Taxpayers pay big for Labours rail dream

During its last year in office, the Labour government spent more than a billion dollars on KiwiRail – an investment that is now valued at just $388 million, says Transport Minister Steven Joyce.

He says there is no realistic chance of taxpayers getting their money back in the foreseeable future.

The last Labour government paid $690 million for the Toll NZ rail assets which, according to a valuation undertaken for the Treasury and KiwiRail, are now valued at just $388 million.

Mr Joyce says while this was a fantastic deal for Toll Holdings, who sold the company to the government, taxpayers should be concerned.

“In addition to the $690 million that was paid, by the end of this month, taxpayers will have provided further support to the tune of $316 million to the combined rail business since the purchase.”

The $316 million comprises:

• $74 million in operating support
• $40 million in capital grants for upgrade and growth projects
• $195 million in loan facilities (including $140 million to pay off KiwiRail’s debts to Toll Holdings).
• $7 million equity injection.

Mr Joyce says that, in opposition, National was very concerned at the purchase price paid by Labour for the rail company and nothing has happened since to change that view.

“We now need some hard-nosed realism about future investments. We need decisions that make sense when stacked up alongside other modal options, including sea freight and roading.

“We want to encourage an environment where rail can operate as efficiently as possible, with strong commercial imperatives to provide the greatest benefit to the New Zealand economy.

“There will be an expectation that investment in the predominantly freight-based national rail network anticipates a commercial rate of return. Any taxpayer subsidies to the freight side of the business should be provided transparently and should not be at the expense of other transport modes.”

This year, KiwiRail operations will be subsidised by $90 million. Any future subsidies will need to be approved by the Cabinet.

Mr Joyce said the government will continue to review what investment is required to ensure the ongoing viability of rail in the future.

“The country needs all its transport investments to work hard and help get the country back on a strong growth curve.

“Private players have expressed interest in moving more freight by rail and this is great. However, should further capital investment be required to facilitate this, propositions will need to be bankable for the government to support them.”

The government has today released the valuation report, along with a number of other official documents discussing rail funding.