Hidden Loan Boosts Cost Of Rail Buyback
May 15th, 2008
Taxpayers face having to pay an extra $200m as part of the Govt’s buy-back of the national rail service. The extra money is a loan to former owner Toll NZ from its parent company in Aust. The extra cost was not made public at last week’s sale agreement announcement and pushes the total upfront cost to close to $900m, not far shy of the $1bn Toll was asking for in the first place. The loan is part of Toll NZ’s liabilities which the Govt automatically takes over as part of the deal. It could avoid paying back the loan only if Toll agrees – which is seen as extremely unlikely.
Investment Uncertain. The revelation is putting more pressure on Michael Cullen, the architect of the deal to justify the expense having already copped flack from some quarters over the deal struck with Toll. National Finance Spokesman, Bill English, says Toll has retained the “lucrative” freight arm of the business while the Govt has paid more than the rail business had been valued at previously. “Rumours abound about price discounts for Toll’s freight in addition to this sweetener.” Although National is unhappy with the Govt’s purchase of the rail service, it has indicated it will not sell the assets should it win power at the next election. However, it has yet to indicate if it is prepared to invest in the network or rolling stock to make rail more competitive with road as the Labour Govt is planning to do.
QUOTABLE: “Taxpayers need to know how much more value Michael Cullen has handed to Toll – in the form of their money – in this desperate election-year lolly scramble.” – Bill English
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