AURIZON and Team Global Express have entered an 11-year contract that will see TGE transition its containerised rail freight to Aurizon’s east-west and north-south rail networks.

The contract includes five weekly east-west services (connecting Melbourne, Sydney, Adelaide and Perth) and two weekly north-south services (connecting Brisbane, Sydney and Melbourne).

Aurizon expects freight from TGE (formerly Toll Global Express) to account for around 70% of the capacity of the services, based on its historical volumes.

Aurizon managing director and CEO Andrew Harding said the partnership, worth around $1.8 billion, is the rail operator’s biggest non-coal revenue contract ever.

“It is another step in achieving our ambition to double the earnings of our bulk business over the decade, and to deliver sustainable growth in non-coal areas of our company,” he said.

At an investor presentation on Monday (20 February), Aurizon chief financial officer George Lippiatt said over the past six years, the company has seen more demand for rail freight than could be met by supply and capacity – particularly from east to west.

“We’re very focused on that east-west market, which we see as a natural rail market, and which we see as needing additional capacity,” he said.

“There’s demand for that capacity.”

Building on the 70% capacity TGE has secured, Aurizon said it would have an opportunity to increase freight volumes through customer growth “to meet the fully installed capacity of these services of more than 200,000 TEU”, in addition to Aurizon’s current containerised freight volumes.

In Monday’s presentation, Aurizon group executive – bulk Clayton McDonald told investors the company moves around 480,000 TEU each year.

“We’ve got a network today that operates that 480,000 TEU across the nation, across those five states that we operate, and so there’s opportunity to move freight around or consolidate freight on some of these services and use some of the 30% of capacity that remains on those trains,” he said.

Mr Harding dispelled the suggestion that Aurizon’s vision to grow its containerised freight business is about returning to a full-service intermodal business, as it had been before 2018.

“Our previous intermodal business was not optimal because it involved full end-to-end service including … a significant trucking fleet, last-mile delivery and managing more than 600 customers,” he said.

“Furthermore, we did not have a customer scale, let alone the scale of TGE to support our services.

“The intermodal business I shut down in 2017 was not a business suited to Aurizon’s capability. Aurizon’s core competency is safely transporting products on rail, primarily across long distances.

“Around two-thirds of capacity in our previous intermodal service was in the north-south (Brisbane, Sydney, Melbourne) corridor, a market dominated by trucking. The remaining capacity was across the longer and far more profitable east-west market.

“The service offered today will see this capacity reversed, with around two-thirds of capacity to be deployed on the east-west market, with the remaining one third on the east-coast market.”

TGE CEO Christine Holgate said she expects the partnership to significantly improve Australia’s rail freight capacity.

“Our partnership with Aurizon is game-changing for TGE customers, securing them important extra capacity and more choice, in what to date has been a very limited rail market with restricted capacity and rising tariffs,” she said.

“The weather events of recent years have demonstrated how important both choice and capacity on major routes are, to ensure important freight, including food, can still be delivered at times of great need.

“They have also evidenced the importance of leveraging rail as a greener solution for transporting freight, to help address climate change and secure our nation’s carbon ambitions.

“Through this partnership, we are able to offer our customers much-needed capacity along crucial routes linking major cities across our country.

“This presents significant opportunities for reliable deliveries, service efficiencies and less carbon intensive transport solutions for customers, whilst helping ensure regional Australians are served.”

Mr Harding described TGE as a tier-one customer, closely matched to Aurizon’s national footprint and network of assets.

“Together with TGE we have designed an innovative transport and logistics solution to best meet their end customer needs,” he said.

“We both share a strong commitment to helping achieve a zero emissions future and recognise the significant role rail can play in helping achieve that goal.”

Aurizon plans to commence services for TGE in April this year, with a ramp-up to full service offering by April 2024.

Mr Harding also announced to investors that the sale of Aurizon’s East Coast Rail business completed on Friday (17 February).