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Last hurdle cleared for formation of the national rail corporation



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I jiifr Bob Brownlu c/D Minister t or Land TransportLULU DC

17 Septem ber 1991

LAST HURDLE CLEARED FOR FORMATION OF THE NATIONAL RAIL CORPORATION

Federal Land Transport Minister, Bob Brown, paved the way for incorporation of the National Rail Corporation today when he signed the Memorandum and Articles of Association and appointed Mr Ted Butcher as inaugural chair of the new body.

Mr Brown said Mr Butcher's outstanding commercial and transport experience had made him an obvious choice for the position. Mr Butcher's initial appointment will be for three years.

Six other directors were also appointed. They represent the partners in new joint venture — the Commonwealth, New South Wales, Victoria and Western Australia.

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They are: Mr Gavin Keneally (former South Australian Minister for Transport); Mr Laurie Carmichael (a former Assistant Secretary of the Australian Council of Trade

Unions); Mr Max Moore-Wilton (Director-General of Transport in NSW and former Managing Director of the Australian National Line); Mr Michael Wright (Deputy- Director of Transport Victoria); Mr James Strong (a

business executive); and Mr Stuart Morgan (a company director).

Mr Brown said another director would be appointed soon, following advice from New South Wales. .

'The board is well balanced with a strong commercial flavour, drawing on individual areas of expertise', Mr Brown said.

'Establishment of the NRC heralds a rebirth of rail in Australia.

'The Federal Government and its commercial partners have agreed to smash down the barriers preventing efficient rail freight movements across state borders and turn loss-making operations into a profit within five years.

'For the first time since Federation, all mainland state capitals will be linked by one rail network operating under a single management structure.'

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Mr Brown said he expected the NRC to be incorporated within the next few days.

'Legislation to ratify the Shareholders' Agreement will be introduced to the Commonwealth and State Parliaments soon.

'It is expected that the NRC will start rail freight operations early in 1992, beginning with marketing and terminal operations. The necessary functions will be transferred progressively from other rail systems', he said.

'The NRC will operate under provisions of the Companies Code as a strictly commercial corporation at arm's length from government.

'The NRC also will be subject to the laws of the Commonwealth and the relevant states, on the same basis as any private company. Likewise, it will be subject to the Trade Practices Act.

'The board's first task will be to appoint its Chief Executive Officer and core management team.

'Before operations start and the investment of capital funds by shareholders, the management team will negotiate industrial agreements and develop a corporate plan, including an investment strategy', Mr Brown said.

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Media contact: David Combe (06) 274 7294 (w)

ATTACHMENTS: (1) Backgrounder on NRC operations (2) Directors' details

A BETTER. MORE RELIABLE INTERSTATE RAIL FREIGHT NETWORK

Advantages of rail

The Federal Government believes the rail industry has an important role to play in developing a more efficient and competitive land transport sector, where road and rail perform the tasks to which each is best suited.

This will enhance the efficiency of our land transport system and the quality of service it provides, as well as conferring environmental benefits.

For certain tasks, rail has advantages over road (particularly over long distances). However, these advantages are unlikely to lead to an increase in rail's share of freight traffic until there is a significant improvement in rail's efficiency.

The Government's strategy to reform and revitalise rail focuses on interstate freight operations. In particular, it has worked with the States to establish the National Rail Corporation.

The Federal Government will continue to encourage the States to operate efficient freight and passenger services within State boundaries. These will remain the responsibility of each existing rail system following establishment of the National Rail Corporation.

Commercial operation

The Commonwealth and the mainland States (except South Australia), meeting at the Special Premiers' Conference in July 1991, signed an agreement establishing the NRC. At last, all interstate rail freight operations will be brought under one management structure. South Australia

supports the Corporation and proposes to sign the agreement after a range of issues under its Railway

Transfer Agreement with the Commonwealth are resolved through bilateral negotiation.

The establishment of the NRC is intended to ensure that interstate rail freight movements operate without Government subsidies.

The NRC will operate under the provision of the Companies Code as a strictly commercial corporation at arms-length from Government. Directors will be required to act

according to the provisions of the Companies Code in the interests of all shareholders. The NRC also will be subject to the laws of the Commonwealth and relevant states, on the same basis as any private company.

Likewise, it will be subject to the Trade Practices Act.

Any new rail projects considered by the NRC to be commercially justified will need to meet the usual requirements of State and Federal legislation, including legislation relating to environmental aspects.

Implementation

The NRC is to be incorporated in late September 1991. The new Corporation will recruit its chief executive and core management team.

Legislation will be introduced to the Commonwealth and State parliaments soon. Before commencing operations, the management team will negotiate industrial agreements and develop a corporate plan, including an investment

strategy.

It is expected that the NRC will start rail freight operations early in 1992, beginning with marketing and terminal operations. The necessary functions will be transferred progressively from other rail systems.

Even allowing for continued cooperation at all levels, it may take about three years for functions to be handed to the new Corporation, and five years for the whole process to be completed.

Operations

It is expected to take the NRC three years to break even and to be self-supporting after five years. The NRC will provide a return to shareholders in the longer term.

Wherever possible, interstate freight activities that incur losses will be turned around before the handover. However, if an activity continues to result in losses at the time it is transferred to the NRC, an appropriate buffer will be paid by the rail system transferring the

loss-making operation to the Corporation. This buffer will be based on the expectation that the NRC will be

able to reduce this loss to zero before the end of the first five years of its operations.

Financial and voting arrangements

Within the provisions of the Companies Code, the NRC will receive equity contributions of about $415 million over five years. These will come from the Commonwealth, New South Wales, Victoria and Western Australia.

The expected equity contribution of each shareholder is:

. the Commonwealth $296 million

. New South Wales $76 million

. Victoria $35 million

. Western Australia $8 million

Provision exists for other governments to participate at a later date, should they wish. Additional calls on equity during the first three years will be met according to a schedule of long-term equity.

For the first five years, the voting rights of shareholders will be determined by a formula that has two elements. The first is the expected long-term equity share. The second is a voting entitlement accorded equally to each shareholder.

The voting rights will be:

. the Commonwealth

. New South Wales

. Victoria

. Western Australia

39.5 per cent

26.5 per cent

19.0 per cent

15.0 per cent

Following this period, voting rights will be determined on the basis of equity shares.

Private sector involvement

Governments have agreed that the NRC will provide access on a commercial basis to its track and terminals. Operation of some terminals may involve the private sector.

The NRC will be permitted to let contracts for goods and services on the open market, including maintenance and operations.

Accountability and control mechanisms

The NRC is required to prepare a corporate plan each year for consideration by shareholders. In the first five years the plan will, among other things, cover:

. the NRC network;

. the functions to be transferred from other rail systems to the NRC, including the proposed timing of transfers;

. the business plan;

. all financial projections, including borrowing requirements; and

. an investment strategy, including improvements to the interstate main line rail network.

NRC network

The network required by the NRC will be set out in the Corporation's first corporate plan. However, it is envisaged that the NRC will use a network connecting the mainland capital cities and Alice Springs, including

connections to the major capital city freight terminals.

Projects such as conversion to standard gauge of the railway between Adelaide and Melbourne, or any extensions of the network, are a matter for commercial judgement of the Corporation.

Relationships with existing rail systems

Although the NRC will own or control most interstate track, it will not control some lines that it will need to use, especially lines used by other traffic, including suburban trains. The Corporation will enter into contracts with state rail systems for the use of this track.

Similarly, other rail systems may need to use NRC track for some of their intrastate business. They will enter into contracts with the NRC in such circumstances.

In the long term, it is expected that the NRC and other systems will cooperate in areas such as train control, infrastructure upgrading, inter-system freight (freight carried by rail to-or from points off the NRC national

network) and operation of passenger trains and other non- NRC trains over the national network.

Industrial matters

All industrial matters affecting the NRC will be the responsibility of the Corporation’s Board of Directors.

The NRC Agreement envisages that an enterprise award will be negotiated between the Corporation and rail unions. This award will reflect the most efficient work and manning practices, determined by the technical capacity

of its equipment and commercial considerations.

The NRC will identify its labour requirements in its first corporate plan. It will employ only those people required for its operations, and will not be responsible for redundancies that may arise in rail authorities resulting from its formation and the transfer of functions and assets to it.

Mr Edward Walter Ayling Butcher FCIT, FBIM

Agei 61

Current position: Chairman of the National Rail Freight Initiative Task Force

Mr Butcher has extensive senior managerial and administrative experience in the transport industry, both here and overseas. He is widely known and respected in the industry generally through his membership of the transport

Industries Advisory Council for most of the 1980s and as president of the Australian Road Transport Federation between 1982 and 1984.

Mr Butcher chaired the National Freight Initiative Committee in 1990, which paved the way to the establishment of the NRC, and the National Rail Freight Initiative Task Force, which has been intimately involved in the establishment of the Corporation.

Employment History:

1966

1973

1979

1983

1984

1987-1990

1990

1990­

1990-91

Chief General Manager, National Bus Company (West of England Area)

Executive Director, United Transport Overseas Co Pty Ltd

Chief Executive, United Transport Holdings Australia Pty Ltd

Deputy Chairman, United Transport Holdings Australia Pty Ltd

Member of the Inter-State Commission

President of the Inter-State Commission

Chairman of the National Freight Initiative Committee

Board Member of Civil Aviation Authority

Chairman of the National Rail Freight Initiative Task Force

Mr Gavin KENEALLY

Age: 57

Current position: Retired

Mr Keneally worked for twenty years in the former Commonwealth Railways and then served with distinction in the South Australian Parliament and Government. He is highly respected throughout the transport industry. He

chaired the Rail Industry Council's investigation and is currently head of the Australian Rail Industry Advisory Council.

Employment History:

1950 Employed by Commonwealth Railways

1970 Elected to South Australian Parliament

1977 Deputy Speaker

1980 Shadow Minister for Water Resources and Chief Secretary

1982-84 Chief Secretary

1982-85 Minister of Tourism

1984-85 Minister of Local Government

1985-89 Minister for Transport and State Services

1889-90 Chairman of the Rail Industry Council

1991 Chairman of the Australian Rail Industry Advisory Council

Mr Laurence Norman Richard CARMICHAEL

Age: 66

Current positions Retired

Mr Carmichael has a distinguished career in the union movement. In recent years he has fought for restructuring of the metal industry, emphasising the need for skills upgrading.

Employment History:

1940 Apprenticed as Fitter and Turner

1944 Instrument Fitter in RAAF

1951 Member of Amalgamated Engineering Union (AEU) Melbourne Executive

1958 AEU Melbourne Secretary

1969 AEU National Assistant Secretary

1983 Member of to ACTU Executive

1987 Assistant Secretary of ACTU

1991 Retired

Mr Max MOORE-WILTON

Current position: Director General, NSW Department of Transport

Age: 48

Mr Moore-Wilton has had extensive in public service and in the management and reform of Government Business Enterprises. s Employment History:

1964-78 Commonwealth Department of Trade

1974-75 Minister, Australian Delegation for Trade Negotiations, Geneva

1979 Deputy Secretary, Commonwealth Department of Primary Industry

1981 General Manager, Australian Wheat Board

1984 Managing Director, Australian National Line

1989 Chief Executive, Maritime Services Board of NSW

1991 Director General, NSW Department of Transport

Mr Michael Grahame WRIGHT

Age: 42

Current position: Deputy Director-General, Victorian Ministry of Transport

Mr Wright has had extensive experience in industrial relations and in promoting micro-economic reform in transport.

Employment History:

1973 Research Officer, New Guinea Research Unit, ANU

1977 Research Officer/Lecturer, Industrial Relations, London School of Economics and Political Science

1979 Lecturer, Industrial Relations and Labour Economics, University of Sydney

1982 Manager, Special Projects, Industrial Relations Division, Public Service Board.

1982 Victorian Ministry of Industrial Affairs

1986 Victorian Department of Labour

1988 Director, Operations, Victorian Ministry of Transport

1989 Deputy Director-General, Victorian Ministry Transport of

Mr James Alexander STRONG

Age: 47

Current position: National Chairman of Partners, Corrs, Chambers,Westgarth

Mr Strong has extensive experience in private industry and was in charge of the Gove bauxite operation in the early 1980s. He managed Australian Airlines with distinction from 1986 to 1989 and is currently a Director of Qantas.

Employment History:

1964-70 Industrial Officer, Australian Sugar Producers Association, Brisbane

1970-78 Industrial Officer and Chief Industrial Officer, Nabalco Pty Ltd

1978-80 Personnel and Legal Manager, Nabalco

1980-81 Administration Manager, Nabalco

1981-83 Site Manager, Nabalco

1983-86 Executive Director, Australian Mining Industry Council

1986-89 General Manager Australian Airlines

1989- Chief Executive, Corrs Solicitor

1991 National Chairman of Partners, Corrs, Chambers,Westgarth 1991

Mr Stuart Llewellyn Gwyn MORGAN

Age: 56

Current position: Managing Director, Westintech Ltd

Chairman, Turbine Components Australia Pty Ltd

Chairman, State Energy Commission of Western Australia .

Director, Rothschild Australia Ventures Ltd

Mr Morgan has an extensive career in private enterprise. he has spent the majority of his time in the design, construction and commissioning of new industries within Australia and South-East Asia.

Employment History:

1967-1971 General Manager and Director, Westralian Plywoods Pty Ltd

1971-1983 Group General Manager and Director, Westralian Forest Industries Ltd

1983- Managing Director, Westintech Ltd