AusRAIL, Market Sectors

Freight Link calls for major new investor to take over

<p>Alice-Darwin rail operator Freight Link has jumped into the rail sale fray, calling for $360m from new investors in exchange for an equity stake in the railway.</p> <p>The size of the stake will be negotiated once the new cash has been offered. </p> <p>Rail industry experts said that the deal would have to be priced against QR’s and Babcock and Brown’s purchase of ARG, with QR buying the above ground rail business for $450m.</p> <p>Freight Link and the track operator and lessee Asia Pacific Transport are to be merged together for the stake sale. The $360m figure is expected to add up to a majority stake in the combined operation. </p> <p>The railway cost $1.4bn to build, including a $460m grant from federal and state governments. </p> <p>Freight Link has a large number of relatively small investors involved in building and financing the project, including Barclay Mowlem with 13.9%, John Holland with 11.4%, Macmahon with 7%, as well as National Asset Management, and Colonial First State.</p> <p>US engineering giant Kellogg Brown and Root is the largest shareholder in Freight Link with 36%. </p> <p>It is expected that a lot of smaller shareholders will exit as a result of the stake sale. </p> <p>Freight Link has got in before Toll has to sell off 50% of Pacific National, expected to go for around $1.2bn, and which has to take place within nine months of settling the Patrick purchase. </p> <p>Freight Link already has 85% of the freight business on the Adelaide-Darwin route.</p> <p>It lost $53m in 2004&#4705, which still included considerable ramp-up costs. </p> <p>This year, the railway began moving road fuel tankers on specially built rolling stock, and more importantly began moving bulk minerals from the OM manganese mine at Tennant Creek.</p> <p>Future business growth is expected to come from more mineral development along the route in South Australia and the Northern Territory.</p> <p>Media speculation suggests that infrastructure and rail players such as Toll, Babcock and Brown, QR, Macquarie, and Hastings Fund Management might be interested depending on ACCC approval. </p> <p>The funds will be used for both expansion and retiring debt. </p> <br />