Publicly listed Australian logistics firm Toll Group has sold its stake in the Kingdom’s national railway, a project plagued with botched community resettlement attempts and development setbacks.
A Toll Group draft media statement, dated today, says Toll Group on Friday offloaded its 55-per-cent stake in the Toll Royal Railway concession to its joint venture partner, Royal Group.
“The decision to divest our interest in the concession was not taken lightly, but it was decided after generating lower-than-expected returns over a period of time,” Toll group managing director, Brian Kruger, is quoted saying in the statement.
“In addition, setbacks and delays in track rehabilitation works by external contractors over the past two years has in our view also impeded the efficient operation, and hence economic viability of the railway.”
Toll will continue to provide external logistics support to Royal Group, today’s media statement says.
“Toll Royal Railway has prided itself on the professional approach it has taken to training staff, safety management, community education and operational excellence, and Toll recognizes the importance of the improvement of logistics services to support the growth and prosperity of Cambodia,” Kruger said in the statement.
In 2009, the Cambodian government awarded Toll Royal Railway a 30-year concession to operate the Cambodian Railway Network and also the rights to Samrong Estate on the outskirts of Phnom Penh to build a new freight terminal.
Toll Royal Railway’s contract was part of the Asian Development Bank (ADB) and the Australian government’s $143 million rail rehabilitation project, which included repairing the 254-kilometre line from Phnom Penh to Sihanoukville and the 388-kilometre line from Phnom Penh to Poipet.
The ADB project, however, came under scrutiny this year when an internal audit revealed the bank failed to ensure just resettlement and compensation for more than 4,000 families impacted by the works.
The report also highlighted the in-limbo status of Samrong Estate, where Toll Royal had planned to build the new freight facility.
Today, the southern railway line has been completed while the northern line remains unfinished due to a lack of funding, according to the ADB.
Ly Borin, chief of the Ministry of Transportation’s railway department, declined to comment on whether Samrong Estate remains green lit for the new freight terminal.
Toll did not detail how much the company had lost during its five-year concession, how much the company sold its 55 per cent stake in the joint venture for, or whether the sale had even been approved yet by Cambodian authorities.
But, Toll exiting the Royal Group joint venture and the embattled Cambodian railway project could be part of a much wider effort to consolidate under-performing investments.
Off the back of a mere 1.1 per cent increase in revenues across the entire Toll Group for the 2014 financial year, the company on November 24 announced it is selling off its Toll Marine Logistics Northern Australian marine freight business, Toll Marine Logistics Asia business, Toll Global Express Asia and its interests in India.
“While the final timing of the various transactions . . . will vary between the first half and second half of this financial year, we expect that they will all complete during this financial year, resulting in an overall positive contribution to reported earnings,” the company said in the November 24 filing to the Australian Stock Exchange.
“The cash proceeds from these transactions, excluding the sale of TOPS property assets, are expected to be in excess of AUS$100 million.”
Representatives from both Toll Group and Royal Group declined to comment.