & Wyoming (G&W) could snap up the intermodal and bulk haulage business, freeing Asciano to focus on coal.

G&W already owns nearly 5000 kilometres of track in South Australia and the Northern Territory, including the 2200-kilometre Tarcoola to Darwin railway.

Present in every state except Tasmania, G&W provides intrastate haulage of bulk commodities including grain, steel, gypsum and minerals, as well as terminal operations.

Based in the American state of Connecticut, G&W also operates in Canada, the Netherlands and Belgium.