GrainCorp initiates historic infrastructure investment

GrainCorp initiates historic infrastructure investment

Article in World Grain on 5/6/2014

SYDNEY, AUSTRALIA — GrainCorp announced on June 5 the initiation of “Project Regeneration.” The initiative is a three-year strategic investment of A$200 million in GrainCorp’s country grain storage network that is designed to deliver improved supply chain performance.

GrainCorp Executive Chairman Don Taylor said the investment reflects GrainCorp’s commitment to provide improved service to customers as international demand for grain increases. “Project Regeneration represents the single largest capital investment in the country network in GrainCorp’s history. It will deliver a faster and more efficient rail capability for the benefit of growers and grain buyers.”

Project Regeneration involves four work-streams:

1. Reshaping the country network;
2. Localized cluster operations;
3. End-to-end export logistics; and
4. Rail loading improvements.

GrainCorp said Project Regeneration will be funded from cash flow and debt facilities. There is an associated restructuring cost of A$4 million which is expected to be reported as a significant item in GrainCorp’s earnings, principally in FY14.
Changes to GrainCorp’s country network and operating model will largely be in place prior to the harvest of this year’s winter crop.

The capital works associated with improved rail capability and three new sites will be undertaken over the next three years, subject to planning approvals and co-investment by government in rail siding improvements.

Further details on Project Regeneration, including site maps and a list of sites under the new network configuration is available in a dedicated section of GrainCorp’s website: graincorp.com.au/regeneration

Through Project Regeneration, GrainCorp is seeking to return up to 1 million tonnes of grain to rail, through reduced train cycle times and streamlined, more reliable operations.
“Rail freight performance has been in decline for some years. Slow loading and short sidings mean grain trains are shunted across multiple sites and cycled slowly, creating both cost and complexity. Furthermore poor track conditions limit wagon weights and track speed, adding to inefficiencies,” Taylor said. “We estimate rail costs in eastern Australia are A$10 per tonne higher than best practice, reducing returns to growers by around A$180 million in an average season. GrainCorp’s investment will significantly improve our network’s interface with rail and help reduce rail costs by A$5 per tonne.

However, the full benefits of our network investment — and the rest of the $10 — can only be unlocked if there is also further investment by track owners in the government-owned rail infrastructure that supports the entire industry.

“Reduced rail costs are good for growers, as competition for grain will see buyers able to post higher bids for grain,” Taylor said.

Project regeneration consists of four strategic subsections.
1. Reshaping the country network

The country network will consolidate to around 180 sites that already receive around 90% of all grain delivered to GrainCorp’s network. A long tail of smaller sites (72 last harvest) receives the residual 10% of grain.
Focusing on the core sites will enable GrainCorp to:
• Invest where it is most needed, in the sites where grower and buyer demand is greatest; and
• Improve service by concentrating equipment, labor and other resources.

Strengthening the core sites will also be supported by the development of three new state-of-the- art country storage sites in Queensland and NSW. The consolidated country network will have storage capacity of 20 million tonnes — enough to hold double GrainCorp’s average intake.

2. Localized cluster operations
The country network will be configured into 34 clusters, each centered around 1 or 2 “Primary” sites, geared to maximizing the amount of grain transported by rail. Primary sites will be export-focused, providing fast cycling point-to-point service for unit trains between country and port.

Several “Major” sites per cluster will service the domestic market by road, and run shorter shuttle rail services in NSW for both export and domestic. Many clusters will also have a number of special purpose “Flex” sites, which will provide additional capacity for specific segregations or customer requirements.

A new, leaner Country Operations structure will be aligned with the 34 clusters, enabling a closer focus on local operations and service. It is anticipated there will be reduction of around 80 full time roles as a result of this restructure. GrainCorp will seek to redeploy affected people within the company where possible. Where this is not possible, assistance to find new employment will be provided. All affected people will receive their full entitlements.

3. End-to-end export logistics
To optimize rail and network efficiencies, export customers will be offered the ability to bundle elevation and transport of export grain under a service to be called ExportDirect. Under ExportDirect, grain stock will be managed to ensure grain is optimally positioned and available for export or domestic outload.

The objectives of ExportDirect are:
• Maximizing rail movements from the sites that have the most efficient rail capability. Primary sites have the capacity to service all export elevations through GrainCorp’s ports, around 5 million tonnes in average year.
• Allowing the benefits of investment in the primary sites to be transmitted throughout the network, by ensuring buyers can buy export or domestic grain at any GrainCorp site — but ensuring grain movements are managed from the most cost effective site

4. Rail loading improvements
GrainCorp will invest in upgrades to rail loading capability at its 68 Primary sites. This will enable the company to provide a streamlined and dedicated rail service from these sites — using faster cycling, point-to-point ‘long unit trains’ (40+ wagons).

Rail capability upgrades at the primary sites will accelerate loading speed (tripling the current average load rate). The upgrades will involve the installation or upgrade at most primary sites of:

In addition, around 40 Major sites in NSW will service point-to-point ‘short unit’ shuttle trains (around 20 wagons) to domestic customers and export shuttles to GrainCorp’s four inland subterminals, where grain will be transhipped to long unit trains.

This upgraded capability will optimize rail operations for export and domestic customers — reducing rail cost, increasing rail capacity and improving reliability.

Supporting investment from track owners will be required to upgrade and extend rail sidings at approximately 40 Primary sites, to reduce the need to break and shunt trains. GrainCorp is working with governments in this regard