Tranz Rail close to decision on who takes its scenic route

By DANIEL RIORDAN transport writer

Tranz Rail has narrowed to three the bidders for Tranz Scenic, its long-distance passenger service, but has withdrawn its refrigerated trucking business from sale.

Tranz Rail expects to sign a "term sheet" (a document very close to a binding agreement) with a preferred bidder for Tranz Scenic within two to three weeks, says chief financial officer Mark Bloomer.

But it could be two months before the deal is finally signed. Whether the bidder is identified before then has not been decided.

Mr Bloomer's comments came as the Auckland-based company released its third-quarter results. Profit for the three months to March 31 is down 25 per cent on the same period last year.

Analysts expect Tranz Scenic to fetch between $20 million and $30 million, the final price depending on how the deal is structured, in particular the cost of leasing tracks from Tranz Rail.

West Coast Railway chief executive Don Gibson confirmed yesterday that his company was one of the final three.

The privately owned company runs a passenger service three times a day between Melbourne and Warrnambool.

The other two bidders remain a mystery, although Tranz Rail spokeswoman Sue Foley said reports that French state-owned enterprise Reseau Ferre de France (RFF) had made the shortlist were wide of the mark.

Fellow French company Transdev, which expressed an interest in Tranz Scenic, is concentrating on commuter services in Auckland and Wellington.

Mr Bloomer said Tranz Rail had decided to hold on to its Tranz Link refrigerated trucking business because it was not happy with the offers it received and conditions in the industry were improving.

New Government regulations requiring more product to be exported in refrigerated form would help, and the market's pricing structures were changing.

Eighty parties had expressed interest in the businesses the company is outsourcing.

Meanwhile, the company remains hopeful it can convince the Government that the $112 million price it negotiated with the Auckland Regional Council for the city rail corridor is fair.

The Government took over negotiations on the deal in March, indicating it wanted to pay Tranz Rail much less.

Mr Bloomer said the company was waiting for the Government to start negotiations, and warned that the longer it took to make a decision, the greater the risk of damaging the Auckland commuter operation.



A decision on the ownership of Wellington's commuter services remained on hold pending resolution of the Auckland situation.

Tranz Rail's revenue for the March quarter rose 5 per cent.

Freight revenues were up 9 per cent. Volumes from the forestry and manufactured sectors both fell by more than 10 per cent.

Agriculture and food volumes remained steady and there was a big increase in coal volumes.

Passenger revenue rose 19 per cent. Operating costs were 17 per cent higher, with fuel costs up 24 per cent and labour costs up 12 per cent.

Tranz Rail is paying no tax this quarter. Mr Bloomer does not expect the company to pay tax until its annual profit climbs above $50 million.

Profit for the nine months to March 31 was $6.4 million, compared with $38.5 million for the same period the year before.

Its share price ended the day 5c lower at $3.75.