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Interesting article!

For ERG, $10m loss is a pleasant surprise
Date: November 27 2007


Linton Besser


ERG Ltd, the Perth company contracted to deliver Sydney's long-awaited transport smart card, has repeated its prediction of a $10 million loss for the current financial year.

Ordinarily, such a prediction would not be cause for celebration, but for ERG, which has notched up $597 million in accumulated losses since it listed in 1984, things could be looking up.

The company lost $75 million two years ago and another $15 million last year.

At its annual general meeting in Perth yesterday, its chairman, Colin Henson, acknowledged that "most shareholder interest will be in the Sydney project and on the sensitivity of the company's position to the continuation of that project".

The Tcard project remains under a cloud after the NSW Government made public its decision to issue the company with a notice of intention to terminate after lengthy project delays.

The card was to have been fully tested and delivered by November last year but is now not expected to be widely available until 2009.

The company will now submit a remedial plan to the Government on November 30 to argue its case for the contract to be continued.

"It would be a tragedy if political and legal sense were to overtake commonsense in NSW's decision on whether to continue with the project in coming weeks," he said.

"We are acutely aware that the existing ticketing systems in Sydney are rapidly ageing and that should the Government decide to terminate the Tcard project that it will, in effect, be condemning the commuters of NSW to many years of continued inconvenience and increasingly unmaintainable equipment."

If the company succeeds, its remaining 10-year maintenance contract carries a much healthier margin than the under-priced installation.

Some responsibility for the delays rests with the State Government, which has shied from taking tough decisions on simplifying fares, and which has demanded the company redirect efforts to a sideline school transport subsidy project.

Mr Henson repeated the company's warning to the Minister for Transport, John Watkins, that ERG would seek to recover the $80 million it has already spent on the project, citing "evolving customer demands" as a key element of the delays.