THE WORLD BANK GROUP WASHINGTON, D.C. TP-7 TRANSPORT PAPERS SEPTEMBER 2005 Public Disclosure Authorized Results of Railway Privatization in Australia and New Zealand Public Disclosure Authorized Robert Williams David Greig Ian Wallis Public Disclosure Authorized Public Disclosure Authorized TRANSPORT SECTOR BOARD RESULTS OF RAILWAY PRIVATIZATION IN AUSTRALIA AND NEW ZEALAND Robert Williams David Greig Ian Wallis TRANSPORT THE WORLD BANK SECTOR Washington, D.C. BOARD © 2005 The International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www/worldbank.org Published September 2005 The findings, interpretations, and conclusions expressed here are those of the authors and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. To order additional copies of this publication, please send an e-mail to the Transport Help Desk [email protected] Transport publications are available on-line at http://www.worldbank.org/transport/ RESULTS OF RAILWAY PRIVATIZATION IN AUSTRALIA AND NEW ZEALAND iii TABLE OF CONTENTS List of Figures and Tables........................................................................................................iv Preface ................................................................................................................................ v Authors’ Acknowledgements ...................................................................................................vii Executive Summary ...............................................................................................................ix 1. Introduction ...................................................................................................................... 1 1.1 History of Railways in Australia and New Zealand...................................................... 1 1.2 The Rail Industry in 1993 ...................................................................................... 2 1.3 Rail Privatization and Concessioning in Australia and New Zealand............................... 3 1.4 Objectives of This Paper ........................................................................................ 3 2 .Rail Reforms...................................................................................................................... 5 2.1 Background to Reforms in Australia......................................................................... 5 2.2 Market Reforms and Open Access ........................................................................... 7 2.3 Structural Reforms ............................................................................................... 8 2.4 Australian Rail Track Corporation ............................................................................ 8 2.5 New Zealand Rail Reforms ..................................................................................... 9 3. Privatization Transactions .................................................................................................... 9 3.1 Introduction ........................................................................................................ 9 3.2 New Zealand Rail Ltd .......................................................................................... 10 3.3 Australian National ............................................................................................. 17 3.4 Westrail Freight ................................................................................................. 22 3.5 V/Line Freight .................................................................................................... 26 3.6 FreightCorp and NRC .......................................................................................... 28 3.7 Comparative Analysis of Australian Rail Freight Railways .......................................... 32 4. Public Private Partnerships..................................................................................................35 4.1 Introduction ...................................................................................................... 35 4.2 Melbourne Rail Passenger Franchising ................................................................... 36 4.3 Australasia Railway BOOT Project ......................................................................... 46 4.4 Sydney Light Rail BOOT Project ............................................................................ 47 4.5 Sydney Airport Rail Link ...................................................................................... 48 4.6 Brisbane Airport Rail Link .................................................................................... 49 5. Summary of Key Findings ...................................................................................................51 5.1 Freight and Passenger Privatizations ..................................................................... 51 5.2 Passenger Concessioning..................................................................................... 52 5.3 Overall Assessment ............................................................................................ 53 Glossary ..............................................................................................................................55 Bibliography.........................................................................................................................56 RESULTS OF RAILWAY PRIVATIZATION IN AUSTRALIA AND NEW ZEALAND iv LIST OF FIGURES AND TABLES Figure 1-1. Structure of the Australian Rail Industry in 1993. ............................................... 2 Figure 1-2. Map of the Australian Rail Network. .................................................................. 4 Figure 2-1. Rail Industry Reform, 1995-2005. .................................................................... 8 Figure 3-1. Total Revenue (Net) Tonne Kilometers for NZ Railways...................................... 12 Figure 3-2. Total Revenue for NZ Railways....................................................................... 12 Figure 3-3. Total Staff Numbers for NZ Railways............................................................... 13 Figure 3-4. Total Revenue (Net) Tonne Kilometers /Staff Numbers for NZ Railways................ 13 Figure 3-5. Tranz Rail Operating Margin. ......................................................................... 15 Figure 3-6. Tranz Rail Debt and Return on Investment ...................................................... 15 Figure 3-7. Australian Railroad Group Operating Structure. ................................................ 24 Figure 3-8. Rail Market Share (Eastern States to WA)........................................................ 34 Figure 3-9. Key Ownership and Structural Changes by State. ............................................. 35 Figure 4-1. Train Use in Melbourne. ................................................................................ 39 Figure 4-2. Cancellations of Trains = Percent of Services Scheduled. ................................... 41 Figure 4-3. On time Performance.................................................................................... 41 Figure 4-4. Passenger Satisfaction.................................................................................. 42 Figure 4-5. Passenger Figures for Sydney Airport Link. ...................................................... 49 Figure 4-6. Passengers for Brisbane Airport Link............................................................... 50 Table 2-1. Total Domestic Freight and Passenger Task, 2001-2002........................................ 5 Table 2-2. Break Up of Australian Rail Freight Task by Commodity (Million Tonnes). ................ 6 Table 2-3. The Australian Passenger Task, 2002-2003......................................................... 7 Table 3-1. Key Transaction Details for NZ Rail. ................................................................. 11 Table 3-2. Tranz Rail Key Financial Performance Statistics.................................................. 16 Table 3-3. Key Transaction Details for Australian National.................................................. 19 Table 3-4. Key transaction details for WestRail. ................................................................ 23 Table 3-5. Australian Railroad Group Operating Statistics................................................... 25 Table 3-6. Consolidated revenues of ARG 2002- 2004 (US$ millions). .................................. 25 Table 3-7. Comparison of Pre- and Post-Sale EBITDA. ....................................................... 25 Table 3-8. V/Line Freight Commodity Mix. ....................................................................... 26 Table 3-9. Key Transaction Details for V/Line Freight......................................................... 27 Table 3-10. Aspect of Transaction................................................................................... 30 Table 3-11.Comparison of Pre- and Post-sale Revenues, 2001-2004. ................................... 31 Table 3-12. Analysis of QR’s Operating Statistics. ............................................................. 33 Table 3-13. Analysis of QR’s Financial Information (A$ millions).......................................... 33 Table 3-14. Key Measures on Australia’s Railways (excluding private railways)...................... 34 RESULTS OF RAILWAY PRIVATIZATION