New Zealand Rail—Piracy Through Privatisation
(Speech given by Rt Hon Winston Peters to Kaiapoi Lions Club Meeting, Kaiapoi Working Mens Club, Raven,Street, Kaiapoi, CHRISTCHURCH)
Just recently TranzRail announced that they were cutting back certain train services and selling others. This at a time when they have been demanding figures like $65 million from the Auckland ratepayers for a regional train corridor which they got for the glorious sum of $1 per annum.
These recent events should not be viewed in isolation from the recent history of New Zealand Rail.
14 years ago New Zealand commenced a massive programme of privatising its assets—everything in the family chest was first corporatised and then to be sold off. Virtually everything was to be on the chopping block under first Labour and then National.
Almost everything was flogged off at bargain basement prices.
Today what have we got left?
Some power companies with no
A television company that’s being run into the ground and is about as non-partisan as TASS was under Kruschev.
New Zealand Post
All these transfers to private interests were accompanied by a shameful litany of secrets and lies.
One of the worst examples of this was the sale of all of New Zealand’s railway land (that’s all the land that the tracks are on) for one single dollar per annum which I mentioned before… and it gets worse from there.
The story of New Zealand Rail is a story about how some “clever businessmen” outsmarted some naïve and stupid politicians and diddled this country out of a major strategic asset—its own rail system.
It is also the story about how those same clever businessmen stripped railways to the bone and now would jettison parts of it for a quick buck with you the taxpayer picking up the tab—both in lost revenue to the state, but also through dilapidated services.
These people have made their money by the recapitalisation of these businesses and not from the creation of true value or service.
In other words they bought state assets at insanely low prices, held onto them for a few months and then sold them for something approaching their real value—at a whopping profit for themselves and a national loss of assets and funds for the rest of us.
When Fay Richwhite and Wisconsin Central railways bought Rail— they had no intention of making the service better or of fulfilling a stated public commitment to invest $200 million in rail which back then Ruth Richardson said the taxpayers couldn’t afford to invest.
The only thing they were interested in what making a killing out of a vital strategic asset.
Michael Fay and David Richwhite no longer see their futures in New Zealand, and they now live in Geneva, Switzerland, and “want to concentrate on Europe.”
Wisconsin Central was itself bought by Canadian National Railway for $US1.2 billion and the Canadians are looking to sell their Tranz Rail shares—at a profit.
Some who would have you believe that the sale of the rails was for the good of railways. That railways at the time of sale was a liability rather than an asset. That somehow selling it off to these pirates was then the only way to “save” rail.
Overnight, after 20th July 1993, on the stock markets Fay Richwhite made $52.2 million and Wisconsin Central made an incremental gain of $76.2 million—both companies made $NZ 128,516,110 gained within 24 hours. Not bad for a day’s non-work is it?
Why was that when the government of the day argued that the railways were worthless and that they had done the country a favour by getting rid them.
In reality the stock markets in both countries knew a sweetheart deal when they saw one and within three weeks of the sale the $128 million gained had become $186 million.
I repeat: some clever businessmen outsmarted some naïve and stupid politicians and diddled this country out of a major strategic asset.
But it gets even worse.
As soon as they bought it they started to eat into the balance sheet—the strong assets of the railways and the projected growth they themselves had forecast allowed them to extract $220.9 million of equity that the taxpayer had contributed just three years earlier.
In 1995, Tranz Rail made a capital repayment of $100 million. As $90.6 million of this went to Tranz Rail's original shareholders it effectively reduced their investment in the group from $107.4 to $16.8 million.
In effect Fay Richwhite and a few others in substance paid a paltry $16.8 million for all the railways, all the trains and all the ferries-- that represents a net cost of 16c a share.
For the first time in years the railways was profitable in 1993 —it was returning funds to the taxpayer and the consolidated fund.
It was estimated, conservatively, that the railways were going to make at least a $100million net profit in the next year – 1994.
That money should have gone to the taxpayer, who had built the railways up for more than 120 years—instead it went to our friends from Fay Richwhite.
But this story also had a twist to it. The new buyers in 1993 were, in fact, the financial advisors to the Railways before it was sold - a position they had got themselves into by 1992.
They had an open door on the accounts and deals that New Zealand Rail were proposing. They were privy to the most highly sensitive commercial information obtained at the taxpayer’s expense.
Then on 6 April 1993 Fay Richwhite jumped over the table and said that they were now not just the advisors—they were the buyers of a company that used taxpayer’ money to make itself profitable for the first time in years.
To those who said this was a conflict of interest Fay Richwhite said that the part of their company that did the advising for New Zealand Rail had nothing to do with the part of Fay Richwhite that was buying their own clients.
The liked the trains so much—they bought the company!
They said that they had erected a “Chinese Wall” between the two offices of the same company.
Does anyone in this room believe that?
Of course there wasn’t a Chinese Wall in the office—it was an open plan office with snakes and ladders going in every direction.
But it gets worse still!
Top executives in New Zealand Rail—the same executives who had previously taken advice from Fay Richwhite were paid hundreds of thousands of dollars to help sell our public rail system.
The present owners have let rail fall into disrepute. Morale is low and Tranzrail have been investigated and condemned for appalling safety standards. You simply cannot let a major organisation like Rail sit idly by, not replace assets and expect it work.
After the initial windfall of the first 3 years they have neglected to maintain our vital rail system.
Why should some people like them get away with this? Why not put rail under professional management on a profit-sharing basis so that the asset remains in New Zealand ownership and produces a positive cash flow towards financing New Zealand’s future?
They are now selling the railways again—none of the buyers are from New Zealand.
But that doesn’t stop the owners from closing down lines and laying off even more staff in an effort to tart up Rail for the sale.
They say that they have made major changes to Tranzrail to make it run better. But funnily enough they’re refusing to tell the New Zealand public.
Sometime Fay Richwhite spokeswoman Michelle Boag said recently: "It's a private company with private interests. If they make a decision to sell, they're not under any obligation to say why."
Is it any wonder that certain businesses in this country are backing National and Labour for the next campaign?
Do you think Labour and National are going to have any problems in filling their coffers this election?
They will continue to bleed this
country for all its worth.
If you are thinking of voting for labour at the next election please take a look at their reaction to the sale.
National had no mandate to make this sale and all Labour could do was complain that “the timing wasn’t right”.
Ladies and Gentlemen, you have got a clear choice to make over the next 16 months. If you want to reward this sort of political behaviour then go out and vote for either National of Labour.
Either one it doesn’t matter—they have become clones of each other. The face and voice may differ—slightly—but the performance when they reach power is the same.
New Zealand First is against sales of our strategic assets to foreigners. We always have been.
Our land continues to be sold. Seventy percent of our forestry is in foreign ownership. All of our railways is foreign controlled. Our airways are foreign controlled. Our nationwide banks are now foreign controlled.
New Zealand First is not opposed to foreign investment but the line has been clearly drawn; such investment must stand the test of being to New Zealand's advantage. Clearly Fay Richwhite and Wisconsin Central did not have New Zealand at heart when they gouged us.
I have dealt with Railways tonight to remind New Zealanders of what actually went on. How a group of men for a paltry $16 million dollars got hold of New Zealand Rail, made enormous profits and, today, the current government is talking about socialising the losses and privatising any further profits. In short they want you to dig deep into your pockets to keep rail services going to parts of New Zealand.
This story is not unique. The same thing happened with Telecom, Air New Zealand and, last year, ENZA. The questions for us all tonight is – when will we ever learn?