Concern over FreightLinks future as buyers line up

By: Jason Whittaker

Date: 02.07.2008

The Northern Territory branch of the Australian Trucking Association (ATA) says it is vital Adelaide to Darwin operator FreightLink continues

The Northern Territory branch of the Australian Trucking Association (ATA) says it is vital Adelaide to Darwin operator FreightLink continues to trade, but there are concerns it has a long-term future.

There is uncertainty over the future of FreightLink which has gone up for sale as a result of high debt levels and a failure to record a profit since beginning operations in 2004.

ATA NT Executive Officer Peter Goed says there was an exodus of trucking operators from Alice Springs when FreightLink began, meaning the trucking industry will not be able to pick up the slack if the rail operator goes under.

But while believing a buyer will be found, Goed is uncertain of FreightLink’s prospects because of its strong focus on minerals haulage.

"What happens when the mining boom ends," he says.

FreightLink has secured contracts carrying manganese ore and iron ore. Furthermore, it will soon begin hauling copper/gold concentrate from the Prominent Hill mine in South Australia.

But with FreightLink carrying the majority of freight along the Adelaide to Darwin corridor, trucking magnate Alan Scott says South Australia "can’t afford to lose" it.

"You know we can’t afford to lost it, we can’t afford to have it closed down and the banks are starting to call up the money, so something has to be done," Scott told the ABC.

"It's very important that it be kept going."

Scott’s and Toll are FreightLink’s biggest customers. A spokesperson for Toll confirms the company is working with Scott on a bid for the rail operator.

The transport giant tells ATN it’s "early days" but the companies are in discussions with FreightLink.

But any buyer will need to deal with FreightLink’s massive debt level, which was incurred when it began operating four years ago. It was set up at a cost of $1.3 billion, with funds coming from the South Australian, Northern Territory and federal governments.

According to The Australian, the South Australian Government will chase the $38 million owed to it if the sale proceeds.

Australasian Railways Association (ARA) Chief Executive Brian Nye says the amount of debt meant FreightLink would struggle to record a profit early on. While saying the prospects of the operator are good, he warns any company interested in purchasing FreightLink needs to remember it is a long-term investment that will take time to deliver decent returns.

The Australian reports the sale process has so far attracted 40 expressions of interest, with bidding ending in September.

A spokeswoman for FreightLink declined to comment on the sale of the company. ATN contacted UBS, which is handling the sale, but its calls were not returned.