Australians top Tranz Scenic sale shortlist

By DANIEL RIORDAN transport writer

Australian company West Coast Railway has emerged as the preferred buyer for Tranz Rail's long-distance passenger operation Tranz Scenic.

West Coast chief executive Don Gibson met Tranz Rail officials last week. A final decision is expected this week pending resolution of what a source close to the process said were minor details.

Two other unnamed parties were on the sale's shortlist - one Canadian - and local bus company Guthreys Coachlines, which already links some of its services to Tranz Rail, is understood to have aligned itself informally with one of the three parties.

Tranz Rail chief financial officer Mark Bloomer said a month ago that his company expected to sign a "term sheet" (a document very close to a binding agreement) with a preferred bidder for Tranz Scenic by the end of May. But he said then that it could be two months before the deal was finally signed.

A Tranz Rail spokesman last week had no comment on the sale process.

Privately owned West Coast Railway - the trading name adopted by The Victorian Railway Company - runs a thrice-daily passenger service over the 267km between Melbourne and Warrnambool.

Like Tranz Rail, West Coast has a sizeable tourist component alongside predominantly commuter services.

The company was formed in 1993 when the Victorian Government offered long-distance country rail services to private operators.

While buses replaced several services, West Coast Railway successfully tendered to maintain the southwest region's rail service.

The company has its own trains and workshops, and is contracted to the Victorian Department of Infrastructure, which specified service requirements.

Head office is in Geelong, with maintenance facilities at Warrnambool and Ballarat East.

The Tranz Scenic network carries 465,000 passengers a year. Profitability figures have not been disclosed.

Analysts expect the sale to fetch between $20 million and $30 million, the final price depending on the deal's structure, including tax issues and the cost of leasing tracks from Tranz Rail.

The services include the daily Northerner and Overlander services between Wellington and Auckland, the Wellington-Napier Bay Express, the Auckland-Tauranga Kaimai Express, the Geyserland to Rotorua, the Southerner main trunk service between Christchurch and Invercargill, the Tranz Coastal between Picton and Christchurch, and the Tranz Alpine from Christchurch to the West Coast.

These last two scenic services are seen as the "stars" - premium rides offering high-class trips for tourists. The other long-distance services compete head-on with air and road transport, a battle which rail has been losing for decades.

The package on offer includes between 10 and 15 DC class locomotives, 57 carriages and 50 second-hand former British Rail Intercity carriages awaiting refurbishment.

Also on offer, if wanted, are the Christchurch, Palmerston North and Hamilton railway stations.

About 100 Tranz Rail staff employed specifically on Tranz Scenic services are expected to be taken on by the new owner.

The Rail and Maritime Transport Union, which claims to represent almost 90 per cent of Tranz Rail's workers, last month threatened to strike if it was not consulted on the sale process.

General secretary Wayne Butson said the sale of Tranz Scenic would set the benchmark for other proposed divestments as the company executed the huge restructuring process announced last year.

About 80 parties have expressed interest in the businesses being outsourced.