Keep TasRail, goverment told

INDEPENDENT economist Saul Eslake has included TasRail in a list of six state government-owned entities he considers should not be considered for sale.

Mr Eslake was commissioned to conduct an assessment of the potential for the privatisation or divestment of a number of businesses currently owned by the Government of Tasmania.

The 16 government business enterprises (GBEs), state-owned companies (SOCs) and other entities, namely • Aurora Energy Pty Ltd • Metro Tasmania Pty Ltd • Tasmanian Irrigation Pty Ltd • Tasmanian Networks Pty Ltd • Tasmanian Ports Corporation Pty Ltd • Tasmanian Railway Pty Ltd • Tasracing Pty Ltd • TT-Line Company Pty Ltd trading as Spirit of Tasmania • Forestry Tasmania trading as Sustainable Timber Tasmania • Momentum Energy (subsidiary of Hydro Tasmania) • Entura (subsidiary of Hydro Tasmania) • Motor Accidents Insurance Board • Port Arthur Historic Site Management Authority • Tasmanian Public Finance Corporation • The Public Trustee • The Land Titles Office.

The first part of Mr Eslake’s report identifies those government businesses which should be ruled out for divestment and was released by the government late last week. The second report will subsequently recommend whether any, and if so which, businesses “should be fast-tracked to a divestment scoping study” and those which “require further investigation”.

In Part One the economist recalls that TasRail, as Tasmanian Government Railways, was taken over by the Commonwealth in 1975 and then sold to the private sector in 1997, passing through several owners. The below-rail infrastructure was bought back by the Tasmanian Government in 2007, and the above-rail business in 2009.

“TasRail had assets valued at $168 million as at 30 June 2024, and liabilities of $40 million, implying a ‘book’ net worth of $128 million. It has incurred losses in all but one of the past ten years, for an accumulated loss over this period of $71 million.

“Over that period it has received equity contributions for infrastructure projects and other funding from the Tasmanian Government totalling over $257 million. The 2024-25 Budget indicates that the Government will provide it with a further $178 million over the four years to 2027-28. Apart from intermittent loan guarantee fees it has never made any financial return to the Tasmanian Government.

“Investment bankers consulted in the course of this assessment have provided divergent opinions as to the prospects for a successful privatisation of TasRail. One noted that Westrail’s freight business was acquired by Australian Railway Group (a joint venture between Wesfarmers and a US-based rail operator) under a 49-year lease in 2000, with the ‘above-rail’ business subsequently on-sold to QR National and the ‘below-rail’ infrastructure and land lease to Babcock & Brown in 2006,” Mr Eslake wrote.

“However this appears to have been a profitable business, unlike TasRail’s. Other investment bankers, noting the relatively small scale of TasRail’s operations, its persistent losses, and its on-going requirement for capital injections and subsidies, suggest that there is unlikely to be any appetite from either other railway operators or passive investors to acquire it.

“The history of previous attempts at privatisation of railways in Tasmania is also likely to discourage any interest on the part of prospective acquirers. Hence this assessment recommends that the Government should not pursue the privatisation or divestment of TasRail. The Government should nonetheless seriously consider whether the extent of its on going financial support for TasRail is justified.

“The traditional argument – put, in particular, by TasRail itself – is that its operations help to reduce congestion on Tasmanian roads, in particular the Midland and Bass Highways (Carlyon 2016, Tasrail 2025). It would be useful for those claims to be rigorously tested as part of any examination of the continuing extent of government financial support for TasRail.”

The Tasmanian Government is still considering a proposal to merge TasRail, TasPorts and TT Line.