Its not so bad rhua5436. The debt for constructing the Waratah...

Its not so bad rhua5436. The debt for constructing the Waratah trains is contained in Reliance Rail which is a public-private partnership (ppp) between the NSW gov (the customer) and downer (the sub-contractor). See here:
http://www.reliancerail.com.au/

The main reason for the cost blowout is 19,000 design changes required by the customer which has caused extra design work, manufacturing costs and delays. So its not all downer's fault.

But so far downer and all the sub-contractors are being paid for their work. That's why the write-off is not on downer's balance sheet. But Reliance will run out of funds before the trains are complete.

Downer has stated that it is not injecting more funds into Reliance. So it has to come from the customer or Reliance goes into receivership (Downer dont care -> waratah is a total write-off). But the NSW gov cannot let that happen because reliance is not just for delivering the trains but also for maintaining them.

So, in about 12mths I expect the gov will restructure the Reliance debt and eventually pay it out with some money from selling the power stations or something. The liberals will just say blame labour for the sale - too much debt.

Then they will be pals again and contracting for more work.


Waratah Pre-production Test Vehicle