Aurizon prepares to sell its Intermodal Division

 
  Nightfire Minister for Railways

Location: Gippsland
What is wrong with this Andrew Harding guy?
bevans
he Is disposing of a loss making part of their business.

Other rail companies / freight forwarders that use rail would have to compete In the open market to win any former Aurizon loading.

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  ParkesHub Chief Commissioner

Meanwhile, the conversion of the Aurizon terminals into Linfox continues at a brisk pace.
  BrentonGolding Chief Commissioner

Location: Maldon Junction
As long as Andew Harding remains CEO of Aurizon the threst of closure will not be a bluff...the closure will happen and the losses will be recovered through individual real estate and equipment sales.
Sulla1
Sulla, apart from the obvious bit about closing down a loss making part of the business (whether real or on paper manufactured loss) is this also about re-deploying assets, particularly motive power, into more profitable parts of the Aurizon business?

This might be a simplification but the way I see it Aurizon have won a heap of coal haulage contracts, probably take or pay, at better profit margins and pretty much guaranteed returns and instead of buying a heap of new MP they can transfer some of the existing across to better utilize them? This would also lower the risk to the business of buying more MP if the intermodal business had continued to lose money and / or been eroded by competitors like SCT.

BG
  Sulla1 Chief Commissioner

As long as Andew Harding remains CEO of Aurizon the threst of closure will not be a bluff...the closure will happen and the losses will be recovered through individual real estate and equipment sales.
Sulla, apart from the obvious bit about closing down a loss making part of the business (whether real or on paper manufactured loss) is this also about re-deploying assets, particularly motive power, into more profitable parts of the Aurizon business?

This might be a simplification but the way I see it Aurizon have won a heap of coal haulage contracts, probably take or pay, at better profit margins and pretty much guaranteed returns and instead of buying a heap of new MP they can transfer some of the existing across to better utilize them? This would also lower the risk to the business of buying more MP if the intermodal business had continued to lose money and / or been eroded by competitors like SCT.

BG
BrentonGolding

It's a bit hard to tell what will happen at the moment, particularly if the sale doesn't go ahead. Currently Aurizon's Bulk Division has 27 2800s in Queensland - which on paper should be enough to operate all Mt Isa trains and northern cattle services - however to date, Bulk has continued to use 4000s on the Mt Isa line. The existing spare capacity in the Bulk Fleet means that those 15-ish Mt Isa line 4000s could be transferred back to coal at any time, which could be Aurizon hedging its bets - I suspect they will be transferred during this year. If the 19 2800s assigned to the PN sale stay with Aurizon, then Aurizon may be forced to find a better way to use its 2800 fleet - it may be encouraged to use them on the cattle and grain services coming out of Central Queensland for example. I suppose it's not impossible for 2800s to find their way into coal service as well (but unlikely), or perhaps see transfers to Western Australia to standardise the Aurizon narrow gauge fleet. Of course, Aurizon may just opt to sell the spare 2800s along with the 300 or so intermodal wagons - all of which are less than 25-years old and reasonably valuable on the secondhand market.
  x31 Chief Commissioner

Location: gallifrey
When would we expect to hear anything about that Aurizon would do next?
  Sulla1 Chief Commissioner

When would we expect to hear anything about that Aurizon would do next?
x31

Aurizon has told investors it will have resolved the sale or closure by the end of the financial year...with Andrew Harding's "crash through or crash" style, I would expect that timetable will be adhered to.
  fzr560 Chief Train Controller

When you start announcing that the regulator is incompetent it may be more crash than crash through.
  bingley hall Minister for Railways

Location: Last train to Skaville
When you start announcing that the regulator is incompetent it may be more crash than crash through.
fzr560

The regulator only responds to concerns from other parties.

The majority of those concerns will emanate from private sector companies. So we can assume the incompetence goes hand in hand  Razz
  james.au Chief Commissioner

Location: Sydney, NSW
The press gods are delivering today....

Rumors of ACCC about to block Aurizon intermodal sale to PN.

https://www.afr.com/business/the-acccs-lights-are-flashing-red-on-aurizons-220m-freight-retreat-20180614-h11e1s

I do love AFR reporting of the issues.  So much more good information.
  Sulla1 Chief Commissioner

The press gods are delivering today....

Rumors of ACCC about to block Aurizon intermodal sale to PN.

https://www.afr.com/business/the-acccs-lights-are-flashing-red-on-aurizons-220m-freight-retreat-20180614-h11e1s

I do love AFR reporting of the issues.  So much more good information.
james.au

The ACCC is kidding itself that it thinks it will tell Andrew Harding what to do. As with his stoush with the QCA proves, he'll shut down the Queensland operations if he doesn't get his way and be damned with the ensuing chaos. The Bruce Highway will be the main beneficiary of any ruling ACCC makes against the Aurizon/PN Deal, pure and simple. PN could take years to double its haulage capacity to take on all of the Aurizon contracts, and it's reasonable to assume many of the those contracts will stay on road once they end up there.
  br30453 Chief Train Controller

The press gods are delivering today....

Rumors of ACCC about to block Aurizon intermodal sale to PN.

https://www.afr.com/business/the-acccs-lights-are-flashing-red-on-aurizons-220m-freight-retreat-20180614-h11e1s

I do love AFR reporting of the issues.  So much more good information.

The ACCC is kidding itself that it thinks it will tell Andrew Harding what to do. As with his stoush with the QCA proves, he'll shut down the Queensland operations if he doesn't get his way and be damned with the ensuing chaos. The Bruce Highway will be the main beneficiary of any ruling ACCC makes against the Aurizon/PN Deal, pure and simple. PN could take years to double its haulage capacity to take on all of the Aurizon contracts, and it's reasonable to assume many of the those contracts will stay on road once they end up there.
Sulla1
The ACCC live in a "ivory tower" and have no idea as to what real competition is.
The competition is between rail and road.
  james.au Chief Commissioner

Location: Sydney, NSW
I think the QCA and ACCC are totally different organisations with totally different decisions.

THe QCA decision is one that is made every 5 years and so I suspect the QCA team may not have broad skills to deal with it which probably explains why it is in the mess it is.  The ACCC on the other hand go through competition decisions day after day and I would think they have seen these sort of facts many times before.

I cant believe that the ACCC will allow the two biggest rail operators (in this case the only two operators) cut a deal between themselves that allows one to create a monopoly, and the other to exit a loss making business whilst getting top bucks for the assets.  PN is more than happy to pay a premium for this to allow it to have a nice cozy monopoly for itself.  We are seeing that it is not very easy (because of the gauge) for new entrants to neutralise monopolies in the Qld rail haulage in an efficient way (eg Mt Isa line) and so you cant expect this monopoly to be short term,

This to me smells of collusion, and a sale process that would make the involvement of a third party (eg QUBE/SSR etc) next to impossible.  Which is anticompetitive and not good for consumers.

For this reason, I think that the ACCC has to oppose this.  It also has to do it because it needs to show that it cannot be held over a barrel by two companies with a threat to flood the market.

Also, if Aurizon has to shut down the business instead of sell to PN, what does this mean for the assets?  They'll have to be sold somewhere.  Yes this will be less than what Aurizon wants, but we have numerous examples on this board of Aurizon having potentially excessive expectations on what contract margins and asset values are and losing out to competition.  Perhaps they will have to go through this process again and sell to their less favoured option, which is better than into a monopoly.  They strike me as quite an arrogant company with these expectations.

People are saying that the competition is road here.  Well, if PN gets the monopoly it is going to have a similar affect.  The prices will go up, and the services go down, to suit PN earning lots of margin.  People will be forced onto road anyway.

No, the market is in my view best served by two rail operators instead of one.  The ACCC needs to act to make Aurizon take another path.

Finally, if the business does go to road and it becomes a string of potholes, then in the long run that may be a good thing.  It might focus attention of the Qld and Federal government on the importance of good rail and investments may be made to improve it to make it a more competitive platform.
  nswtrains Chief Commissioner

I think the QCA and ACCC are totally different organisations with totally different decisions.

THe QCA decision is one that is made every 5 years and so I suspect the QCA team may not have broad skills to deal with it which probably explains why it is in the mess it is.  The ACCC on the other hand go through competition decisions day after day and I would think they have seen these sort of facts many times before.

I cant believe that the ACCC will allow the two biggest rail operators (in this case the only two operators) cut a deal between themselves that allows one to create a monopoly, and the other to exit a loss making business whilst getting top bucks for the assets.  PN is more than happy to pay a premium for this to allow it to have a nice cozy monopoly for itself.  We are seeing that it is not very easy (because of the gauge) for new entrants to neutralise monopolies in the Qld rail haulage in an efficient way (eg Mt Isa line) and so you cant expect this monopoly to be short term,

This to me smells of collusion, and a sale process that would make the involvement of a third party (eg QUBE/SSR etc) next to impossible.  Which is anticompetitive and not good for consumers.

For this reason, I think that the ACCC has to oppose this.  It also has to do it because it needs to show that it cannot be held over a barrel by two companies with a threat to flood the market.

Also, if Aurizon has to shut down the business instead of sell to PN, what does this mean for the assets?  They'll have to be sold somewhere.  Yes this will be less than what Aurizon wants, but we have numerous examples on this board of Aurizon having potentially excessive expectations on what contract margins and asset values are and losing out to competition.  Perhaps they will have to go through this process again and sell to their less favoured option, which is better than into a monopoly.  They strike me as quite an arrogant company with these expectations.

People are saying that the competition is road here.  Well, if PN gets the monopoly it is going to have a similar affect.  The prices will go up, and the services go down, to suit PN earning lots of margin.  People will be forced onto road anyway.

No, the market is in my view best served by two rail operators instead of one.  The ACCC needs to act to make Aurizon take another path.

Finally, if the business does go to road and it becomes a string of potholes, then in the long run that may be a good thing.  It might focus attention of the Qld and Federal government on the importance of good rail and investments may be made to improve it to make it a more competitive platform.
james.au
Aurizon should never have happened in the first place. Smacked of that old Peanut Farmers delusional visions (totally mad).
  neillfarmer Chief Train Controller

I think the QCA and ACCC are totally different organisations with totally different decisions.

THe QCA decision is one that is made every 5 years and so I suspect the QCA team may not have broad skills to deal with it which probably explains why it is in the mess it is.  The ACCC on the other hand go through competition decisions day after day and I would think they have seen these sort of facts many times before.

I cant believe that the ACCC will allow the two biggest rail operators (in this case the only two operators) cut a deal between themselves that allows one to create a monopoly, and the other to exit a loss making business whilst getting top bucks for the assets.  PN is more than happy to pay a premium for this to allow it to have a nice cozy monopoly for itself.  We are seeing that it is not very easy (because of the gauge) for new entrants to neutralise monopolies in the Qld rail haulage in an efficient way (eg Mt Isa line) and so you cant expect this monopoly to be short term,

This to me smells of collusion, and a sale process that would make the involvement of a third party (eg QUBE/SSR etc) next to impossible.  Which is anticompetitive and not good for consumers.

For this reason, I think that the ACCC has to oppose this.  It also has to do it because it needs to show that it cannot be held over a barrel by two companies with a threat to flood the market.

Also, if Aurizon has to shut down the business instead of sell to PN, what does this mean for the assets?  They'll have to be sold somewhere.  Yes this will be less than what Aurizon wants, but we have numerous examples on this board of Aurizon having potentially excessive expectations on what contract margins and asset values are and losing out to competition.  Perhaps they will have to go through this process again and sell to their less favoured option, which is better than into a monopoly.  They strike me as quite an arrogant company with these expectations.

People are saying that the competition is road here.  Well, if PN gets the monopoly it is going to have a similar affect.  The prices will go up, and the services go down, to suit PN earning lots of margin.  People will be forced onto road anyway.

No, the market is in my view best served by two rail operators instead of one.  The ACCC needs to act to make Aurizon take another path.

Finally, if the business does go to road and it becomes a string of potholes, then in the long run that may be a good thing.  It might focus attention of the Qld and Federal government on the importance of good rail and investments may be made to improve it to make it a more competitive platform.
Aurizon should never have happened in the first place. Smacked of that old Peanut Farmers delusional visions (totally mad).
nswtrains
Had nothing to do with that delusional peanut farmer. He actually built a solid rail system that he then used to milk the miners to bolster the state budget. It was the delusion political arm of the AWU that run up such horrendous debts that they sold it all out to the highest bidder. I think we all agree that the sale was badly structured but the now Bankers Association CEO could only see the $s.
  Sulla1 Chief Commissioner

I think the QCA and ACCC are totally different organisations with totally different decisions.

THe QCA decision is one that is made every 5 years and so I suspect the QCA team may not have broad skills to deal with it which probably explains why it is in the mess it is.  The ACCC on the other hand go through competition decisions day after day and I would think they have seen these sort of facts many times before.

I cant believe that the ACCC will allow the two biggest rail operators (in this case the only two operators) cut a deal between themselves that allows one to create a monopoly, and the other to exit a loss making business whilst getting top bucks for the assets.  PN is more than happy to pay a premium for this to allow it to have a nice cozy monopoly for itself.  We are seeing that it is not very easy (because of the gauge) for new entrants to neutralise monopolies in the Qld rail haulage in an efficient way (eg Mt Isa line) and so you cant expect this monopoly to be short term,

This to me smells of collusion, and a sale process that would make the involvement of a third party (eg QUBE/SSR etc) next to impossible.  Which is anticompetitive and not good for consumers.

For this reason, I think that the ACCC has to oppose this.  It also has to do it because it needs to show that it cannot be held over a barrel by two companies with a threat to flood the market.

Also, if Aurizon has to shut down the business instead of sell to PN, what does this mean for the assets?  They'll have to be sold somewhere.  Yes this will be less than what Aurizon wants, but we have numerous examples on this board of Aurizon having potentially excessive expectations on what contract margins and asset values are and losing out to competition.  Perhaps they will have to go through this process again and sell to their less favoured option, which is better than into a monopoly.  They strike me as quite an arrogant company with these expectations.

People are saying that the competition is road here.  Well, if PN gets the monopoly it is going to have a similar affect.  The prices will go up, and the services go down, to suit PN earning lots of margin.  People will be forced onto road anyway.

No, the market is in my view best served by two rail operators instead of one.  The ACCC needs to act to make Aurizon take another path.

Finally, if the business does go to road and it becomes a string of potholes, then in the long run that may be a good thing.  It might focus attention of the Qld and Federal government on the importance of good rail and investments may be made to improve it to make it a more competitive platform.
james.au

There's no doubt the ACCC and QCA are two different organisations with different experience, however, having won concessions from the QCA, Andrew Harding will be emboldened to take on the ACCC and play hard ball. All the cards are in his hand, he can sell assets to PN, or sell assets to scrappers. He fully intends to remove Aurizon from the intermodal market and will move to do so regardless of the ACCC, and at the peril of the employess and customers who would have transferred to PN in this deal. As is often lost in these rail-based arguements, rail cannot monopolise intermodal in Queensland. The Mt Isa Line/Flinders Highway corridor debacle proves road can compete with rail and win, the same is applicable to the North Coast Line/Bruce Highway corridor. A single rail operator hauling containers will not be able to monopolise pricing with the parallel highway and coastal shipping able to quickly take advantage of dissatisfied customers, and the ACCC would do well to consider that before Aurizon's intermodal staff are made redundant. Rail customers are not welded to the use of rail, this has not been the case for decades - they will make their shipping decisions based on price, delivery times or reliability - and rail rarely achieves all three of these in any general freight market.
  james.au Chief Commissioner

Location: Sydney, NSW
Ive said that in my post. If PN gets it, or if Aurizon shuts it down through scrapping* we get to the same outcome - more freight on roads.  If ACCC takes action to prevent these, and creates a pathway for sale to another operator, rail keeps its current position (or wins, eg if SCT was to become interested)

* I doubt Aurizon will want to scrap assets here.  They are wanting a high asset value to make their returns on capital.  I'm pretty sure that scrapping them would not achieve a good return on capital, and they would prefer to sell them to other operators than scrap them.
  LancedDendrite Chief Commissioner

Location: Gheringhap Loop Autonomous Zone
I suspect that the ACCC will ask for something like the locomotive + wagon 'starter pack' that PacNat had to provide when it bought Freight Australia, so that there will be a lower cost of entry for a second Queensland intermodal rail operator should that occur in the future. Perhaps some open-access terminal provisions as well.
  james.au Chief Commissioner

Location: Sydney, NSW
I suspect that the ACCC will ask for something like the locomotive + wagon 'starter pack' that PacNat had to provide when it bought Freight Australia, so that there will be a lower cost of entry for a second Queensland intermodal rail operator should that occur in the future. Perhaps some open-access terminal provisions as well.
LancedDendrite
Yes that thought came to mind too after my post.  I might go looking for any ACCC or predecessor rulings and see if there is any similarities.
  Sulla1 Chief Commissioner

Ultimately this will be a personality war. Andrew Harding will not agree with an ACCC ruling unless it suits him. Unlike the Freight Australia/PN purchase, Option B is closure. The ACCC cannot prevent a company shutting down a division for commercial purposes - otherwise everything from the last car factories and power stations in various states would be still running. As long as Harding is prepared to close the intermodal division then the ACCC will find it very difficult to sucessfully impose conditions on the PN sale.
  james.au Chief Commissioner

Location: Sydney, NSW
Ultimately this will be a personality war. Andrew Harding will not agree with an ACCC ruling unless it suits him. Unlike the Freight Australia/PN purchase, Option B is closure. The ACCC cannot prevent a company shutting down a division for commercial purposes - otherwise everything from the last car factories and power stations in various states would be still running. As long as Harding is prepared to close the intermodal division then the ACCC will find it very difficult to sucessfully impose conditions on the PN sale.
Sulla1
Depends on how badly Aurizon (and PN) needs this sale.  How is Andrew Harding's own reputation with the board going at the moment?
  fzr560 Chief Train Controller

Ultimately this will be a personality war. Andrew Harding will not agree with an ACCC ruling unless it suits him. Unlike the Freight Australia/PN purchase, Option B is closure. The ACCC cannot prevent a company shutting down a division for commercial purposes - otherwise everything from the last car factories and power stations in various states would be still running. As long as Harding is prepared to close the intermodal division then the ACCC will find it very difficult to sucessfully impose conditions on the PN sale.
Depends on how badly Aurizon (and PN) needs this sale.  How is Andrew Harding's own reputation with the board going at the moment?
james.au
Neither need the sale. Aurizon are focused on coal and Intermodal is a minor irritation. PN have a successful intermodal business and could reasonably expect to gain several significant intermodal contracts in the short term, regardless of any action by regulators.
  james.au Chief Commissioner

Location: Sydney, NSW
Ultimately this will be a personality war. Andrew Harding will not agree with an ACCC ruling unless it suits him. Unlike the Freight Australia/PN purchase, Option B is closure. The ACCC cannot prevent a company shutting down a division for commercial purposes - otherwise everything from the last car factories and power stations in various states would be still running. As long as Harding is prepared to close the intermodal division then the ACCC will find it very difficult to sucessfully impose conditions on the PN sale.
Depends on how badly Aurizon (and PN) needs this sale.  How is Andrew Harding's own reputation with the board going at the moment?
Neither need the sale. Aurizon are focused on coal and Intermodal is a minor irritation. PN have a successful intermodal business and could reasonably expect to gain several significant intermodal contracts in the short term, regardless of any action by regulators.
fzr560
Stands to reason then that if PN is denied the sale, or purchase of subsequent assets, that Aurizon will turn to next best offers, eg QUBE as mentioned int the AFR, which could maintain those contracts.  I doubt Aurizon would hold onto the assets to spite the ACCC.
  Sulla1 Chief Commissioner

Ultimately this will be a personality war. Andrew Harding will not agree with an ACCC ruling unless it suits him. Unlike the Freight Australia/PN purchase, Option B is closure. The ACCC cannot prevent a company shutting down a division for commercial purposes - otherwise everything from the last car factories and power stations in various states would be still running. As long as Harding is prepared to close the intermodal division then the ACCC will find it very difficult to sucessfully impose conditions on the PN sale.
Depends on how badly Aurizon (and PN) needs this sale.  How is Andrew Harding's own reputation with the board going at the moment?
Neither need the sale. Aurizon are focused on coal and Intermodal is a minor irritation. PN have a successful intermodal business and could reasonably expect to gain several significant intermodal contracts in the short term, regardless of any action by regulators.
Stands to reason then that if PN is denied the sale, or purchase of subsequent assets, that Aurizon will turn to next best offers, eg QUBE as mentioned int the AFR, which could maintain those contracts.  I doubt Aurizon would hold onto the assets to spite the ACCC.
james.au

We shouldn't confuse what makes good sense to us with what Andrew Harding will do. He has agendas his board has so far given him a free hand to pursue. Busting the regulators appears to be one of those agendas. He may well decide to sell the intermodal rollingstock to a third operator if the money is good, but I wouldn't expect this will happen simply because it's the logical thing to do. Keep in the mind a successful $220-million sale to PN (or another party) will only represent around 6.4% of Aurizon's annual revenues, so the equipment could just as easily be written off as a loss if that's how he decides he wants to play.
  jakar Assistant Commissioner
  M636C Minister for Railways

As well as many yellow containers still lettered "Aurizon", (and a few with the name removed) SCT's MB9 and BM9 trains have been running with red painted QQCY five pack single level container wagons. Five QQCY sets were noted on 6BM9 two weeks ago. You have to look, since SCT's own five packs are also red. Some QQCYs were grey, and none of those have been seen on SCT trains, by me at least.

(Maybe SCT always owned the red QQCY wagons?)

Peter

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