Obscured By Clouds – Part Two

By Paul Bugler

To read Part One click here

Last week I looked at who might be interested in purchasing the QR coal assets, and came to the conclusion that, attractive as the prospective of owning a minerals railway might be, the reality is that the assets are inextricably mixed with non-coal freight and passenger traffics. Whoever acquires those assets will have an interesting portfolio on their hands and an intriguing group of stakeholders to manage.
Apart from the coal related assets, the Queensland government is still weighing up its options as to what to sell, and how best to package the various parts. The current indications are that the government is seeking to retain the non-coal track unless it can reach agreement with the Commonwealth for ARTC to take it over. Either way the non-coal track will not be for sale to the private sector.
The rest of the QR narrow gauge freight business ranges from some potentially bright spots, e.g. the Mt Isa line minerals hauls through to regional community service obligation (CSO) operations that could never be commercially viable. This is truly a mixed portfolio, but may have some attractions to train operators provided the government is prepared to give a long term guarantee of continued support for the CSO services. This is particularly important for both the prospective purchasers and the regional communities that currently benefit from the CSOs, but of course, runs counter to the government’s hopes of divesting the costs of these services.
Again the issues of competition and infrastructure ownership will weigh heavily in bidder’s thoughts. The purchaser of the non-coal freight business will be subject to competition for the more commercial parts of its business, while being dependent on government subsidies for a substantial proportion of operations. This places some fairly solid constraints on the owner in tailoring its service offering, asset base and flexibility in managing costs. Where it has to run over the part of the network owned by the purchaser of the coal assets, as is likely, it will need to convince that owner to part with precious track capacity for freight traffics that cannot usually afford to pay access prices at fully commercial rates.
This inevitably puts the non-coal operator in an invidious position of having to do business that it cannot (without assistance) afford and with a supplier that preferred it went away – hardly an inviting prospect.
The same will apply to getting access to the Brisbane passenger network. Passenger traffic in Queensland has legislated priority over freight traffic and is funded by subsidy. It therefore gets a “free ticket” as far as securing capacity on the rail network. Not so for freight, which will struggle to keep the capacity it currently has and even more for any new capacity it might want. I have no doubt that the Queensland government will consider carefully whether the current infrastructure access arrangements will provide the right balance between the various interests. This is a truly complex issue that will require the wisdom of Solomon to ensure that the purchaser of the coal network is not unfairly imposed upon and constrained while at the same time giving the non-coal freight operator a fair go.
Next week, I’ll wrap this up with a quick peep at the issues surrounding the QR interstate business.

*Paul Bugler has  been influential in access regulation and heavily involved in business development in the rail freight area with the development of open access. In 2009 he formed Lacertus Verum, a consulting firm offering rail management services particularly in the areas of business development, infrastructure access and contract negotiation. www.lacertusverum.com.au

To read Part Three click here