Re: Freight is booming

[Bob <gioia@fastlink.com.au>]

Maurie Daly wrote:

> The interesting point here is that when making the consideration whether to
> scrap a loco fleet and replace it with new locos ,the improved fuel
> consumption in itself may simply not be enough.
> Unless the improved fuel consumption / reduced maintenance costs is greater
> than the additional lease payments / interest on loans that will be required
> to service the debt incurred by buying a new fleet of locos,its still cheaper
> to keep the old ones.
> The other more difficult question that needs to answered is that will the new
> locos be capable of producing enough revenue over their useful life to repay
> the capital cost and the interest.
> Where the loco fleet to be replaced is small , the above question isnt too
> hard to answer, where the loco fleet is large,there is a fair degree of risk.
>
> As an example what happens , if Freightcorp lose the contract to
> haul coal in the Hunter Valley when it comes up for renewal in 2 years time,
> to say Westrail.
> They would then have a fleet of 90 class locos with a large debt which they
> must repay with no capacity to earn any income,90s cant really be used for
> anything else other than hauling coal in the Hunter.
> Buying a new fleet of locos over a long time span , is a gamble in these
> competitive days.

Most of the current Freightcorp coal customers are tied to a five year contract. If freightcorp
should (and there's nothing to suggest this) get out of the coal haulage business then they could
lease these units to another company as there are provisions in the contract for this to happen.
Also an even more unlikley scenario is to modify them and reduce their weight. At the present time
however they are talking about adding more weight to them.
Bob