Govt buys back rail, ferries for $665m

ROBERT KITCHIN/Dominion Post

BACK IN THE FOLD: Toll Holdings Ltd Executive director CEO Mr Paul Little and Dr Michael Cullen sign the documents to buy back the rail system from Toll for $665 million.

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Finance Minister Michael Cullen has pledged more state investment in the rail network following today's announcement that Government has bought back Toll's rail and ferry business for $665 million.

Dr Cullen said the deal gave the Government complete control of the rail assets, which would allow it to better integrate the rail network with other transport networks and address climate change issues.

He said the Government had initial plans for further investment in the network, though details were not ready for release.

The Crown has been in negotiations with Toll over a buyback for several months.

It comes against a backdrop of wrangling over Toll's access agreement to the rail tracks, which are already owned by the Crown, with the Government saying it has been failing to pay its fair share.

Prime Minister Helen Clark today said the deal would pave the way for the modernisation of the rail network, which formed a key part of the Government's sustainability agenda.

"Modernising our transport sector is central to transforming our economy and making it truly sustainable," Miss Clark said.

"With rising fuel prices and growing awareness about the challenge of global climate change, many nations are looking to rail as a central part of 21st century economic infrastructure."

She said a modern rail system could reduce the emissions of the overall transport network, take pressure off our roads and allow trucking and shipping to operate more efficiently.

The Government will pay a purchase price of $665 million for the trains and Interislander ferries with settlement on June 30. The deal does not include Toll's freight forwarding business, which includes one of the country's biggest truck fleets operating under the Tranz Link name.

Dr Cullen said buying the rail operating business was the best way to increase investment in the industry and make it more responsive customers' needs.

Rail assets had been run down after the sale of the public rail system in the early 1990s and the Government would now look at upgrading rolling stock.

Dr Cullen said Toll had done a good job increasing freight volumes and streamlining the operation of terminals, but it had struggled to run a "commercially viable" business without government support.

"The Government will now avoid paying subsidies to third parties and we also avoid the on-going disputes over the implementation of the National Rail Access Agreement that had the potential to destroy value in the business and erode the morale of the people who work in it."

The negotiations reportedly took place against a backdrop of the Government manoeuvring to make Toll start paying the full price of access to the rail track network.

Toll has been paying about $48 million a year since an access deal was struck in 2004, with the Government picking up the shortfall of about $10 million needed to maintain and improve the tracks.

- With NZPA

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wang   #37   05:26 pm Jan 28 2009

Don't you remember when TNZ Rail was owned by the NZ govt? It was a complete piece of crap and it will go straight back that way under the Labour govt. The only reason the Labour govt got the rail back in the first place is because they get the good publicity for buying it but when the national govt get in they will have to spend heaps of money on it and screw up other things. It's only a political move.

Sam   #36   05:26 pm Jan 28 2009

I like that the people now own the railway in its entirety. The whole idea of businesses competing to drive down costs and boost efficiency does not work when there is a monopoly.

However government can do no better. I find it hard to believe a government run railway could actually turn a profit. Perhaps government owned/privately managed is the best solution.

Kevy   #35   05:26 pm Jan 28 2009

very well said the power sector we need back also asap

simonw   #34   05:26 pm Jan 28 2009

Good going.

I am a NZer living in Switzerland where the public transport system is extraordinary. Although the rail system is no longer government owned, I believe it was only through the government that the service became well established.

As long as the NZ government can manage the system well and improve the services to meet continental Europes standards (excluding Italy) then the rail system will have a chance of being profitable. This is especially the case with the looming petrol price hikes (and the fuel prices aren't going to go down). Yes, this will require a lot of investment, but create jobs and make NZ more sustainable.

richarquis   #33   05:26 pm Jan 28 2009

No doubt this will attract the usual flurry of anger, but i might presume Steve M can sort out his own dinghy if he is so sure of christmas and school holiday strikes? I'll take my chances with NZ govt before I take them with foreign profit hounds. Viva Aotearoa.

Kay   #32   05:26 pm Jan 28 2009

Well done Labour, some sanity at last. How about the electricity network next.

Ben   #31   05:26 pm Jan 28 2009

Full circle stupidity comes home to roost. That's the headline I would have gone for. It seems the New Zealand public has a serious case of short term memory loss, considering it was the exact same labour government that sold the network for $1 to Toll in the first place. How we are now forced to buy it back at the cost of $665 million beggers belief.

We must face up to facts, the current rail system is a farce, and it will take a complete overhaul to ever bring enough people onboard to make it profitable. The governments job should never be to prop up companies who's model clearly doesn't work, infrastructure or not.

Matt Taranaki   #30   05:26 pm Jan 28 2009

Typical Government. Sell assest. The new owner runs it down and takes as much profit as possible with little capital investment. Government then buys it back at 200 million over book value. Cullen must have a Swiss bank account !!!!

Steve Withers   #29   05:26 pm Jan 28 2009

This is good news. NZ will now be able to move ahead in building the transport infrastructure required better public transport and a sustainable future.

Frank & Earnest   #28   05:26 pm Jan 28 2009

But will they re-open Manakau railway station? (and give us more than just the one daily commute train to Wellignton)?

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