Table Of ContentS
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Steel on Steel is the inside story of the privatisation of the freight
E
arm of Queensland Rail, written by Stephen Baines, a senior executive E
involved intimately in the struggle for the railroad’s future. An icon L
that touched every part of life in Queensland, QR was famously
catapulted into the private sector in 2010 after more than 140 years
of government ownership. S
T
The privatisation was the second biggest in Australian history, and the E
most difficult. It involved simultaneously a massive de-merger from P
H
the passenger business, and a $4.6 billion initial public offering (IPO).
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For eighteen months, this IPO was Australia’s ultimate corporate soap
N
opera. This book describes how this big idea was conceived and
executed in the face of unprecedented outrage and opposition. B
STEEL
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STEPHEN BAINES is an Australian business strategist and innovator who,
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for the past twenty years, has specialised in the mining and transport
S
industries. Born in England, Stephen grew up in Sydney, New South Wales,
moving to Brisbane, Queensland to study journalism. Before his seven-year
ON STEEL
stint as advisor to the chair and chief executive officer at QR/Aurizon, he
worked with another rail transport company and a major mining group. He
lives in Brisbane with his wife Suzy and their three daughters Emily, Isabella
and Olivia. This is his first book.
Inside the battle for the future
of Australia’s biggest railroad
ISBN 978-0- 7022-5349-2
STEPHEN BAINES
9 780702 253492
Steel on Steel
Steel
on Steel
Inside the battle for
the future of Australia’s
biggest railroad
STEPHEN BAINES
Not Aurizon’s view and no liability
This document was authored by Stephen Baines and does not necessarily represent the views of Aurizon Holdings
Limited (ACN 146 335 622) or its related bodies corporate (collectively referred to as “Aurizon”) or any of their
directors, officers, employees or agents. Aurizon makes no representation or warranty as to the accuracy, completeness
or reliability of any of the information contained in this book. To the maximum extent permitted by law in each
relevant jurisdiction, Aurizon and its directors, officers, employees and agents and any other person associated with the
preparation of this book, each expressly disclaims any liability, including without limitation any liability arising from
fault or negligence, for any errors or misstatements in, or omissions from, this document or any loss howsoever arising
from the use or reliance upon the whole or any part of this document or otherwise arising in connection with it.
No offer or investment advice
This book is not intended to be, and should not be considered to be, investment advice by Aurizon nor a
recommendation to invest in Aurizon nor an offer to sell or a solicitation of an offer to buy or sell securities in Aurizon
in any jurisdiction (including in the United States). The information provided in this book has been prepared as an
historical account and not for the purposes of promoting investment in Aurizon or providing any investment advice
whatsoever. It does not take into account any recipients’ investment objectives, financial circumstances, taxation
position or particular needs. Any recipient of this book must make its own independent assessment of Aurizon after
making such investigations and should obtain independent professional advice before making any investment decision.
Forward-looking statements
This book may include forward-looking statements which are not historical facts. These statements are not guarantees
or predictions of future performance. Actual results or developments may differ materially from those expressed in the
forward-looking statements contained in this document. None of Aurizon, the author nor the publisher is under any
obligation to update these forward-looking statements to reflect events or circumstances that arise after publication.
Past performance is not an indication of future performance.
First published 2014 by
Custom Publishing,
University of Queensland Press,
PO Box 6042, St Lucia,
Queensland 4067, Australia.
Custom publisher: Lynn P Bryan
Designer: Avril Makula
Editor: Janet Hutchinson
Copy editor: Puddingburn, Sydney
www.uqp.com.au
ISBN 978-0-7022-5349-2
© Stephen Baines.
This book is copyright. Except for private study, research, criticism or reviews, as
permitted under the Copyright Act, no part of this book may be reproduced, stored
in a retrieval system or transmitted in any form or by any means without prior
written permission. Enquiries should be made to the publisher.
Cataloguing-in-Publication entry is available from the National Library of Australia
http://catalogue.nla.gov.au
Printed in China.
Front cover: Photograph by Steffan Jannides.
COntentS
Foreword vii
Introduction ix
Timeline xii
Prologue xiv
ChApter One Opting in 1
ChApter twO Last off the rank 10
ChApter three Reform and scandal 21
ChApter FOur The brothers 30
ChApter FIve A freedom to roam 37
ChApter SIx The Queensland Premier shocks the State 43
ChApter Seven Policy battle lines are drawn 50
ChApter eIght Inspiration from abroad 56
ChApter nIne The policy battle 65
ChApter ten Breaking up is hard to do 72
ChApter eleven We will destroy your IPO 81
ChApter twelve Communication breakdown 92
ChApter thIrteen The final putsch 100
ChApter FOurteen Leaving the station 114
ChApter FIFteen Going to market 119
ChApter SIxteen Hitting the road 125
ChApter Seventeen Black bookbuild 135
ChApter eIghteen The elegance of Hahli 144
ChApter nIneteen A calm determination to change 152
Epilogue 160
Endnotes 164
Index 171
FOrewOrd
After my first meeting with Queensland Rail (QR) CEO Lance Hockridge in
Montreal in 2009, I wondered if this thoughtful, mild-mannered gentleman
was going to survive the bruising gauntlet he was about to face in trying to
privatise QR.
In retrospect, it is clear that only someone with his tact, tenacity and steely
strength could have succeeded.
Fourteen years before this meeting, as Canadian Transport Minister, I had
been at the helm of the commercialisation of Canada’s government-owned
railroad, Canadian National. While the CN privatisation was a major challenge,
I have to say that it was a cakewalk compared to the QR/Aurizon journey.
In the case of QR, one would have thought that widely documented earlier
experiences in New Zealand, Great Britain, Canada as well as in Australia
would have served as examples to those who were interested in the process
and outcomes of previous privatisations.
Yet I have never seen such an extraordinary and relentless counter-attack
on a necessary and worthwhile government reform.
It should not come as any surprise that the QR proposal would be seen as
a threat by the leaders of rail unions. Their reaction and rejection was similar
to attempts in any sector to bring about substantial change. And certainly
the position taken by opposition politicians was equally understandable and
consistent with political reality.
But the reaction from mining companies, other governments, media,
and the investment community added a completely new dimension to the
opposition.
vii
STEEL ON STEEL
Only the resolve of Andrew Fraser, the Treasurer in the Queensland
Government, and the total commitment and steadfast determination of
Hockridge and his team kept the process on the rails.
Stephen Baines, Advisor to the Chair and CEO of QR/Aurizon, enjoyed
a singular opportunity to be both a participant and an observer of the QR
journey from concept to IPO. His account reveals the lengths that some
elements went to in order to thwart government policy and how key players
withstood the massive anti-privatisation campaign.
Premier Bligh and her government showed political courage in coming to
the decision to privatise QR. The necessity to sell off most of the QR freight
operations was the best way to leave behind a taxpayer-supported, bloated,
feather-bedded entity and ensure that a crucial component of the transportation
infrastructure supporting the Queensland and Australian economies would
become a world-class, results-driven, shareholder rail company.
As more and more governments recognise their role is to provide for
education, health care, welfare and justice for their citizens, they will continue
to take steps to have the private sector be responsible for freight railroads,
ports, airports, airlines and air navigation systems based on the concept of
user-pays.
As in any complicated, controversial venture there are lessons to be
learned. Stephen Baines has written a valuable addition to the very limited
literature available that tells the story of a successful government privatisation.
It was one of the most exciting and challenging experiences in my career to
play a small part in what has become the most successful government IPO in
Australian history.
Hon M Douglas Young PC QC
Former Canadian Minister for Transport
Tracadie, New Brunswick, Canada, May 2014
viii
IntrOduCtIOn
Since 2007, I have had the privilege of being on the inside to witness and
participate in one of the most extraordinary transformations in the history of
Australian business.
An icon that touched every part of life in Queensland, QR was famously
and audaciously catapulted into the private sector in 2010 after more than 140
years of government ownership.
This is the story of how that big idea was conceived and executed in the
face of unprecedented outrage and opposition.
QR was big, but it was slowly and methodically dying. Even though tens
of billions of dollars of annual export revenue travelled on its infrastructure,
it was not run as a business. Governments expected involvement in daily
commercial decisions, customers expected sweet-heart deals, and employees
expected jobs for life. With Asciano, a powerful and impressive private
competitor on the scene, QR was just never going to survive long-term as a
government entity. But thousands, including powerful decision-makers, were
in denial. It was the blistering reality of the global financial crisis that blew
away this nostalgic luxury.
The two main players in this story, the remarkable chief executive officer
(CEO) of QR/Aurizon Lance Hockridge and Queensland’s relentless former
Treasurer Andrew Fraser, shared that insight and were joined in steely
determination to see the process through.
The privatisation of QR was the second biggest in Australian history, and
the most difficult. It involved simultaneously a massive de-merger from the
passenger rail business, and a $4.6 billion initial public offering (IPO). For
ix
