AusRAIL, Market Sectors

Turnaround plan for KiwiRail ? Part Two

<span class="" id="parent-fieldname-description"> The New Zealand Government is “working hard” to encourage an environment where rail can operate efficiently and with strong commercial imperatives, though this is not without its challenges, according to transport minister Steven Joyce. </span> <p><strong>To read Part One of this story click <a href="">here</a></strong></p><p>By Jennifer Perry</p><p>Given the previous NZ Government’s “poor choice” in spending a billion dollars of taxpayers’ money on KiwiRail, that is now valued at just $388m, Joyce* said it is&nbsptime for some “hard-nosed realism” about future investments.<br />For the past several months KiwiRail has been working on a “turnaround plan” that aims to see KiwiRail become a sustainable freight-based business that is able to fund its ongoing and capital expenditure from customer generated revenue within ten years.<br />“It’s a challenging goal,” Joyce said.</p><p><strong>Regional Council’s role<br /></strong>For a turnaround plan to work, Joyce said that the government needs buy-in from Auckland’s and Wellington’s regional councils.<br />While the government has invested significantly in improving metro rail in the last several years including $1.6bn to modernise and extend Auckland’s network, Joyce said “the reality is” that neither Auckland or Wellington are currently paying the actual amounts required to maintain tracks, ensure services are reliable and renew their share of the network.<br />“Because of this we’re in the ironical situation where here in Wellington, KiwiRail is constantly bagged because of its rundown and sometimes unreliable services but no one has yet been prepared to fund the full amount to have the network adequately maintained,” he said.<br />“Well, for a KiwiRail turnaround plan to work, all customers, including those regions that provide metro passenger services, and their co-founder NZTA, will need to stand up.<br />“The metro operations will have to meet the actual fair costs for the renewal and maintenance of the networks that they use to go forward.”</p><p><strong>Don’t die in a ditch for a line that carries fresh air</strong><br />“Rail advocates are passionate about rail and I understand and support that,” he said.<br />“However, if we are to successfully turn KiwiRail around…we need to be realistic about what can be made to work and what can’t. And the reality is there are a few of our smaller lines that literally are not used at all or are used very rarely.”<br />“…There are one or two branch lines, that despite carrying very little now, may have the real opportunity of…anchoring the revenues on the line in the near future…I am supportive of staying in a holding pattern on those if that’s what KiwiRail wants…<br />“More generally I suppose I’m saying that it’s a good idea to pick your arguments. You shouldn’t die in a ditch for a line that’s only carrying fresh air.”<br />With NZ’s freight task expected to double by 2040 and fossil fuel prices likely to go higher over time, Joyce concluded that a well-run, successful rail company has an important role to play in NZ’s transport future.</p><p>*This was a report from NZ minster for transport Steven Joyce’s presentation given at the recent NZ Rail conference<br />&nbsp</p>