Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Crown Tranz Rail Proposal

Media Backgrounder – Crown Tranz Rail Proposal

The following is a simplified description of how Tranz Rail’s access charge would be set if Tranz Rail shareholders accept the Crown offer. It is pitched at the level of retail investors and is not a full technical description. The Crown will be providing a full briefing for the major institutional shareholders next week.

The overall Track Access Charge (TAC) would be set, on a forward looking basis every three years, at a level that should enable Tranz Rail to be commercially viable. Commercial viability is defined as making an economic return, which in turn is defined as providing an appropriate return on the capital invested.

The “appropriate” return will be calculated using financial industry standard methods. These methods allow for a return on capital proportional to the risk of an investment. Specifically it allows a margin to cover the higher risk of investments in the sharemarket and the rail industry relative to, say, government bonds.

In technical terms this means that the TAC will be set so that Tranz Rail is expected to have a Net Operating Profit after Tax (NOPAT) equal to its Weighted Average Cost of Capital or “WACC”. The WACC is the cost of capital including both debt and shareholders’ equity.

The exact margin for risk and fine details of the WACC calculation are still being agreed between Tranz Rail and the government.

The TAC is also capped at the level of TrackCo costs, so rail users will never pay access charges in excess of the costs of owning and maintaining the rail network.

If Tranz Rail performs to budget the return to Tranz Rail shareholders will be as calculated. However, it is not a guaranteed or capped return as performance worse than budget will result in a lower return and better performance will achieve a greater return.

Overall the TAC calculation is very favourable to Tranz Rail shareholders as it assumes a level of shareholder risk based on sharemarket and industry averages, but then removes components of that risk.

© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines


Also, Loan Interest: Productivity Commission On Tertiary Education

Key recommendations include better quality control; making it easier for students to transfer between courses; abolishing University Entrance; enabling tertiary institutions to own and control their assets; making it easier for new providers to enter the system; and facilitating more and faster innovation by tertiary education providers... More>>


Higher Payments: Wellington Regional Council Becomes A Living Wage Employer

Councillor Sue Kedgley said she was delighted that the Wellington Regional Council unanimously adopted her motion to become a Living Wage employer, making it the first regional council in New Zealand to do so. More>>


Scoop Images:
Dame Patsy Reddy Sworn In As Governor-General

This morning Dame Patsy Reddy was sworn in as the New Zealand Realm’s 21st Governor-General. The ceremony began with a pōwhiri to welcome Dame Patsy and her husband Sir David Gascoigne to Parliament. More>>


Ruataniwha: DOC, Hawke's Bay Council Developer Take Supreme Court Appeal

The Department of Conservation and Hawke's Bay Regional Investment Company (HBRIC) are appealing to the Supreme Court over a conservation land swap which the Court of Appeal halted. More>>


With NZ's Marama Davidson: Women’s Flotilla Leaves Sicily – Heading For Gaza

Women representing 13 countries spanning five continents began their journey yesterday on Zaytouna-Oliva to the shores of Gaza, which has been under blockade since 2007. On board are a Nobel Peace Laureate, three parliamentarians, a decorated US diplomat, journalists, an Olympic athlete, and a physician. A list of the women with their background can be found here. More>>

Gordon Campbell: On The Key Style Of Crisis Management

At Monday’s post Cabinet press conference Key was in his finest wide- eyed “Problem? What problem?” mode. No, there wasn’t really a problem that top MPI officials had been at odds with each other over the meaning of the fisheries policy and how that policy should be pursued... More>>


Mt Roskill: Greens Will Not Stand In Likely Post-Goff By-Election

“The Green Party’s priority is changing the Government in 2017, and as part of that we’ve decided that we won’t stand a candidate in the probable Mt Roskill by-election... This decision shows the Memorandum of Understanding between Labour and the Green Party is working." More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news