Infratil's NZ Bus completes Auckland deal, still expects business to shrink
By Sophie Boot
Oct. 25 (BusinessDesk) - Infratil, the publicly listed infrastructure investor, has concluded its NZ Bus negotiations with Auckland Transport while negotiations in Wellington are ongoing, and still expects the business will shrink by a third.
In a release to the stock exchange, Wellington-based Infratil said it secured 20 long-term contracts in Western, Central and Northern regions of Auckland, with the result of negotiations consistent with previous earnings guidance and the expected scale of NZ Bus in future.
In August, Infratil said NZ Bus’s loss of certain public transport contracts meant it would shrink to about two-thirds its original scale, with 75 percent of the business in Auckland and 25 percent in Wellington. Overall medium-term returns should be maintained through downsizing and productivity gains, although the 2018 earnings outlook was weighed on by the future for NZ Bus.
Zane Fulljames, NZ Bus chief executive, said the contracts were worth about $1 billion with an average term of nine years. The company expects to invest some $47 million in new fleet, including an additional 75 doubledecker buses.
"Electric vehicles are the future of public transport and will be a key focus now the contracting process for NZ Bus in Auckland has concluded," Fulljames said. "We are extremely well positioned for future market and technology challenges and have a solid platform to continue our journey towards cleaner and greener transport solutions."
In May, NZ Bus lost most of its bus contract with the Greater Wellington Regional Council to Masterton-based Tranzit Group, which the council said could offer the service cheaper, reducing its share of services to 28 percent from 73 percent.
Earlier this month, GWRC said trolley buses would be decommissioned by the end of October and replaced by diesel buses immediately and by diesel and electric buses from July 2018. Infratil said today that negotiations for five of those contracts are ongoing
"NZ Bus continues to work towards deployment of the trolley fleet with alternative power train technologies," it said.
Infratil shares recently traded at $3.15, and have gained 15 percent this year.