Aurizon signs $1.8bn deal with Team Global Express to expand national freight haulage
Aurizon has taken a big step forward in its plans to reduce its rail business in coal, signing a $1.8bn haulage contract with logistics group Team Global Express.
Aurizon has taken a big step forward in its plans to reduce its rail business in coal, signing a $1.8bn contract with logistics group Team Global Express that will result in the company hauling goods for some of the biggest companies in Australia.
The contract will turn Aurizon into the transnational hauler of choice for TGE, formerly known as Toll Global Express, replacing a 20-year relationship TGE had with Pacific National.
And with Aurizon promising to spend $280m to expand its infrastructure and rolling stock to meet the contract’s demands – and include room for growth – TGE chief executive Christine Holgate said she believed the deal could lead to a substantial increase in the amount of freight dedicated to rail.
Aurizon will dedicate five rail services for TGE transnational services between Melbourne, Sydney, Adelaide and Perth, and two services between Melbourne and Brisbane.
Aurizon managing director Andrew Harding said the agreement would double the amount of freight the company carried on its national networks within a year, to about 100,000 Twenty-Foot Equivalent Units (TEUs).
Mr Harding said TGE’s historical freight volumes would take up only about 70 per cent of the capacity of the new services, allowing plenty of room for growth for both Aurizon and TGE – which is the biggest rail freight forwarder in the country, according to Ms Holgate, and already accounts for about 25 per cent of the national market.
“We will transition our customers from one provider to a new provider. We then have the opportunity to work with customers to actually put more of their freight up onto rail,” Ms Holgate said.
Ms Holgate said the expansion of its rail business would not only allow more timely delivery of some products, but would also reduce the company’s carbon emissions. She said Aurizon’s promise to lift the capacity of its fleet and infrastructure would help meet pent-up demand for rail services.
“Most of our big rail links almost operate today as a monopoly, there’s actually very limited choice. And if we wanted to move from that previous provider we were kind of hamstrung because they were the only one who could take our scale and volume,” she told The Australian. “We wanted to move more stuff to rail, but there was a limited market and now we have the capacity to do it.”
Aurizon has been looking for ways to expand its non-coal bulk haulage business for some time, with the company having previously outlined an ambition to double the size of its non-coal business by the end of the decade.
Mr Harding said the TGE contract was a big step towards that goal.
“We’ve got a lot of room to grow and TGE also has aspirations to grow, so that remaining 30 per cent can actually get filled up by TGE growth over time. Or, obviously, it’s open to the market to fill the back of the train and that’s quite a substantial opportunity as well,” he said.
Aurizon also said on Monday it had won clearance from the ACCC for the $425m sale of part of its east coast coal business to Magnetic Rail Group. The haulage business was part of the company’s $2.4bn acquisition of OneRail, and Aurizon agreed to divest the unit to win ACCC agreement of the overall deal.
The rail provider last week cut its earnings guidance on the back of lower volumes caused by bad weather, and a Queensland rail accident that caused a two-week disruption of haulage on its Blackwater line in Queensland – which carries about 20 per cent of Australia’s coal exports.
Aurizon shares closed up 0.6 per cent, or 2c, on Monday at $3.44.
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