Tuesday 29th Sep, 2020

Construction teams benefit from leasing model

Photo: CFCLA

CFCL Australia’s Matthew Roberts says more construction consortiums are relying on leasing the equipment they need to deliver projects on time and under budget.

 


CFCL Australia (CFCLA) has fingers in many pies when it comes to rail asset leasing. From a large fleet of locomotives, to wagons servicing a range of industries, to heavy machinery capable of laying and maintaining track, CFCLA can service the needs of just about any rail owner or operator.

One thing CFCLA is not, however, is a rail operator. “We don’t want to compete with our customers,” CFCLA Rollingstock Operations Manager, Matthew Roberts, explains to Rail Express. “We want to work with them and provide them with a stakeholder who’ll take a long-term approach to the rollingstock they rely on.”

Supplying rail operators with locomotives and wagons has been a core business for CFCLA for more than 20 years. Its fleet in Australia includes 78 locomotives and roughly 1,700 wagons, including intermodal, grain, and bulk. Its core business is leasing those pieces of rollingstock to operators and shippers, so they can do their business without taking on the burden of long-term ownership.

But Roberts says an increasing source of work for CFCLA in recent years has been large consortiums and construction firms who are bidding for major contracts to build new infrastructure.

“There are more companies coming to us that aren’t rail operators; they’re the people going out to try to win big projects,” he says. “Obviously, we think everyone should lease, but in the past, it would have just been the rail operators. Now, it’s the consortiums coming to us.”

The benefits of leasing to these firms are simple: it means they don’t actually need to own all the equipment they need to bid for any given project, and once they win such a project, they don’t need to buy it. “The thing is, jobs of that scale might only come up every few years for any given company,” Roberts explains. “Between jobs you’ve got to be able to store the equipment for long periods. When we buy a locomotive, it’s got to have over a 35- to 50-year life cycle, maybe even longer. Wagons are the same. Whenever we buy anything, we always take the long-term ownership view.

“When a project consortium comes together, they want to get that job done and then disperse. Through a leasing model we essentially hold the equipment, and then bring it out again for the next job. That also means we’ll keep the expertise we need to maintain that fleet.”

Further simplifying things, CFCLA has its own accreditation with the Office of the National Rail Safety Regulator, so customers know a high standard is being maintained across the fleet. “That means when they take our equipment, and we sign off to say it’s ready to go, they can be sure that it’s ready to go.”

A typical contract will include, in CFCLA’s fee, all the necessary maintenance on the locomotives and the wagons. Lessors can find comfort knowing it’s in CFCLA’s best interest to do a good job of that, too, and CFCLA will even activate its flexible workforce to set up shop in close proximity to a project, if it’s being done in a remote place.

One example of this was for John Holland’s construction of the Roy Hill railway in the Pilbara. CFCLA supplied heavy equipment for that work, and supported that contract with a team on the ground to keep the equipment maintained.

CFCLA recently put together two locomotives and a ballast rake for work on the Inland Rail construction project from Parkes to Narromine, and Roberts says the company is well-equipped to do more of that work as the project ticks along. “We’ve got the rail equipment that was used to make the Roy Hill line a couple of years ago,” he says, “equipment that can build a greenfield railway. We’d anticipate that could help assist with the Inland Rail project.”

Growing business

Increased interest from construction teams is a welcome growth area for CFCLA, but the company still does well with its core business leasing locomotives and wagons to shippers and operators.

The CFCLA fleet operates across the national standard gauge network, including locomotives and rail maintenance trains in the Pilbara Region, servicing iron ore rail operators.

When it comes to general freight, Roberts notes some specific contracts are shorter build, such as solar power station construction or other project work.

While CFCLA can handle these short term contracts, he says it can also offer improved economies to customers in the longer term.

“When it comes to general rail freight, contracts can be shorter, or they can be a five- or a seven-year contract,” Roberts says. “Regardless of contract length, it’s better for them to come and lease it from us. At the end of the contract, if they don’t win it again, we’ll take the assets back, for them to be maintained in the long-term.”

The synergy then for CFCLA is if a contract changes hands from one rail operator to another, CFCLA can simply offer the assets to the new contract holder, and an easy transition can be made.

In terms of the impact Inland Rail will have on the freight market, Roberts doesn’t expect a sudden increase in demand for CFCLA’s services; instead he expects steady growth over time.

“I think it will take time,” he says. “The way freight transport works, it might take three years for contracts to end and more freight to move from roads to rail. But we’re there to help with that transition, and to take on the role of rollingstock supplier in the long-term. Should an operator or shipper need to ramp up slowly to multiple trains or locomotives and wagons we are there to help a business as it grows.”

CFCLA’s newest locomotives are the CM Class, built by Motive Power (Wabtec) in Boise, Idaho. The fleet also includes locomotives from other North American firms EMD and GE. The key benefit of this, Roberts explains, is the US-built machines are already accredited for use in Australia. “Ours were out running the moment they arrived,” he says.

Notably, a significant portion of CFCLA’s wagon fleet was built in Adelaide, the site of the larger of two CFLCA Maintenance workshops – the other being in Goulburn. CFCLA Maintenance is not only used to maintain CFCLA’s fleet but also services locomotives and wagons owned by other companies, including passenger rollingstock like The Ghan and the Indian Pacific, which are worked on in Adelaide.

“We do passenger car work, locomotive work, wagon work, track maintenance equipment work. Being positioned in Adelaide, in particular, means we’re able to work on rollingstock being used on the east-west and the north-south corridors,” Roberts concludes.

 

Contact: cfcla.com.au


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