Govt Buys Back Rail And Ferry Operations
May 8th, 2008
The Govt has bought back Toll Holdings’ rail and ferry business for $665m. The deal sees the Govt become the owner of 189 locomotives, 4200 freight wagons, assorted other rolling stock one ferry and leases on two others. However, exactly how the operations, which employ 2300 people may be run in the future and the level of investment the Govt is prepared to make in modernising them has yet to be finalised. The ownership reverts to the Crown from July 1. The deal marks the culmination of several months of negotiations with Toll over a buyback with the operator initially wanting close to to $1bn for the rail and ferry operations.
Best Option. Michael Cullen says although Toll has done a good job increasing freight volumes and streamlining the operation of terminals, it has struggled to run a “commercially viable” business without Govt support. Cullen says buying the rail operating business is the best way to increase investment in the industry and make it more responsive to customers’ needs.
Details Sketchy. Helen Clark says the deal will pave the way for the modernisation of the rail network, which forms a key part of the Govt’s sustainability agenda. “Modernising our transport sector is central to transforming our economy and making it truly sustainable.” However, although the Govt says it is committed to upgrading rolling stock neither she nor Cullen indicated how much money the Govt is prepared to invest in modernising the rail services or the infrastructure. The services are likely to be either run as an SOE or as a separate arm of Ontrack. Cullen has ruled out a return to a fully integrated national railway operation covering both infrastructure and operations.
QUOTABLE: “The Govt will now avoid paying subsidies to third parties and we also avoid the on-going disputes over the implementation of the National Rail Access Agreement.” – Michael Cullen
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