$2 for $90m lease FA

realmakoym8 · Posted: Fri Jun 25, 2004 1:23 pm

http://www.heraldsun.news.com.au/common/story_page/0,5478,9948615%255E2862,00.html

$2 for $90m lease
Peter Mickelburough, state politics reporter
25jun04

THE US owner of Victoria's rail freight operations is threatening to sue after the State Government offered it $2 for a track lease it paid $90 million for.

Rail America leased thousands of kilometres of track for 45 years in 1999 as part of its $163 million purchase of the financially troubled V/Line Freight Corporation.
In documents seen by the Herald Sun, the company says the Department of Infrastructure demanded it surrender its lease for $1 plus a $1 consideration payment if it sells its operation as planned.

Rail America said it would lose more than $80 million on the pending sale of Freight Australia, the successor to V/Line Freight Corporation.

The Australian Competition and Consumer Commission is expected to rule on the sale to Pacific National, a joint venture of transport giants Patricks and Toll Holdings, within days.

Rail America executive chairman William Pagonis told Premier Steve Bracks in April that the $2 surrender demand had caused "significant damage" to the sale price.

"Rail America intends to complete the sale of Freight Australia, exit the international markets and focus on our North America franchise," a copy of the April 30 letter seen by the Herald Sun says.

"Clearly, if we are prevented from doing so we must seek alternative remedies to protect our shareholders from the very substantial financial damage caused by the department's actions."

The letter says the company paid $89.7 million for the long-term track lease in 1999 and has since invested more than $130 million in the operation.

Transport Minister Peter Batchelor said selling or relinquishing the track to the Government was not a condition of the proposed sale.

But public transport director Peter Harris was required under the lease to consider the public interest before approving the sale.

"(He) is considering a number of public interest issues, including ensuring open access, co-operation with the Government and other operators on infrastructure projects and a strong commitment to delivering safety and maintenance," he said.

An April 30 letter to Mr Harris from Rail America says the initial suggested sale price of $375 million was reduced after government officials told prospective buyers of the state's intention to "seize control" of the track.

The letter also accuses the Government of releasing confidential information to prospective buyers.

"The state interfered with our proposed commercial transaction by linking any consent to a surrender of the lease for $2," the letter says.

Opposition Leader Robert Doyle said government meddling would again leave taxpayers with expensive legal bills.

"Freight Australia must not turn into another Seal Rocks," Mr Doyle said, referring to the

$46.8 million in government legal costs and payouts associated with the Seal Rocks Sea Life Centre last year.

Freight Australia declined to comment yesterday.

There is only one way any building or object or structure could collapse strait down. You would have to remove the resistence below it.
The force of the building pushing up is greater than that of the part of the building falling down.

freightgate · Posted: Fri Jun 25, 2004 1:55 pm

My comments would include that freight Australia is already a Seal Rocks. It is a disaster in terms of return for Victoria.

What has Marinus spent the $130m on?

Please someone enlighten me.

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witsend · Posted: Fri Jun 25, 2004 3:11 pm

Can't be maintenance.

3 x G Class, Notch 8, Belair Station, 25km/h

Regards,

Samuel Wittwer
Member - LC of Yorke Peninusula Rail

former employee · Posted: Fri Jun 25, 2004 6:40 pm

realmakoym8 · Posted: Fri Jun 25, 2004 7:05 pm

Yes and giving that this an American company you could imagine the court circus thats going to follow.....

I say screw FA and pay your dues.

I cant buy a house and do nothing with it no maintenance etc and expect to sell it 5 years later for triple what I paid. (assuming a flat market with 2% growth). Industry has added value on customer margins but there is nothing new with FA. No new stock, locos, equipment and that work they have done has had a tax margin applied on capital investments. So you be FUBAR m8!

There is only one way any building or object or structure could collapse strait down. You would have to remove the resistence below it.
The force of the building pushing up is greater than that of the part of the building falling down.

Fireman Dave · Posted: Sun Jun 27, 2004 3:36 pm

Firstly you guys critsizing FA for not undertaking any maintenance to the BG network are forgeting 1 very important fact. When rail America bought Vline Freight it included to lease on the BG network, this included having to allow 3rd party access, but at a rate at which a return could be made on the investment. This right to "make money", for want of a better term, was removed by the Bracks government.
If I was Rail America I wouldn't want to spend large amounts of money on infrastructure so others can make money at my expence.
Also the reason FA has incresed in value is because as far as being an operator it has expanded and has a large number of contracts outside of Victoria, that Vline Freight didn't have.

Dave Malcolm
DRIVER, PN CMD

mjja · Posted: Mon Jun 28, 2004 12:51 pm

The limit on what FA could charge for track access was because Kennett didn't want them blocking the competition by "conveniently" putting the price of track access too high. It's just an illustration that government interference, even with the best intentions, can backfire.

I put a comment in the News section on this subject but I'll expand on it here:

What should happen is that Rail America/FA and the government should try to settle this out of court. FA should concede that the track today is not in as good condition as when they bought it. The government should concede that it's not nice to seize things off companies if you want to do business with them later. Then they should come to an agreement like "If you fix up the track by doing all the deferred maintenance to get it to the state it was in when you got it (or get it to some national standard of condition - if there is such a thing) then we'll buy it off you at the proper price."

But don't bet on anything.

Happy Gunzelling and remember, "Go by rail!"

Michael Angelico
President, Smart Passengers Inc
(My opinions are my own unless specifically stated.)

freightgate · Posted: Mon Jun 28, 2004 1:06 pm

ParkesHub · Posted: Mon Jun 28, 2004 1:24 pm

freightgate · Posted: Mon Jun 28, 2004 1:30 pm

freightgate · Posted: Mon Jun 28, 2004 1:32 pm

Further, I have heard of larger opportunities in places like Mildura (seen here and on grapevine) where FA is not even interested to the extent, they retrenched their marketing and sales people in Mildura.

I have never been up there, but understand it to be a large produce area which needs fast and reliable access to australia's ports for their produce.

Where is FA?

just let another operator in and start delivering service to customers.

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mjja · Posted: Mon Jun 28, 2004 1:40 pm

ParkesHub · Posted: Mon Jun 28, 2004 1:54 pm

freightgate · Posted: Mon Jun 28, 2004 1:59 pm

ParkesHub · Posted: Mon Jun 28, 2004 2:06 pm