Hark, is that a train I hear in
Larry Bannister from the Australasia
came to Tennant Creek to bring us up to date with the
latest developments with the Alice to Darwin railway project.
After the public meeting on the 7th of December,
he spoke with Paul Cockram about where we're at ...
Yes, we are definitely getting a train - with the announcement of the
Prime Minister on the 28th of October that the Commonwealth will be
putting in the additional $65 million to match the Northern Territory's
money and with South Australia's contribution.
What we've got is agreement in principle for the financial aspects of
the project, which is the core of the deal. We've still got a lot of
hard work ahead of us, another six months or a little less than that
because of the detailed contractual negotiations that we have to go
through. Fundamentally, we've got the money in place and the associated
risk allocations with that. The deal's done!
Do you mean that only the public money is in place?
The consortium has committed to $750 million and both their financial
advisors as well as our corporation's financial advisors have expressed
confidence that the project can be financed on the basis of the fundamentals
that we agreed on at the end of October.
Has it made any difference that under the Federal Government's new tax
regime, some of the accelerated depreciation benefits and other tax
breaks previously allowed for infrastructure projects are no longer
Indeed, the Ralph Report recommendations have abolished accelerated
depreciation but there are also proposals by the Commonwealth Government
that it will be replaced by a special project allowance. They haven't
gone into the detail of exactly what this will be.
Has a value ever been put on the Alice Springs to Tarcoola section?
Is that a gift from the people to the consortium?
Yes, it's an important part of the Commonwealth's contribution. You
can't just see their contribution to the project as being $165 million,
that in itself is a substantial amount, but they're also providing the
Tarcoola to Alice Springs railway at a peppercorn rental of a dollar
It was built between 1975 and 1980 and although I haven't a recent estimate
of what it might cost if it were built today. I did one a couple of
years ago and it was around $440 million.
One of the things that concerns some people is that if you sit by the
Stuart Highway and count the road trains going by, there aren't very
many and so it doesn't make much of a train.
In the early stages at least what freight will the train actually carry?
It's estimated it will carry some 1.2 million tonnes a year, from the
commencement of operations in 2003. That's very much a conservative
figure and the consortium's financial work is based on that base case.
With some assumptions in relation to growth, I think it's about 3% per
annum over a fifty year appraisal period, it is sufficient for there
to be a reasonable return on their investment over that period.
What that doesn't take into account is prospective freight, like growth
from mineral exports for example, growth from land-bridge trade - international
trade through the port of Darwin.
So it is viable, we've looked at it in terms of its economic viability,
which is a public measure of the railway and our latest estimates show
that it's got a cost benefit ratio of 1.88. That means that for every
dollar the Australian community spends on this project, they'll get
a return of $1.88.
In financial terms, I think the markets have spoken. The consortium
is prepared to do this project, they are putting in more than 60% of
its money, the financial resources required for this project and its
got the backing of Deutsche Bank and Macquarie Bank who both are confident
that the project can be financed on the current financial fundamentals.
There is a feeling in the town that we haven't been told anything, in
the sense of what it means logistically for Tennant Creek. For instance,
where the freight terminal will be and where the trucks cross the highway
if they're going to go east via Camooweal, that sort of thing.
The exact location of the freight terminal is yet to be decided and
Asia Pacific will look at that more carefully after Christmas. These
are matters of detail when you're dealing with the pile of contractual
documentation that we have at the moment. It's going to stand more than
a metre high by the time we've completed our negotiations. So the focus
has been very much on that level, that the specifics of the detailed
planning for the project will start falling into place from early next
year and those questions will be answered.
You mentioned freight crossing the Stuart Highway to get onto the Barkly
Highway. I guess it's going to travel exactly the same way as it does
right now. Why would that pattern be any different?
Well it depends on where the freight terminal is - if it's down to the
Well, it's expected to be to the south and the west of Tennant Creek.
Where the railway deviates from the Stuart Highway, it's in that vicinity
of Tennant Creek, within 3 or four 4 kilometres of Tennant Creek, but
still removed from the town so that the train operations will in no
way inconvenience Tennant Creek, although it will be right on it's door
There is a perception that we're just sitting around waiting to be told
about decisions that effect Tennant Creek, involve Transport and Works,
the Town Council and other people as well, about where the rail will
be built and where the terminal goes and how the roads are upgraded
between here and there and all that sort of thing. We don't want to
just be told by decree at the last minute.
No, of course not. Indeed there have to be consultations and that's
quite right. The operations, as I've said, will be removed from Tennant
Creek from that point of view and I wouldn't envisage there to be any
discernable change in the current pattern of road train movements.
Once the railway is operational, the road trains will be coming out
to the south of Tennant Creek, travelling through the town and then
turning down the Barkly Highway going east and vice versa, bringing
product in from the western districts of Queensland and through the
centre of town and down to the south to the rail head in Tennant Creek.
So, no real discernable difference.
Local participation in the project is as important a part of it as local
industry participation is. There will be communication and coordination
committees set up in each of the regional centres, including Tennant
Creek, and they will be a very important part of the operation, both
in construction, as well as in train operations.
I realise it would be the same for a while , but in the future, say
five or ten years from now when you start getting into land-bridging
and if the Port of Darwin goes to stage two and becomes one of the premier
ports of Australia, we're talking a lot of traffic.
If the eastern connection isn't built by rail, and it's quite likely
it won't be built for some time, then anything that gets off the train
to go east may well get off at Tennant Creek and be moved by truck across
Queensland or to wherever it's going, which means there will be a lot
of freight movements. Isn't that right? Isn't that part of the plan?
Well, the principle focus of the project over the foreseeable period
at least is going to be the Melbourne to Adelaide axis, linked into
the ports of central and northern Asia like Pusan in Korea and Hong
That's the principle focus, but who knows what market forces will dictate
in these terms. It may well be that some freight will travel down the
railway, be trans-shipped at Tennant Creek to go into the Brisbane market.
Nevertheless, you've got to recognise that the steaming time from Darwin
to the north Asian ports is not much less than it is from Brisbane to
those ports. So, in a sense, land-bridge into Brisbane is a competitor
with land-bridge into Darwin.
I think that a lot of that international freight into Brisbane will
go into Brisbane direct rather than into Darwin and then trans-shipped
at Tennant Creek and then across to Brisbane.
Relatively speaking, Brisbane, Sydney and Melbourne are all close together.
Doesn't that in some sense, negate the argument that Darwin will become
a bridging port at all?
Well, as I said, the principle focus for Darwin is the Melbourne to
Adelaide axis and in that sense, Darwin is very well positioned for
international trade, it's strategically positioned to service that market.
Suppose we take cars, Toyotas say, and they're going to Sydney or Melbourne.
If you're making them in Japan and putting them onto a ship, why would
you want to double handle them to get to where the market is? Why wouldn't
you just leave them on the ship and take it round to Sydney or Melbourne
and unload it there? What's the incentive to use this big, long train
that goes right down to the length and breadth of the continent?
Well, the international trade will be very successful when container
movements along the transport corridor reach, say a quarter of a million
containers or TEUs. You've got to keep it in perspective though, that's
only ten percent of the total Australian container market. So in that
sense, Melbourne and Sydney ports will remain large ports, no question
The focus of this project is on time sensitive high value commodities,
like motor vehicle parts. The way you assemble a motor vehicle these
days is a very sophisticated and complex thing.
One of the critical elements is to ensure your inventory costs are kept
to the very minimum. The consortium has got a total transport logistics
package, they don't simply wholesale transport. They provide customer
service door to door and in the case of motor vehicle parts for example,
these days factories don't keep much more than an hour's supply of parts
and they are critically time dependent.
The railway project will be providing that reliability and rapid transit
more so than sea and at a cheaper cost than air transport. Similarly,
products like chilled meats and horticultural products are high value
commodities that require rapid transport and they're the sort of niche
markets that this project will be targeting.
Apparently there are some sectors of Alice Springs, including the Town
Council, who are not that happy about a large amount of traffic going
through the Gap, because at the moment the freight trains just come
in and stop. Is it going to go through there or is it going through
The railway will go in through the existing route, into the current
freight terminal. You've got to remember that going out north of Alice
Springs, it's quite well removed from the residential areas there. We're
only talking two trains a day, one in each direction.
That's just for a few years though isn't it?
Yes. The movement of trains into Alice Springs is not going to be discernably
different to what it is today and Alice has had trains for seventy years.
In ten to fifteen years, it's expected that the frequency will increase
to something in the order of ten to twelve trains per week. On that
basis, you're not talking large scale, high frequency train movements
through Alice Springs.
Once it reaches frequencies considerably above that, it will be in everybody's
interest to build a bypass through Honeymoon Gap. But at an estimated
capital cost of $35 million to build that bypass today, it's hard to
see how that could be justified.
What about level crossings? Are you still in negotiations with Land
Councils or has that been pretty well sorted out?
The crossings have been sorted out pretty well in detail now. There
are going to be five grade-separated crossings along the highway - that's
where you have road crossings separated from rail crossings. The rail
will use a fly-over to get across the highway. With our open speed limit
on Territory highways, it's appropriate that they be built but for other
roads there will be much more modest crossings into Aboriginal communities,
pastoral properties and the like.
There are Australian design standards that you have to meet for all
types of crossings and it's dependent upon the frequency of vehicle
movements that determines the standard of the crossing.
What happens next for Tennant Creek, what are we waiting for?
There will be a Rail Industry forum in March where the consortium will
have much more detail. There'll be even more detail from its final design.
They'll be able to provide a lot of information to potential local industry
to participate in the project.
Construction, we expect to commence on or around the 1st of July 2000.
Work will start before then in Tennant Creek, I would expect things
like the concrete sleeper factory to be underway in the first part of
It's going to be quite busy times for the town. I think there's just
under a hundred employed in the so-called permanent camp, that is during
the construction years 2000, 2001 and 2002. As well, it will be a central
point for the servicing of the mobile camps because all of the camps
will move back through Tennant Creek to travel up and down the track.
In operations I think Tennant Creek is also going to take on a new focus
and get a boost because it'll be a rail head. Again, it's strategically
located and it can capitalise on that strategic location being at the
junction of the Stuart and Barkly highways with a major railway going
It's part of the package that the consortium is required to build a
terminal at Tennant Creek.
Is it true that the consortium aren't running the railway, they're just
a building a track and then leasing it to whoever?
No, the consortium are operating the trains as well. They have a train
operator in Genesee & Wyoming; they have a totally integrated logistics
provider in MPG Logistics and they are associated with Hutchinson Port
Holdings, one of the largest port operators in the world. Asia Pacific
has a construction side and an operation side in their consortium.
When the Ghan turns up in Alice Springs heading north, do the consortium
put their own drivers on?
No, the Ghan will negotiate, again that's market driven and it's a decision
for the consortium to make. They will charge the Ghan a fee to operate
their passenger services up and down the railway.
What's the BOOT scheme?
Build, Own, Operate, Transfer back scheme. It is increasingly being
used for major infrastructure projects with the private sector providing
publicly accessible infrastructure. It's increasingly the way governments
are doing those deals these days.
Look at freeways in Sydney, or at Suburban passenger services in Sydney,
or the Melbourne City Link freeway system. They've all been done under
a BOOT arrangement. It's using the sophistication and the lateral way
of financing projects that the private sector can bring, together with
the public sector. It's a public/private sector partnership.
In circumstances where the public sector is increasingly pulling back
and is unable to provide these quite expensive major infrastructure
projects, where tax payers are demanding lower taxes and that sort of
thing, you're seeing these private/public sector deals emerging. The
Australian market is a very sophisticated one, there are a number of
different packages that can be put together by the public sector, in
partnership with the private sector.
As tax payers, does that make us shareholders with Asia Pacific or do
we not actually get a return until the forty years are up and we get
the whole lot back?
Well, there are the public benefits that the railway's going to bring
immediately like employment, then for example, the environmental benefits
that this project will bring. It's going to save something like five
million tonnes of emissions over the fifty year appraisal period, which
is a substantial greenhouse saving. It's got defence benefits, it's
got developmental benefits, road maintenance savings on the Stuart Highway,
traffic accident cost savings both in lives and injury and property
damage. All of these things that the private sector can't capture. So
that's a legitimate reason in itself for the public sector to be putting
Importantly, it gets the asset back after fifty years and railways have
a hundred year life.
The public will own this railway in fifty years.
The philosophy of the NT government from the word go has been to facilitate
the project by the provision of government financial contributions up
front. Having paid those, it stands back and leaves the construction
risk and the operating risk to the private sector. From that point of
view it's not in the government's interests to become a shareholder.
It is a shame that for some decades, publicly owned railways have been
losing literally billions of dollars and that's a cost to you and I
as taxpayers. It's also behind the incentive and policy of the Federal
and State governments to privatise their railways, to get them off the
The fact of the matter is that Australian railways across the nation
for years, decades, have been losing billions of dollars a year, which
is a substantial drain on the public purse.\
Railways, in the United Kingdom for example, were once all privately
owned. They became fat and lazy late last century and early this century
and the public sector took them over. Now you'll find that the pendulum
has swung back and railways are being privatised.
In another fifty years time, perhaps the private sector railways will
become fat and lazy and the public sector will come to the fore again.
I don't see this in any partisan way, I take a very open view.
That's the way history has gone.