AMP, INPP Aussie rolling stock deal bailed out

The New South Wales government has pledged to invest A$175m in the troubled Reliance Rail rolling stock public-private partnership – which counts AMP Capital, International Public Partnerships and RBS as investors – to reassure its creditors ahead of a planned draw down.

The New South Wales (NSW) government has had to bail out Reliance Rail – a rolling stock public-private partnership (PPP) in Sydney, Australia – in order to keep the project from going under as it prepares to draw down a significant amount of debt from a group of concerned creditors.

The authorities have promised to invest A$175 million (€143 million; $187 million) in Reliance Rail in 2018 in exchange for the successful delivery of 78 trains serving Sydney’s suburban network. The deal will see NSW acquire 100 percent of the equity of Reliance Rail, a consortium led by Australian engineering company Downer EDI (49 percent) and including funds managed by AMP Capital Investors (25.5 percent), International Public Partnerships (12.75 percent) and Royal Bank of Scotland (12.75 percent).

Reliance Rail is preparing to draw down on a A$375 million bank loan, but jittery creditors  concerned about the troubled PPP – which is already running 18 months behind schedule – needed assurances that the consortium would be able to refinance its debt by 2018. The NSW bailout provides that security, but the government is pressuring the concessionaire to be able to refinance the debt on its own by 2018.

In a strongly worded statement, NSW Treasurer Mike Baird said “the Reliance Rail project included an extraordinarily complex and risky financing structure. This was a case of the financiers and an incompetent Labour government failing to provide a buffer for potential risks”. He added:

“The reality is that without this agreement, NSW Treasury estimates the project could be facing up to A$250 million in break costs and up to A$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. If this PPP was abandoned altogether, the people of NSW would be waiting up to five to seven years for replacement trains.”

Reliance Rail has already delivered six of the 78 passenger trains it owes the state under the 30-year PPP contract and is scheduled to deliver the remainder by the end of 2014.

“This agreement gives all involved parties – whether suppliers or financiers – the confidence to now get on and fulfil their contractual obligations, and we expect them to do so without further delay,” Baird warned.