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Larsen states position on CBH deal

Paul Larsen, CEO Brookfield Rail. Photo: Oliver Probert

Brookfield boss Paul Larsen says he wants to see CBH commit to moving more of its grain by rail, as part of ongoing negotiations for a long term deal between the parties.

In an open letter published on Brookfield’s website, Larsen looked to “correct the public record”, and explain his position on the negotiations.

“Brookfield Rail, until the recent interim deal [with CBH], received between $1.8m and $4.5m in access fees a month (the equivalent of around $6.50 a tonne of grain),” Larsen wrote.

“This cost to CBH represents a relatively small portion of the overall supply chain costs that growers pay to get their crop to market and represents a minimal 2.5% of the ultimate market value of the grain.”

CBH and Brookfield came to terms on a temporary deal after CBH wagons were forced off the road for several hours in early May.

At the time, CBH complained it had been “backed into a corner” by the rail operator, which controls the WA network CBH needs to use to export its growers’ product.

But Brookfield argued the time had come for it to earn more money from CBH, a sentiment echoed in the recent letter from Larsen.

As well as hinting to increased fees, Larsen indicated the operator wants to see more business from CBH under a long term contract.

“Only 55-60% of each year’s grain harvest travels by rail to port with the remainder moved by road,” Larsen stated.

“The rail network has capacity and capability to do more and we want to see this share increase significantly.

“If CBH commits to move more grain by rail, transporting grain by rail will become more commercially viable than transporting grain by road – an outcome that will benefit not just growers but all Wheatbelt communities.

“If governments move to recover from the trucking industry the true cost of their usage of government owned regional roads, rail will be even more competitive,” he added.

Larsen said Brookfield and CBH had been working towards a long term deal since December 2013. With the current negotiation period due to end on June 24, he said his side is committed to coming to terms on a deal without resorting to “an arbitrated process”.

“However in doing so, we will not compromise on the safety and efficiency of the rail network,” he said. “Nor will we resile from the fact that access fees must increase to cover the basic costs of maintaining safe and efficient operations on our tracks for the long term, including re-opening the Tier 3 lines that CBH is seeking access to.”

The ‘Tier 3’ lines are among WA’s least-used. Brookfield says it cannot operate these lines without incurring extra costs, which will have to be passed down to users, like CBH.

“There are a number of ways in which to structure such an agreement, and we will continue to discuss the best way to achieve this at the negotiating table with CBH over the coming weeks,” Larsen resolved.

“Ultimately, we are committed to get more grain on rail.”

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