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.
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.
Four bidders have been shortlisted to proceed to the next stage of the sale of Westrail's freight business, Transport Minister Murray Criddle announced today.
Mr Criddle said the Australian Railroad Group, Black Swan Rail Consortium, Freight WA and Western Freight would now enter a detailed due diligence process, culminating in final, binding, financially underwritten bids in October.
"I hope that we will be in a position to announce the successful bidder before the end of the year," the Minister said.
He said he was delighted with the calibre of the shortlisted parties which had been selected from a strong field of bidders.
"All shortlisted bidders submitted a strong business plan with innovative ideas for improving service and growing the rail business," Mr Criddle said.
"They have also stated their commitment to employee training and incentives.
"I'm pleased that we have a good mix of Australian, European and American representation among the bidding parties."
The partners in the Australian Railroad Group are Genesee and Wyoming Australia, and Wesfarmers.
Genesee and Wyoming Australia is part of the Genesee and Wyoming group which includes more than 20 operations in Australia, the US, Canada and Mexico. It runs the South Australian freight railway and is part of the consortium chosen to build and operate the Alice Springs-to-Darwin rail link.
Wesfarmers is one of Australia's major diversified industrial groups, and owns Wesfarmers Transport, a leading WA road transport operator.
The Black Swan Rail Consortium is made up of Railroad Development Corporation, a US-based short line rail operator with operations in North and South America and in Africa, and Barclay Mowlem Ltd, an Australian subsidiary of a major international engineering group with substantial railway construction and maintenance experience.
Barclay Mowlem is also an equity participant in the consortium which will build, own and operate the Alice Springs-to-Darwin railway.
Freight WA is owned by Rail America, which is the largest short haul and regional rail operator in the world. Rail America was the successful bidder for the Victoria rail freight business V-Line Freight, which was privatised in 1999.
The Western Freight Consortium consists of GB Rail and AMEC Engineering. GB Rail operates freight and passenger operations around the world and is the third largest rail freight operator in the United Kingdom.
AMEC Engineering is a wholly owned subsidiary of AMEC plc, one of the world's leading infrastructure groups with substantial experience in developing and managing rail assets.
"All the short listed consortia are led by highly respected, experienced and efficient rail operators and backed by quality institutional equity providers," Mr Criddle said.
"I'm confident that from these four consortia we will be able to select the innovative and aggressive operator we are seeking to introduce operating efficiencies to Westrail Freight, to grow the business, and to invest in the business to an extent not possible with the limited resources available to Government."