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Adelaide to Darwin railway- Kellogg, Brown and Rooted?

It still amazes me that the CEO of Halliburton so recently slipped in and out of South Australia so quietly. His previous visit was to represent private interests at the opening of the Adelaide to Darwin Railway. Instead of the bells and whistles of yore, all we heard was that Lesar had already been and gone. Halliburton subsidiary KBR, says their website “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 won two international finance awards." The company, apart from being constructors, kept a 38 per cent share of the specially formed operators Freightlink, and former head of Halliburton Australia Malcolm Kinnaird became Chairman of the board.

Within eighteen months there was an obvious cash -flow problem: KBR reported to the U.S. Government that

In 2006, we recorded $58 million of impairment charges related to an investment in a railway joint venture in Australia. This joint venture has sustained losses since the railway commenced operations in early 2004 and incurred an event of default under its loan agreements by failing to make an interest and principal payment in October 2006. The write-down of our investment in this joint venture in the first and third quarters of 2006 resulted from lower than anticipated freight volume, a slowdown in the planned expansion of the Port of Darwin and the joint venture's unsuccessful efforts to raise additional equity from third parties

"... and a delay in mining operations that resulted in reduced freight" wasn't sent to the SEC, but was added in a later Halliburton media release. What mining operations might that be? Uranium, do you think? Well, Freightlink did go on to run a three month trial transporting uranium for BHP, and it had been expected that the uranium oxide ore from the new Honeymoon mine would run up to Darwin on the tracks. Northern Territory Minerals Council chief executive Kezia Purick said a while back that uranium ore could only go offshore via Darwin, so it's more than a fair guess that Halliburton had expected the Howard Government to have moved more efficiently in creating a nuclear industry.

Yesterday Freightlink announced it was on the market. Today's newspapers carry the story of Honeymoon being mothballed. Of course, Freightlink's collapse has nothing to do with that either. Does it?

Another bit of trade the railway had been expecting had been the transport of the Army's new M1A1 Abrams tanks. Defence Minister Hill even announced the expansion of the training base near Port Augusta on the strength of the defence rail movements. The only trouble has been that nobody had figured out (or been told) before the tanks would arrive here that they'd need special rolling stock to carry them, and the delay meant that the first tank has only (in April) had its first run up and down the line.

That's neither here nor there, really, I suppose. It seems though, that Defence Minister Robert Hill was a bit rash in expanding the base before he knew that such a move was appropriate. Coultana could have become a very expense White Elephant!

I loved this little paragraph in today's Northern Territory News:

Mr Fullerton said the company inherited a large amount of debt from the construction phase that the company was unable to manage.

It's amazing, don't you think, that a project can come in on-time, under budget, and still have all these financial problems. I wonder what went wrong?

What's peculiar is that the 2006/07 financial year saw Freightlink increase its trade by 70 per cent and at the same time an after-tax loss of more than 50 million.

They lost the amount that the project had been fined for defaulting on payments. One of life's amazing little coincidences, I guess.


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Another porkie from Kevin

F Kendall: "And you consider that a "frightful lie", Eliot?

Okay. here's another one:

A contentious regional grants program that Labor branded as blatant pork barrelling before the election will go ahead, after the Rudd Government reversed its decision to axe the scheme.

The $236 million program was scrapped in this month's budget even though the previous government had approved 115 community projects.

The Government claimed the program had been discredited by an Australian National Audit Office report last year that found it had "fallen short of an acceptable standard of public administration".

But Regional Development Minister Anthony Albanese yesterday reneged on the Government's budget pledge to dump all applications that had not received contracts, saying it would fund up to 86 of the not-for-profit projects worth a total of $30 million.


Richard Tonkin:  "It still amazes me that the CEO of Halliburton slipped in and out of South Australia so quietly."

Not quite as quietly as if you had not posted this, Richard.  Thank you....and I have passed it on.


hmm crystal ball reading

Hi Richard, yep, Rudd has little comparative power to the pressures pushing for it – the entire nuclear industry of the US and the energy supply to such; added to that the local interest groups added to that the military complex and nuclear side to that; added to that the financial windfall for those involved. Bigger than Kev.

Hence the main recommendation from the Chair of security at the 20/20 that it all happens-nuclear waste dump(acquisition of Abo land and depowering opposition by ATSIC etc, rail infrastructure, acquisition of island of Darwin for depot, enormous markets in this region – China , Indonesia – with nuclear plans now, India to balance the denied Iran Pakistan pipeline), nuclear energy – needed if we are to reprocess, nuclear weapons – MIC sweetener and testing here anyway, and the power plant building here. All would be better to wait until nuclear fusion , not so far away now methinks although I do think our only defence against Indonesia and China (should diplomacy fail and others decide to take our resources) are bio and nukes. The standing armies outnumber ours and the modernism is now equal or ahead in some areas to our own. Especially our – snicker snicker – non armour coated ageing Abrams white elephant tanks.

Rudd is smooth and clean and very smart.

Failure to spot irony

David R: "errr - forgive me for mentioning this, Eliot (far be it from me to be accused of failing to spot irony) - but how many trucks do you think will be on the road when diesel is over $2 a litre?"

Gosh, you've got me there, David. Lemme guess. Not many?

No political will for rail development

I don't know how much diesel is used by a train pulling 100 wagons or more, but one would think it would have to be considerably less than 100 trucks pulling the same freight. But road freight is a growing business, not declining.

The NSW Government under planning minister Sartor is giving the green light to a massive road transport hub development by Mariner near Goulburn to handle very large numbers of trucks. Another company plans a similar development on the other side of the city. Needless to say the local council is not happy at being bypassed in the approval process.

Clearly the price of diesel is not considered a negative by those companies and there is no decent rail alternative anyway. The main southern line is ageing and would not stand up to the volume of freight now moved by road. It can hardly handle the few remaining passenger services.

The south Goulburn development will require a third interchange off the Hume Highway Bypass, a bit of a problem since the opposition bought up the land they planned to use for that access. So no sod is yet turned.

The trucking firms will simply pass on the cost of diesel to the consumer. There is no political will to upgrade the rail system in this country. Quite the opposite, in fact.

Pardon me boy, but is that the Chattanooga choo choo?

With oil prices at $139.98 a barrel in Singapore overnight, what kind of a fool would build a overland railway across Australia when there are so many trucks on the road?

David R: errr - forgive me for mentioning this, Eliot (far be it from me to be accused of failing to spot irony) - but how many trucks do you think will be on the road when diesel is over $2 a litre?

Curiouser and curiouser

And you consider that a "frightful lie", Eliot?   To me, it's seeing a gecko as an alligator.

I notice on this site:


that there are/were plans to introduce a "platinum service" on the Ghan, for "the discerning passenger looking for the next level of comfort".  24 large cabins with double beds, spacious ensuites and 24 hour room service.  Now, I wonder who will snap those up?

And will the platinum passengers, like the Gold, also receive a "certificate of travel" and "collector" stickpin when they disembark?  Ah, those are the kind of perks that make the $1920  Gold fare well worth it, don't you think?

Knowledge of Chinese helps boost trade

F Kendall: "As yet, Rudd hasn't told us the frightful lies that Howard told on an ongoing basis, in order both to villify boat people, eg, and to take us to war."

Well, actually, there's this porker...

In September 2007, Rudd lamented the loss to Australia of "that great Chinese entrepreneur in the solar industry business, Mr Shi, Zhengrong Shi and his decision, that he couldn’t actually sustain his business in Australia, had to invest in China instead. One of the reasons is, the absence of an effective renewable energy target."

 In fact, there are other reasons why a solar panel maker might choose China. According to the Washington Post, Chinese polysilicon research firm executive Shi Jun says Chinese companies are saving millions of dollars by not installing pollution recovery systems when manufacturing the polysilicon used in the production of the solar panels:

"He said that if environmental protection technology is used, the cost to produce one ton is approximately $84,500. But Chinese companies are making it at $21,000 to $56,000a ton".

Not Tweedledum and Tweedledee to me

As yet, Rudd hasn't told us the frightful lies that Howard told on an ongoing basis, in order both to villify boat people, eg, and to take us to war.

A few stumbles and disappointments weigh nothing against that, to my mind.

Quite a few people on this talkboard see Rudd as just the same as Howard, and yes, they're both politicians ... quel surprise. But, to my mind Rudd has done nothing as yet as remotely unethical and manipulative as Howard ...and so still looks much better to me.

Rudd still years ahead of Howard

F Kendall, I agree with you Rudd is years ahead of Howard. Howard's mind was still in the 1950's. Rudd is about 30 years in front of him, about 1980. We need to drag our political leaders kicking and screaming into the 21st Century.

Only by making them stick to their promises will they make the necessary changes.

I am upset with Rudd because he made quite a few promises in the run up to the election. For example:

A Rudd Labor Government would double the funding for rebates to install solar panels across Australia to slash greenhouse gas emissions.

Australia’s long-term prosperity will only be secured by tackling the threat of climate change. For too long, climate change sceptics have sat on their hands and ignored the warning signs. It is now time to act.

Federal Labor’s Solar Home Power Plan will invest $50 million over four years to install solar power in Australian homes, schools and community buildings.

This practical plan will allow around 12,000 Australian households to install cleaner, greener power.

No mention of means testing the rebate for solar panels here. Rudd was going to bring about honest open government. Not much honesty here.

No wonder people feel they have been conned.

Of white elephants and cashflow

While understanding where you're coming from, John, I'm more interested at the minute in the promises that may have been made before this railway started. Let's say promises made in '97 when Cheney visited Australia as Halliburton CEO and John Howard was about to assume power. I would expect that arrangements to propagate railway related industries would have been made, a game-plan embarked upon.

Otherwise we wouldn't be reading a piece like this today:

[ABC extract]

A major Australian freight company says the Alice to Darwin railway line is a white elephant.

Freightlink has put the Adelaide to Darwin railway line up for sale after reporting a loss of $50 million last year.

But Northline's Alice Springs branch manager, Darryl Wilson, says the mining sector may secure the railway line's future

Reading from the link you provided, John, it appears that the railway is doing fine except for the "orginal sin" of the debt. If it's not the default fine that's been the catalyst of Freightlink's demise, then what? And why the two year delay in calling in the marker? Did ANZ buy the debt from somebody else, say Barclays Bank?

Or again, was the spin-off carried out without enough perceived liquidity? Don't forget that that this was what the UK govt was examining when it asked KBR to refrain from splitting pending investigation. KBR didn't comply, and it cost them control of the Devonport dockyard.

I think the railway situation suggests that KBR has a cash-flow problem.

A little clearer

From yesterday's business section of the Australian:

The line cost $1.2 billion to build, of which $560 million was provided to FreightLink's parent -- Asia Pacific Transport Consortium -- by the federal, South Australian and Northern Territory Governments. But the rest of the cost and other spending is an enormous burden for a rail operator to carry on the back of five freight train services a week between Adelaide and Darwin, as well as mineral traffic from two mines and track fees for The Ghan tourist train, which operates two return services a week over the line.

$500 million mightn't be too much when you're investing in Happy Days, but a lot riskier when it comes to Laverne and Shirley. The banks looked at the paperwork and puled the plug. Fair assumption? Put another $50 million on top, paid by the scheme organisers, and you've got a lot of money owed to people. The fact that the loan repayment wasn't made on time shows how fine a tighrope the project balanced upon. Surely our Finance Minister, when he represented PM Howard at the launch, should have been aware of the precariousness?

The Ghan

Richard: "I wondered where the Ghan fitted into the picture."

And I wonder how profitable the Ghan itself is now. When I looked at the price of a ticket on the thing I found I could get to the UK for the same money. So that was enough for me. I guess a lot of people feel the same and the overseas tourists are not coming as much these days due to the dollar hike.

Setting aside the special circumstances that appear to have affected Freightlink, it is unfortunate if rail freight generally is becoming an unviable proposition. Clearly the reluctance to stay in the grain rail shipment business means companies do not find it terrribly profitable in the eastern states, though coal freight clearly is a better money spinner for them.

Unfortunately any decline in viability of rail freight will see more those diesel guzzling and road chomping trucks on the roads.  Not a good outcome.

I wonder if that was the reason for the canning of the north south inland freight line. It has been on again off again for a long time now. The very fast train hit the decks too, deemed not viable given low air fares.

Yes it seems KBR might be in trouble and I am sure you are happy that Cheney's star seems to be waning. About time.

If you know Cheney like I know Cheney

Jenny, I hope his star is descending, but I'd watch out for his next trick. He's a greatly underestimated person Capable of implementing many twisted schemes, and of leading the world into a (pardon the vernacular) really bad place.

I hope he fails at whatever he tries. There is no other human being, especially after a few years of studying him, on whom I could place such a curse. The world will, IMHO, be a better place when he's powerless. I just hope he's not, when the Administration departs, going to take up the Halliburton reins from Dubai.

Maybe the win in Australia will send a global message. I hope so.

As for the Ghan, well I'm training to be a long-haul train trip connoisseur. I've been broadcast in half a dozen countries playing squeezebox on the Indian Pacific, but haven't done the trip north. Have travelled from Xining to Beijing though, quite a jouney in hard-sleeper.  I hope the Ghan journey survives, even as a tourist trip that we natives can't affford. The opportunity of such a voyage would be a sad thing to eliminate.

Two sides of the brain

Richard, I agree totally with you about Cheney but I think he has plenty of clones in the US. But yes, the experience here might have clipped his wings a bit.

Did you see Kerry O'Brien last night interviewing (forget the guy's name) about the health of democracy and the power that the capitalists and their lobbyists hold in the US? All well known of course but very disturbing all the same. And while the Yanks have got it down to a fine art, it is not confined to the US.

And I don't think the change of Government is going to change such here.

I think the notion that these people, who count their own worth in power and billions, have a well developed citizenship side of the brain does not stack up.  

Yes the Ghan - I would love to do the journey but the cost puts me off. Might do the Indian Pacific though later this year. We will drop in on Adelaide on the way back, to see you and that pub of yours and take in some of that music.

BTW: Rudd really does seem to have it in for the CSIRO even more than Howard did. The closure of that Mildura research facility does not make sense given the work they were doing.  And we know he has been accused of wanting to restrict the freedom of reporting by the CSIRO more than Howard. What is going on here?

Adelaide to Darwin rail growing at 65 per cent per year

All our costs are covered by the revenue that we generate from the business and, as I said, our operational earnings before interest, tax and depreciation have been growing each year at about 65 per cent."

Mr Fullerton has also rejected the IPA's suggestion that freight services will be cut when the line is sold off.

"We plan to add and additional service between Adelaide and Darwin because the five services that we currently operate are full. And putting more services on improves our profitability at an operating level and improves our cash flow.

It takes time for business to change old habits but a growth rate of 65 per cent a year seems to be quite healthy. The five services that operate now are at full capacity and additional services will improve profitablility.

The high cost of fuel will encourage more business onto rail. The future looks bright for the railway.

Is he any different Richard

Richard, is Rudd any different to Howard? I don't think so. I think he is going to disappoint a lot of people and that is already happening. Failed to take account of the likely impact of the drought on revenue - can you believe that - thinks it will rise by 20%.

A nuclear waste dump? I would not be too confident that he would oppose it. As for Halliburton et al, it will be business as usual. Can we expect anything to change there if the Republicans lose in the US? Probably not but if Hillary gets in they should probably think about getting out of Iran before she blows the place off the map.  

So who will buy Freightlink? The buyer would no doubt be looking for some sign from the Government that any investment there will be worthwhile. You will need to stay on your toes I suspect.

Would love to be a fly on the wall at a Board meeting of Freightlink. That no doubt would give one quite a scoop.

But maybe rail freight generally is not such a good investment. The company (forget the name) that traditionally transported much of the Eastern grain crop wants out of it. Some deal was struck to keep it operating at least this year.


Maybe it is truly a bit different now, Jenny. I had more than suspected that the whole nuclear debate was a device to get the trade with the US and India going. Supplying twenty reactors and picking up the rubbish would have been a reasonable trade. Quite a few train trips north and south. The postponement of Honeymoon says a lot... there isn't enough of a trading market around to make the work viable just yet.

As for differences, well I've seen some encouraging signs in SA. The KBR aquifer storage plan has been knocked back by Labor, in spite of being championed by the Libs. The I.T. contract procurement laws have been restructed to stop Cheney's mob from grabbing the lot. The Lake Alexandrina Public Private Partnership didn't get a guernsey. Then there was the surprise of surprises, that our new desal plant is NOT going to be a PPP. Local councils who were outsourcing maintenance work have decided to use their own crews.

I think the age of the Cheney expansion is over. Mind you, drilling our gasfields and subcontracting our ships, and the JSF program (expect announcements, finally, of SA's participation in the next few weeks) they haven't done too badly.

And, Jenny, if the Rudd Government closes off politcal donations from corporations, our pollies won't feel behoven to give their benefactors the work.

Their departure from the railway ownership makes me feel much happier, too. I can't help but think that if this poject was so well put together yet apparently (in Freighlink's hindsight) doomed from the outset that it may have been deliberately knobbled to provide the escape hatch that is currently being opened.

It does pose further questions, though, if KBR's liquidity since the spin-off from Halliburton is becoming questionable.

No surprise

If anyone in Oz knows about transport it would have to be Chris Corrigan. He said it was a " no brainer". So just what went on? A white elephant built to transport other white elephants, the Abrams tanks? I don't think so but it does make you wonder. Pork barrelling? With so few seats involved? Curious.

Nuclear waste dump land now cleared by High Court win

Hi Richard, astute of you as usual. KBR et al obviously expected a bit more transit happening.

Perhaps they had not expected the High Court action to take so long.

Now there is a win the government can take any Aboriginal/other person' land and give it to a private group for private profit.

With the 20/20 Security meeting sporting the choice for Chairman of a pro-nuclear waste/weapons/energy government stooge it is left to one to guess that the whole gamut is still on the agenda of this much better iced government cake action. Against, apparently, the wishes of most of the group that chaired group came up with pronuclear waste dumping here and all that goes with that "sweetened" by the nuclear weapons option.

Thus all land needed for the dump can be taken, and wanna bet along which rail line and which port (note the confiscation of the Aboriginal land in the islands off Darwin for a depot) the world's nuclear waste shall cometh unto us?

The US nuclear industry and energy supply is too great a priority to allow a few greenies and Abos to block such refinancing and needed rebuilding by blocking its Non Nevada waste dumping.

The same players are all there, just better "cloaked".

Let us be aware. See who buys the shares.

Richard: Yep, Angela, the delay wouldn't help. Do you think that nuclear dumps will happen under Rudd? First thing this Govt did was knock on the head the most pressing need for a dump, the India deal.

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