State-owned Queensland Rail, Australia, has won a $1.8bn (A$2bn) contract from Xstrata Coal to haul coal from its mines in the state.

The deal comes shortly after the state government’s recently announced plans to hold an initial public offering (IPO) for the operator’s coal and rail freight network by the end of 2010, keeping 25–40% of the business, in an effort to reduce the state’s budget deficit.

The long-term contracts will begin in 2010 and 2011.

The passenger and freight rail operator now plans to invest nearly $100m in new locomotives to support the deal.