The NSW Treasurer Mike Baird has announced the government will invest $175 million in Reliance Rail in 2018 in return for 100 per cent of the equity in the company.

 

The bail-out will avoid the prospect of one of Australia’s largest public-private partnerships going into administration, having accumulated debts of more than $2 billion prior to the global financial crisis.

 

 “The reality is that without this agreement, NSW Treasury estimates that the project could be facing up to $250 million in break costs and up to $1 billion in replacement funding. This would be a direct hit to the State’s balance sheet and see funds diverted from roads, school and hospitals,” Mr Baird said.

 

Reliance Rail, a consortium involving Downer EDI Limited (49%), Interests managed by AMP Capital Investors (25.5%), the Royal Bank of Scotland Group plc (12.75%)  and International Public Partnerships Limited (12.75%), is building 626 new Waratah carriages over the next three years at a cost of $3.6 billion. The first Waratah train entered passenger service in July 2011 and by late 2014 the Waratah trains will make up to about half of CityRail's current suburban fleet.

 

Mr Baird said that if the PPP was abandoned altogether, the people of NSW would be waiting up to five to seven years for replacement trains.

 

“Not only is this agreement our best chance of ensuring the continued delivery of the air-conditioned trains without further delay, but it also minimises the cost and risk to the State’s balance sheet now and into the future.”

 

Mr Baird said the investment would be conditional on the successful delivery of the 78 Waratah trains and Reliance Rail’s ability to refinance its existing debt at that time.

 

Six of the 78 eight-carriage Waratah trains have so far been accepted by RailCorp, with delivery expected to ramp up this year.

 

If Reliance Rail adheres to its schedule, the last train is expected to be delivered to RailCorp by the end of 2014.