Keolis Downer keeps maintenance deal as Adelaide trains, trams go public

The Opposition has cried foul over a new “partnership” with private rail and tram operators which falls short of full return to the taxpayer.

Global rail operator Keolis Downer has won a maintenance contract as a sweetener for the state government tearing up its $2.14bn taxpayer deal to run train services.

The state government announced on Sunday that Keolis Downer will return the operation of drivers, network and timetable planning to the government by January 31, 2025. The company will also hand over customer services and security operations by June 2027.

As part of the deal, Keolis Downer will continue to maintain the train fleet and infrastructure until 2035.

That will cost taxpayers $30.5m for the first two years, but the cost of the deal from 2025-35 remains hidden because of “commercial in confidence”.

The former Liberal government awarded Keolis Downer the total management contract in 2020, but Labor made good on a threat to take back services and give the company nothing in compensation.

Penalty fees could have cost $94m, but Premier Peter Malinauskas said he was confident of winning a vote in both houses of parliament if MPs were faced with costing taxpayers so much money or legislating to tear up the deal at no cost.

Mr Malinauskas said on Sunday a take-it-or-leave-it “partnership” deal was put to the company as an alternative to a vote in parliament, which would have resulted in 100 per cent losses for its shareholders and no compensation.

“I was willing to … use the full force of the parliament to make sure we delivered our election commitment,’’ he said.

“Once Keolis Downer got that message they were willing to negotiate with us and we got this outcome.”

Before the 2022 election, Labor had warned all the bidding companies there would be no compensation.

Opposition Transport spokesman Vincent Tarzia said the side deal was a broken promise.

“This is a variation of the contract, not a termination as Labor promised, and will come at a cost to South Australian taxpayers,’’ he said.

The Opposition’s point was in part backed up by Keolis Downer in a written statement: “This partnership will continue in a different form”.

Transport Minister Tom Koutsantonis said the value of the maintenance contract from 2025 to 2035 would not be as much as the $30.5m two-year 2023-25 deal because that figure included significant start-up costs.

He said passengers would have no changes to services during the transition back to public hands.

Premier Peter Malinauskas & Transport Minister Tom Koutsantonis, holding a media conference re: trains and trams returning to public hands, with transport union members in attendance at Adelaide Railway Station. 2 April 2023. Picture Dean Martin

Tram operator Torrens Connect has also been forced to hand back operations by July 2025, trashing its 2021 deal.

The transition of trams will cost around $6m over two years and the company has also scored a far less expensive maintenance side deal.

Mr Koutsantonis said even without the side deals the taxpayer would have to pay for maintenance of the services.

But he said the taxpayer was saving $120m over the life of the contract because private operations were more expensive than the taxpayer-run service had been.

Mr Koutsantonis and Mr Malinauskas on Sunday had rare praise for the private companies, but Keolis Downer rejected an invitation to be at the joint government and union media conference on Sunday.

Rail, Tram and Bus Union branch secretary Darren Phillips said the deal was a “huge win” but the union had only been told on Saturday night and wanted more detail.

“South Australia’s trains and trams are coming home,” he said.

Around 130 workers – including valued train drivers — who did not find jobs with Keolis Downer and have since been in limbo are experted to return to the workforce.