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Govt Deal Gives Best Prospect Of Rail Turnaround

Government Deal Gives Best Prospect Of Turnaround In Rail Freight Performance

Major rail freight customers say the Government's planned restructuring of rail would clearly provide a better outcome for all stakeholders than Australian based Toll Holdings gaining control of Tranz Rail as a result of its increased offer.

Rail Freight Action Group spokesman Cedric Allan says if Toll's bid succeeds there will be little chance of competition on the tracks, something the Group believes is vital to achieve the full benefits of restructuring, as Toll has said it wants to be the only freight operator with access to the rail network.

The Group, which includes some of New Zealand's largest exporters, has welcomed the possibility of competition if Tranz Rail's existing volumes fall below agreed levels on nominated lines, but believes the minimum volumes set out in the Government's proposals have been set too low. The group also wants other key performance indicators, as well as volumes carried, to be grounds for the introduction of competition if performance does not measure up.

"No one wants open slather access, but we know various overseas rail operators are definitely interested in providing competitive tenders on certain lines if Tranz Rail can't meet clearly set out standards," said Mr Allan.

Mr Allan said the Government's proposals also give certainty that the tracks would be brought up to standard and improved and extended where warranted.

"These moves would themselves make rail freight more efficient, and Government ownership of the rail network would create a level playing field for rail and roads, with Government financing, building and maintaining the infrastructure and charging fees to commercial users of either transport mode.

"There is no certainty the Toll Holdings would be prepared to make the same major investment in infrastructure, " said Mr Allan.

"We have made our concerns clear in discussions with Toll representatives and they are well aware we prefer the Government's restructuring plan and the prospect of competition if the monopoly service provider is not measuring up.

"We must not lose sight of why Government had little choice but to intervene. A ten year experiment with a monopoly service provider, under no threat of competition, has resulted in Tranz Rail being on the brink of receivership.

"Changing shareholders in the failing monopoly operator gives no guarantee that things will get significantly better, and the opportunity for the Government to buy back the network and establish conditional competition will either be lost, or be much more expensive to implement, of Toll's bid for control succeeds.

"Rail's share of available freight has fallen. Significant volume increases are required to break the cycle and have rail play its proper part in the economy. The key to achieving this is a business model which delivers services that meets the needs of major freight customers.

"Toll Holdings is an experienced transport company who may well be a desirable cornerstone shareholder in Tranz Rail if it can persuade the company to change its business philosophy. However, if Toll's bid kills the prospect of Government track ownership and the opportunity for competition, then a major opportunity to restructure rail services will have been lost."

Mr Allan said a better outcome could be achieved by Toll Holdings delaying an offer for Tranz Rail until the Government restructuring has been approved by shareholders and then considering increasing its stake in the company.

"That way we could have the benefits of restructuring as well as an experienced cornerstone shareholder for Tranz Rail."

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