AusRAIL, Market Sectors

Toll North dispute could ‘end in break-up of Pacific National’

<p>Patrick has formally triggered dispute proceedings against Toll over rail freight contracts that could see the break-up of the Pacific National joint venture.</p> <p>The company told the Australian Stock Exchange this morning (Monday, September 5) that under the deadlock arrangements in the Pacific National joint venture agreement, there were now 14 days to reach an agreement.</p> <p>The two chief executives, Chris Corrigan and Paul Little, are required to meet within a month if there is still no agreement. </p> <p>Patrick started the formal dispute procedure after failing to get the Pacific National board to agree to appoint independent lawyers to investigate the contract. </p> <p>"This process has as its end point the breaking up of Pacific National", a Patrick spokesman said. </p> <p>If this point were reached, Pacific National’s assets would be auctioned off to the two shareholders by a sale facilitator, leaving Toll and Patrick to run their own rail operations. </p> <p>The Patrick spokesman did not believe that the ending of the joint venture would weaken Patrick: "We would have a chunk of it ourselves to run in our own way."</p> <p>Toll is expected to respond to the Patrick move later today.</p> <p>The dispute over freight contracts given to Pacific National by Toll North has been going on since last year. </p> <p>The row was due to be discussed at a PN board meeting on the very day that Toll made its offer for Patrick, with the meeting subsequently delayed until last week. </p> <p>Patrick claims the Pacific National joint venture has been "short changed" of up to $510m over 20 years in a take-or-pay contract signed between Pacific National and Toll North in August 2003 to move freight in northern Queensland. </p> <p>Patrick said the contract had not delivered because it was based on poorly advised and unrealistic assumptions, and had been presented to Pacific National directors for signing in haste. </p> <p>Pacific National would have to generate another $380m in revenue to make up the returns from the contract that the rail operator thought it was going to get, the company said. </p> <p>Patrick said Toll is benefiting from $84m in underestimated train crew costs, $68m in underestimated capital costs, and $33m in underestimated maintenance costs. It also says the contract has inflated capacity on the trains and prevents Pacific National from carrying any cargo except through Toll, at an estimated further cost of $130m. </p> <br />