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Halliburton's Railway Down Under Goes Under
As U.S. Vice President Cheney's star falls from the political firmament, the man who paved the way for Halliburton's expansion into Australia and Asia is left to clean up the mess the company has left behind. Feted as an engineering masterpiece when opened, in the wake of the worldwide financial meltdown the Adelaide to Darwin railway has become a white elephant whose shadow falls along the length of the country's backbone and can be seen all the way from Washington.
Nestled almost appropriately between a funeral parlour and a railway station, railway consortium Freightlink's office would seem too small a monolith to cast such a shade. However, when you consider who set the company up, who was at its head, and who was behind it, international interest in Freightlink's self-controlled collapse isn't surprising. The answers are: Halliburton, Dick Cheney and Malcolm Kinnaird.
In 1997, the year that Cheney visited Australia as Halliburton's CEO, the company bought what it planned to be its Asia-Pacific nexus for the princely sum of 44 million Australian dollars. As the company morphed from Kinhill Australia to Halliburton Australia to KBR Australia, long-term director Kinnaird departed the board to serve as a KBR consultant and as a director of a prominent local cement-making company. He was to become chairman of Freightlink's board.
As Halliburton's boss came down to lend a hand at the gala opening in 2004, the company's website proudly proclaimed how they'd "led the delicate financial negotiations between the three governments, the financial backers and the consortium that saw the private sector contribute about 60 per cent of the project cost ($850 million of the $1.4 billion project)." The deal, said Halliburton, won two international finance awards.
The consortium that created the railway, ADrail, was a joint venture between Macmahon Holdings (10%), KBR (50%), Barclay Mowlem (20%) and John Holland (20%).
In 2006 Freightlink's shareholders comprised of Kellogg Brown & Root (36.3%), Barclay Mowlem (13.9%), John Holland (11.4%), National Asset Management (7.3%), Macmahon (7.0%),
KBR reported to the U.S.' S.E.C. that:
The company's media release explained how KBR had copped $US 30 million in charges (more than it had spent in acquiring Kinhill) "related to an equity investment scheme in an Australian railroad and reduced activities for Government and Infrastructure activities in Iraq."
KBR's global Vice President for Infrastructure Andrew Fletcher was the chief engineer for the project. He has now departed the company to head Defence SA, reportedly Australia's only State Government operated Defence Department
Freightlink issued a media release yesterday to explain its decision to hand the business over to administrators:
Whichever banks were involved in the "second tier" funding of Freightlink, it hardly seems coincidental that the financing partnership has turned sour just as the stockmarkets of the world began to collapse. Not that any of this affects Cheney or Halliburton.
On spinning-off KBR from its parent company, Halliburton CEO Dave Lesar moved their headquarters to Dubai. Last week the company announced the creation of a new operations base in Singapore.
And Cheney? His Vice Presidency may expire in January. but his Halliburton stock options do not.
After watching his business bloom after being assimilated into Cheney's empire, it would be understandable if Malcolm Kinnaird was feeling a little lonely and neglected at the moment. Surely, though, somebody will take care of him?
Epilogue, June 2009
In last weeks Queen's Birthday Honours, Kinnaird was named a Companiion of the Order of Australia, the local equivalent of a knighthood. The railway is still in bankruptcy, with a buyer searched for but not yet found. Kinnaird, according to The Australian, still acts as a consultant for KBR.