Asciano puts grain back on track

The Victorian and New South Wales grain industry breathed a sigh of relief yesterday (Monday, May 5) after a long-awaited deal was secured between Asciano and GrainCorp which would provide export grain rail haulage services for the next five years. Asciano’s rail subsidiary, Pacific National, would run eight trains to service GrainCorp’s Victoria and NSW export haulage requirements under the five-year contact. After months of arduous discussions, GrainCorp accepted Asciano’s terms on a take-or-pay basis. Late last year, Asciano chief executive Mark Rowsthorn said that Pacific National would withdraw its grain trains unless the industry agreed on a long-term take-or-pay contact. Mr Rowsthorn said that without a take-or-pay contact Asciano would be left with financial risk due to the unpredictable export grain industry. The take-or-pay agreement would benefit Pacific National through additional variable payments for export grain volumes moved and in the case of a drought the companies provisional service costs would be covered by the rail haulage contract. Mr Rowsthorn said that securing a take-or-pay contact with GrainCorp reduced Asciano’s risk in its grain segment and would ensure an acceptable rate of return for the company’s dedicated grain assets. &#8220The Australian Bureau of Agriculture and Regional Economics is predicting a bumper winter grain crop this year,&#8221 he said. &#8220Asciano will be well placed to benefit from any upside while ensuring the grain business remains viable in the event that drought conditions persist.&#8221 GrainCorp managing director Mark Irwin admitted that the company would assume some up-front risk with the contact but said that GrainCorp would manage that risk by selling logistics solutions to its grain customers. &#8220This is a win-win for both parties, as it will enable shipping and storage facilities to be integrated with rail,&#8221 Mr Irwin said. &#8220This will significantly increase train utilisation by introducing much needed efficiencies in our export grain logistics chain.&#8221 A GrainCorp spokesman told Lloyd’s List DCN that dedicated trains would be used for storing and handling grain upcountry and would provide GrainCorp with export opportunities for wheat, barley, sorghum and grain. &#8220This allows us to better integrate rail transport with upcountry grain accumulation and export demand and domestic transhipment,&#8221 he said. &#8220The attraction for the company is that we will be better able to co-ordinate transport and customer demand for transport.&#8221 GrainCorp spokesman said that the eight contracted trains would sufficiently handle a &#8220normal crop&#8221 but in the case of a bumper crop additional grain exports would need to be picked up by road transport and existing and additional resources. &#8220It will underpin the existing rail services that we’ve already got and underpin what we would like to refer to as a `normal crop’,&#8221 he said. &#8220What this eight-train, five-year deal does is underpin our normal operating business, and allow us to achieve our transhipment targets and be able to achieve what we would normally expect as an export task in addition to the existing resources that are currently being deployed.&#8221 Victorian Farmers Federation grains group deputy president Russell Amery welcomed the deal but said that in the case of a bumper grains harvest, eight contacted trains would fail to cover the entire crop. &#8220But eight trains are better than no trains,&#8221 Mr Amery told Lloyd’s List DCN . &#8220It is a positive step &#8800 at least then we have someone committed to running a rail freight service for the next five years.&#8221 Furthermore, Asciano has resolved its Broadacre obligations with the NSW Government and once the company hands over the rail assets it no longer intends to operate, the $70m Broadacre investment pledge would drop by $30m. As a consequence Asciano expects its obligations under the agreement to be wiped entirely within five years. Mr Rowsthorn said that the arrangements would benefit his embattled business by delivering an acceptable return. &#8220The NSW Government is to be commended on its leadership in ensuring that Asciano continues to invest in the NSW grain network, while also assisting in ensuring a commercially viable outcome for both Asciano and GrainCorp,&#8221 he said.

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