Aussie firm bids to keep Tranz Rail on the rails

By Graeme Kennedy

Friday 23rd November 2001

TONY SHEPHERD: Bidding for major rail and road contracts

Australian industrial out-sourcing giant Transfield Services is bidding for major New Zealand rail and road contracts to almost treble its business here in the next 12 months.

The company specialises in maintenance, operations and build, own, operate, transfer (Boot) sector work across a broad range of industries with about 20% of its $A3 billion contracts in hand and $A700 million annual revenues in transport.

Transfield's $120 million New Zealand contracts include refinery, housing and power line maintenance but it is seeking growth in the transport sector where it is currently two _ years into a 10-year Transit New Zealand contract to provide $8 million in maintenance and $2 million in capital works annually for the New Plymouth-Hamilton highway.

Deputy chairman Tony Shepherd said the company's biggest opportunity for expansion was with the $50 million a year contract to maintain Tranz Rail's tracks throughout New Zealand.

"If we get Tranz Rail, our New Zealand turnover would increase to about $200 million annually," Mr Shepherd said.

"Once we get that critical mass the easier it is to grow.

"We have a reasonable business here now but we need $200-$300 million to get the lift.

"Tranz Rail's is a highly competitive tender that has been going now for six months. We have had a big team here in New Zealand working on it and expect a decision by the end of the year.

"Tranz Rail is also out-sourcing maintenance of its rolling stock as a separate package, but we are interested in the track, which is an area in which we have been very successful in Australia.

"When we took over maintenance of South Australia tracks they had a terrible safety record of 50 to 60 injuries per million man-hours and we have reduced the rate to a little more than four - and reduced maintenance costs by 20-30% a kilometre.

"The contract here is the type that raises the need to perform well, a stick and carrot approach with key performance indicators which must be achieved and where both parties agree up-front to goals in quality, safety and reliability.

"The return is based on performance and that's the risk involved so you are motivated to achieve top performance for higher rewards but if you do a crook job you don't make any money - Tranz Rail asked for this type of contract and it is an enlightened approach."

Mr Shepherd said Transfield would take on all of Tranz Rail's 450 in-house maintenance staff if it won the contract.

The company is also bidding with Palmerston North firm Higgins Contracting for maintenance of the western Bay of Plenty's council and Transit NZ roading system in a 10-year contract worth about $15 million a year.

The project includes some capital works such as highway and bridge widening.

The roads carry heavy logging traffic and Mr Shepherd said the goals there would be to provide quality and safety, the same as for the New Plymouth-Hamilton works.

Transfield was also looking at establishing a rail extension from Oakley, south of Whangarei, to the new deep-water port at Marsden Point.

The link would be a Boot project in which the company would build and own the facility and charge a toll for a specified period, usually 30 years, before handing it to local or central government free of charge.

Mr Shepherd said local councils has shown keen interest as the rail link would replace about 500 logging trucks a day on the roads.

"We are also looking at the proposed $50 million Weiti toll bridge project connecting the main highway near Silverdale with Whangaparoa, north of Auckland," he said.

"We are in it with Fletchers and ABN Amro and it would be another Boot build.

"Weiti is attractive to us as it would give us a return on equity plus the long-term maintenance cash-flow that comes out of it.

"We have done a lot of Boot projects in Australia, including the Sydney Harbour Tunnel which opened in 1992 with a 30-year concession."

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