KiwiRail pushing for NZTA to fund rail network
KiwiRail pushing for NZTA to fund rail network
By Pattrick Smellie
Oct. 29 (BusinessDesk) - State-owned
KiwiRail is pressing the New Zealand Transport Authority to
take over funding the national railway network and believes
it has Transport Minister Simon Bridges onside in a way not
true of his predecessors, Gerry Brownlee and Steven
Joyce.
In comments at KiwiRail's annual public
meeting, chairman John Spencer and chief executive Peter
Reidy highlighted the inclusion of a new top priority in the
NZTA 2015-2019 statement of corporate intent to "integrate
road and rail to improve freight network productivity" as a
sign the government is coming round to the need for an
integrated approach to road and rail network
investment.
Published in June, the SCI priority objective had been developed with KiwiRail's input, said Reidy. There had been a significant shift in NZTA's stance towards rail "in the last four to five months" and both the NZTA chair and chief executive had attended yesterday's KiwiRail board meeting.
"The goal is to stand back over a short period of time to look at whether there's a different approach to 'below rail' costs," he said, referring to the costs of maintaining the 4,000 kilometres of tracks, bridges, signals and other infrastructure that KiwiRail runs trains on. "Are there some different options for funding critical infrastructure?" said Reidy, who has been promoting a 'true value of rail' argument that separates the cost of maintaining the rail network from KiwiRail's 'above rail' freight and passenger business.
KiwiRail is arguing it
will never be profitable while it owns the rail network and
will always require hundreds of millions of dollars of
annual government support to maintain the rail network
because New Zealand produces too little rail freight to
justify its large, geographically challenging
network.
The rail company made a $91 million operating
surplus on the 'above rail' part of the business in the year
to June 30, but reported a statutory loss of $168 million,
caused by the impact of depreciation on the rail network,
and depends on government funding of $210 million in this
financial year and $190 million next year for capital works
to maintain the network.
That funding comes from the
so-called Future Investment Fund, comprising the proceeds of
partial privatisation of state-owned power companies and Air
New Zealand. A recent Treasury review concluded that closing
large chunks of the rail network would not improve
KiwiRail's fortunes since it operates as a network, although
closures on some very lightly used routes could be
contemplated.
Spencer said critics of splitting responsibility for tracks and trains pointed to the failure of that model when the government owned the tracks and private operator Toll Holdings ran the trains - a situation reversed when the then Labour-led government took back ownership of the rail business from Toll in 2008.
"Now
you've got common ownership", making consideration of
different funding options easier, said Spencer. If organised
on that basis, KiwiRail's freight and passenger businesses
could operate profitably and even make a small contribution
to the cost of the 'below rail' network.
The last thing KiwiRail needed was "an open cheque book", but it did need an integrated national transport strategy that valued rail on a national interest basis, Spencer said.
The transport agency's 2013-16 SCI made no mention of rail among its priorities, instead focusing on "moving more freight with fewer trucks."
"Minister Bridges understands the issue and is encouraging us to work with NZTA," said Spencer in answer to questions. "That understanding wasn't there before. We need to strike while the iron is hot."
Looking to the
current financial year, Reidy declined to give guidance on
KiwiRail's operating result, saying the national freight
market remained volatile, and subject to significant shifts
in sources of demand as both shipping and port companies
changed their resources and strategies.
On Solid
Energy, the financially distressed state-owned coal miner
currently in administration ahead of sale, Reidy said
freight volumes this year were expected still to be around
one million tonnes, roughly the same as last year, when
revenues fell to around $27 million from $50 million a year
earlier.
Reidy confirmed to BusinessDesk after the
meeting that KiwiRail was assessing a number of tenders from
freight and tourism operators interested in using all or
part of the closed Napier to Gisborne rail link.
Key to freight proposals would be the willingness of regional councils to help fund a service. KiwiRail was only willing to entertain deals that were "clean" and exposed it to no additional commercial risk, he said.
(BusinessDesk)