FreightLink sale: third time lucky?

<span class="" id="parent-fieldname-description"> The Adelaide-Darwin railway has been put up for sale for the third time by KordaMentha, the receivers of FreightLink. </span> <p>By Jennifer Perry</p><p>“We advertised on March 4th, although we have been talking to various parties for many months,” KordaMentha partner Martin Madden told <em>Rail Express.</em><br />Madden said that since commencing the formal sale process other potential parties had also shown interest, though it was too early to comment further on the sale. He declined to name the interested buyers.<br />Receivers were appointed in November 2008 after FreightLink was unable to obtain all of the required consents for a voluntary sale of the railway, with reported debts in excess of $500m.<br />Buyers have failed to come forward twice, though Madden reportedly said that the sale process had been “smacked by the global financial crisis”.<br />“Bidders in the prior sale process withdrew because of their own issues post-GFC such as funding availability,” he said.<br />“FreightLink was not ‘smacked’, indeed, it continues to perform exceptionally well and is servicing its senior debt obligations comfortably.”<br />Accounting for 90% of freight between Adelaide and Darwin, the 1420 km railway cost $1.2bn to construct, with $475m of this coming from state and Federal Government funds. Approximately half of FreightLink’s $900m investment into the railway was debt, something that chief executive John Fullerton believes could have been avoided.<br />“Like many Public Private Partnership (PPP) projects in Australia, getting the balance right between the amounts of government investment compared to private investment is the trick to ensure viability of the project at the commencement of operations,” Fullerton told <em>Rail Express</em> last year.<br />“It may be, if government had put in that extra one or two hundred million dollars the business could have been profitable from day one.”<br />FreightLink’s revenue will climb to a reported $123m this year from $71m three years ago. Future growth prospects are “very much tied” to minerals and the railway providing a low cost transport solution, Madden said.<br />He expects that the business will continue to grow as mining activity expands along the corridor.<br />The company currently has three major rail haulage contracts with AusMinerals, OM Holdings and Territory Resources. It operates 24 bulk trains a week between mine sites and the Port of Darwin and carries in excess of 3m tonnes of bulk freight, 800,000 tonnes of intermodal freight and 70,000 tonnes of bulk liquids per year.<br />&nbsp</p>