Serco, Veolia Consortium, Transit On Sydney Ferry Short List

Australia's New South Wales state has whittled down to three a short list of bidders seeking to run Sydney's famed harbor ferry service after 28 companies initially expressed interest in the contract.

Serco Group PLC's (SRP.LN) Australian unit is competing against a partnership of Veolia Environnement S.A. (VE) with Transfield Services Ltd. (TSE.AU) and Transit Systems and Forgacs Engineering on the shortlist. The companies now have until early 2012 to submit detailed proposals to the state government on how they propose running the ferries.

"The ability of tenderers to improve the overall customer experience will be a key consideration, in line with the emphasis on customer service we are implementing across the public transport network," said Gladys Berejiklian, transport minister in a statement.

The deal is part of a push by the state government to maximise cash from publicly owned and operated utilities to help fund major new infrastructure projects. The state plans to raise more than $2 billion Australian dollars (US$1.95 billion) by leasing Port Botany, one of the country's biggest container ports.

Sydney Ferries traces its roots back to the late 18th century when Great Britain established a penal colony in Australia and has been in the red for a number of years as the cost of operating and maintaining an ageing fleet exceeded stagnant revenues. The company lost A$7.1 million in the year to June 30, 2010, narrowing from a deficit of A$14.5 million in the previous financial year.

Ministers hope privatization will lead to the reinstatement of hundreds of ferry services, and encourage more people to swap their car for travel within Sydney's panoramic harbor.

Under the reform, the NSW government will continue to own Sydney Ferries and control fare structures, but private operators will be handed the right to lease, maintain and run the fleet.

Sydney Ferries operates 28 vessels traveling between Sydney's business district and nearly 40 destinations, including Taronga Zoo and the beach suburb of Manly. The ferries make a combined 175,000 trips every year. Private operators are allowed to run competing services with Sydney Ferries, with closely held Sydney Fast Ferries operating two vessels between central Sydney and Manly since April 2010.

-By Enda Curran, Dow Jones Newswires; 61-2-8272-4687; [e-mail]