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Questions and Answers - Government rail buy back

Questions and Answers - Government rail buy back

Q What will the government own after today's purchase?

A The government already owns the rail infrastructure which includes 4,000 kilometres of track, six million sleepers, 1,787 bridges, 150 tunnels, 12,000 culverts and signalling infrastructure including points, railway level crossing alarms, electrification and communications systems. These, along with control of trains on the network, are vested in ONTRACK, which has a staff of 900.

Following today's purchase, the Government will own 180 mainline locomotives, 4,200 wagons, one rail ferry and leases on two other ferries. Toll employs approximately 2,300 people in its rail and ferry operations.

Q Why has the government purchased Toll's New Zealand rail business?

A Buying the rail operational business enables the government to implement a sustainable, integrated transport strategy and to invest in the business to further rail's potential to contribute in a much more meaningful way to the New Zealand economy. The government believes a fully modernised rail system will be a central component in our work to build a truly sustainable economy.

It also enables the government to avoid paying subsidies to third parties and the on-going disputes over the implementation of the National Rail Access Agreement that had the potential to destroy value in the business and erode the morale of the people who work in it.

Q Is this the sale and purchase agreement?

A What has been signed is a "frame agreement" - an overarching agreement that sets the path for due diligence and contains the basis for all the subsidiary agreements necessary to carry out the transaction.

Q How much a share does are you effectively paying for Toll's business?

A If you remove the value of the road transport and warehousing businesses, the value is approximately $3.16 a share. The amount being offered is not out of kilter with the $3 a share paid by Toll to buy minority shareholders last year. The asset has a greater value for the Government because the deal unlocks a number of benefits that didn't exist under the former ownership structure.

Q How will the rail system be operated after the government takes ownership on 1 July?

A The government is in discussions with Toll on a transitional agreement and is still developing plans for the long-term governance structure of the rail business. Further details will be made public as soon as they are available.

Q Will the government invest in new rolling stock for the rail system?

A The Minister of Finance will investigate options for purchasing new, modern rolling stock and will present options to Cabinet as soon as possible.


ENDS

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