End of line for boss of train firm as Australia's PPP follows Metronet
Sydney Morning Herald: August 8, 2007
THE $8 billion contract for Sydney's next generation of trains has descended into farce after the project's chief executive quit without explanation after just six months in the job.
Five days after the engineering company running the contract forced out its managing director, the boss of the Reliance Rail project, John Hopman, has also been pushed aside.
The company yesterday declined to comment on the circumstances surrounding Mr Hopman's departure, saying only that it was unrelated to the resignation of Downer EDI's managing director, Stephen Gillies.
Sources close to the company said Mr Hopman had been sacked, claims a spokeswoman, Kate Burrows, did not rule out.
Mr Hopman had worked for Reliance Rail - a consortium of the engineering company Downer EDI, AMP Capital, ABN Amro and Babcock & Brown - since March. Reliance won the contract from the NSW Government last November.
Mr Hopman was previously the managing director of the tollway operator Hills Motorway, a senior executive with the engineering company GHD and a director of capital projects at the Department of Transport.
He has been replaced by Terry Kearney, who had held a business development position at the engineering company Transfield.
Downer EDI stunned investors last Thursday by warning of another profit downgrade, its third in a year and a move that forced the resignation of its managing director, Mr Gillies.
Reliance Rail yesterday described the profit downgrade as an upgrade. The drama has wiped more than $372 million from the company's market value, and its shares have fallen to levels not seen since last September, when it announced its previous downgrade.
Market observers said they were concerned about Downer EDI's ability to deliver on time and on budget.
Downer EDI succeeded in winning the contract to build 626 of Sydney's passenger rail carriages, to be used for 30 years, by beating its arch rival United Group.
It is the largest public-private partnership contract in Australia's history.
Analysts warned the price the consortium was willing to build the trains for was not reflected in the risks of such a large project.
The company, which also built the Millennium trains, has outsourced the construction of the carriages to a Chinese company with little experience of supplying passenger trains to a developed country.
The chairman of Reliance Rail, Alan Cameron, said in a statement yesterday that he wanted to "thank Mr Hopman for his contribution to Reliance Rail and the PPP project during his contract term".
He said he was being replaced by someone with " more direct rail experience to lead the PPP project".
Downer EDI said last week it was confident the consortium would meet its contract to deliver the carriages between 2010 and 2013 - and maintain them for 30 years.
Industry sources say the contract is about six to nine months behind schedule, even though it was won only nine months ago.