US firm enters through WA grain rail deal

Watco wins 10-year CBH contract from 2012 in blow to ARG

By Rob McKay | December 14, 2010

US intermodal group Watco Companies is poised for a long-term entry into the Australian freight market, driven by a 10-year grain rail deal with Western Australian agribusiness CBH Group.

Predominantly a railway operator, Watco does conduct trucking and light truck and van operation in the US midwest, south and west through its ‘transload & intermodal services’ arm.

It expects to begin WA operations in May 2012, after CBH's existing contract with QR subsidiary Australian Railroad Group expires.

"We want to grow the rail business in Western Australia and we will do that by providing exceptional customer service," Watco Chief Commercial Officer Ed McKechnie says.

"We are committed to operating a safe and efficient railroad that creates value for growers.

"This is done by moving more tonnes to port and doing it through creativity and innovation."

"We believe our experience in grain transportation and the successful execution over 40 start-ups on railroads, rail car shops, switching operations and transload locations will be of significant value when commencing operations in Western Australia."

Despite the stated intentions, Watco will have to deal with historically neglected infrastructure that has only recently seen WA and Federal government investment and upgrade.

Then Transport Minister Simon O’Brien announced last month an additional $178.8 million towards the rural rail network and roads which secured the Federal Government’s contribution of $135million.

· rail re-sleepering works and rail siding upgrades to continue on the Tier 1 and 2 rail lines ($187.9million)

· improvements to Wheatbelt roads ($118.3million)

· continuation of a transition package to ensure rail transport remain competitive with road ($14.6million)

· a rail study ($500,000)

However, CBH Group Chief Executive Andrew Crane, who highlighted a $175 million rolling-stock investment as part of the deal, acknowledged previous underspending on the supply chain.

"Our decision to go to tender for the first time for our rail transport requirement has resulted in the introduction of competition for the first time in the Western Australian grain rail freight market and the first major investment in new rolling stock for decades," Dr Crane saays.

"We still need continued support and engagement with below-rail provider WestNet and the State Government to achieve an optimal outcome.

"However, subject to a satisfactory new track access agreement, and with the State and Federal Governments’ $350 million funding package, our planned investment means more than $500 million has now been committed this year to the grain transport network after decades of neglect."

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