Transport giants look to switch freight to rail

Transport operators are hopeful of shifting more freight from road to rail after the Government's $665 million deal to buy Toll NZ's rail and ferry business.

The Government and Toll NZ's Australian owners, Toll Holdings, have in the end been unable to reach a national track access agreement, which would have stipulated how much Toll should contribute to track maintenance and improvement.

Toll Holdings chief executive Paul Little said the disagreement on the access fee had been headed for court but the Government indicated about three months ago it was an interested buyer of the assets, in effect renationalising the railways.

Toll's preference was to hold on to the rail and ferry business. "But because we couldn't get the security we needed around track access we couldn't go and invest another $100 million-plus with having a dubious return.

"The Toll board simply couldn't live with that."

Mainfreight chief executive Don Braid said the listed transport company was keen to move more freight by rail.

"Provided the Government manages it [the rail operations] in a commercial way and puts a commercial board in place there's an opportunity to see far improved rail infrastructure, which would be good for everybody including Mainfreight," he said.

Other transport operators, including Halls Refrigerated Transport and coastal shippers Pacifica, welcomed the move.

The Road Transport Forum had been calling for the separation of Toll's road and rail operations for several years because it was uncertain whether Toll was favouring its trucking business, Tranzlink, over competitors in terms of rail access.

Forum chief executive Tony Friedlander said the split would lead to more transparency but declined to comment further without seeing more detail about how the Government intended to run the rail and ferry business.

Business NZ chief executive Phil O'Reilly said the Government would need to run the rail business in a transparent manner and not confuse commercial and environmental objectives.

"They need to run rail as a business," he said.

"If they're going to say to people, `We need to reduce our carbon footprint,' they need to give all transport providers an opportunity to do that and to pick up any funding or assistance available.

"The danger is that those purposes get mixed up and you get a poorly run transport operator."

The sale price of $665 million is $235 million above the $430 million value that Toll put on the assets in its accounts.

Mr Little said Toll had invested more than $200 million in the rail and ferry business since it bought it from TranzRail in 2003.

"The rail and ferry business has transitioned from being an absolute basket case to achieving a reasonable return on investment," he said.

Toll did not disclose in its accounts how well the road and ferry business was doing as opposed to the trucking operation.

Rickey Ward, joint equities manager at former Toll NZ shareholder Tyndall Investment Management, said Toll had been a good owner.

"They were doing a great job in a very tough environment where there was definitely not an equal competitive platform for rail versus road.

"It's an asset that was clearly mismanaged in the past and they've done their best to turn it around."