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Aurizon: Australian rail network’s evolution from govt-owned to publicly listed firm

Mamuni Das New Delhi | Updated on January 24, 2018 Published on March 29, 2015

JAMES MOUTAFIS, V-P, Aurizon Operations

Freight carrier shows interest in investing in India

As Indian Railways looks to set the way forward for the dedicated freight corridor corporation, it could take a few lessons from Aurizon, a freight company of Australia’s Queensland Railway that got listed on the stock exchanges. Aurizon owns a 3,000-km network and earns network access charges from other operators.

The company, which is trying to evolve as a supply chain services provider, has dynamic tariff system with various customers, James Moutafis, Vice President-Strategy and Business Development, told BusinessLine during a recent visit. Excerpts:

Based on interactions with Indian Railways, what opportunity do you see?

We have had joint study groups, some of them assisted by the World Bank.

Our interest in Indian Railways is to see how they are going about their privatisation.

Our aim is basically in the possibility of controlling operations.

Some of the current attempts of the Railways are at attracting investments in infrastructure. We invest in infrastructure when we can operate that infrastructure.

Could you tell more about Aurizon’s journey?

We are primarily a rail operator, and have to come up with a cost curve per unit. We have to offer service to customers that improves their supply chain.

In the last four-five years that we have been privatised, we have been able to succinctly take a view on the cost per unit.

In government ownership, there are different kinds of pressures such as public and political interests.

As a result of privatisation, we have been able to become lot more efficient and lower our cost base.

Could you share the kind of long-term contracts you have with customers?

We have 3,000 km of track in Queensland, a monopoly track, and charge track access charges. We are also an operator parts of the country where we do not own the track.

At times we offer the entirety of solutions to customers, while at times, we offer rail operator solutions or the access to tracks. Customers include mining firms, coal and firms with agri-products.

What is the tenure of your contract with customers?

We have contracts that operate for 10 years – for example our mining contracts.

Some contracts range from five to ten years. We are in talks with GVK for infrastructure as well as train operations – these contracts could last for almost 30 years.

How much revenue comes through network access charges and how much through operations?

In very broad terms, 40 per cent is through network access and remaining through operations. However, it varies from customer to customer. For some it could be 20 per cent and for some there are no network access charges.

How do you determine the tariffs?

There is no standard way. For some, there is a network charge and train operations charge. Some customers simply ask for a cost per tonne. The trend is moving towards sophisticated customers seeking ways to reduce total cost of operations.

There was a reduction in staff after privatisation. Was it easy to downsize?

It is never easy. Use of technology helped lower costs. Also, most of the current network of Queensland rail exists since 1950s, built when the mining and coal boom kicked off — as a result of which the costs are depreciated and unit costs are low.

Could you share details of your low-cost long term funding agreement with China? Is this the first time that a rail company acquired a mining company?

We acquired Bao Steel – a Chinese mining company – as a part of which that we will would be building a rail network and a port, for which China’s banking entities would extend long term funding. It is the first time for us. In the short-term we will have a 15 per cent stake, in the medium term the desire is to split the rail and port and exit from the mining activity

Published on March 29, 2015
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