Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance Case Study: Australian Rail Track Corporation Rail has reinforced its dominant position on long-haul east-west routes, but has performed poorly on the three shorter corridors, albeit each is around 1,000 kilometers. During 1997-00, the initial response suggests that the creation of ARTC increased market share by about 10 percent on most routes but, over the longer-term, improved road competitiveness combined with rail investment delays have dragged down shorter-distance market shares. The ARTC performance is an important enabling factor, not the critical factor. The combined impact of open access, ARTC and before it, the AN access unit, is shown in Figure 7, which gives the market share of dominant direction west- The World Bank Page 318
Railway Reform: Toolkit for Improving Rail Sector Performance Case Study: Australian Rail Track Corporation bound freight over the last decade. 142 In 1995-96, the rail share was 65 percent, by 1999 it was 72 percent, and it continued to rise to about 80 percent in 2003, where it has remained ever since. Now, most general freight on this corridor goes by rail; road carries express freight, some perishables, and out-of-gauge traffic. 8 Summary The ARTC was probably the first stand-alone track authority in the world to deal predominantly with private-sector freight operators. As a result, ARTC had to innovate to establish commercially acceptable operating procedures and charging practices. The ARTC has enjoyed considerable success on the east-west corridor and the Hunter Valley coal network. However, although it has overseen large investments on the north-south corridor, the benefits will only begin to flow through into sustainable timetable improvements during 2011. The business has operated on a commercial basis and generated sufficient surpluses to contribute to its capital program. The strength of the underlying business model is an important element of success, although the long hauls and a strong coal market have helped. Today, little doubt exists that interstate rail freight would be in a worse state if ARTC had not been created. In the longer-term, ARTC’s capital structure and funding sources will be an emerging issue. To date, Government has supplied almost all external investment funding in the form of equity or grants. As a result, as of June 2010, ARTC had A$2.5 billion of equity, no long-term debt, but had paid no dividends since 2005. ARTC is now starting to take on debt for ‘commercial’ investments in the Hunter Valley and this will increase substantially over the next few years (and a bond issue for up to A$200 million has also been recently advertised). But the questions remain as to what is the appropriate debt:equity ratio, how much of ARTC’s future investment could be debt-funded and would funders be public or private, and what dividend policy should it adopt? 142 In this case, road volumes are known exactly because West Australia maintains a road checkpoint. The World Bank Page 319
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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