Infratil admits botching Tranz Rail investment

By PAULA OLIVER

Infratil chief Lloyd Morrison yesterday shed some light on his opposition to selling Tranz Rail shares to Toll Holdings for 95c each - ruefully admitting that Infratil had paid an average $2.47 a share to get into the troubled rail company.

Morrison spoke candidly at Infratil's annual meeting in Wellington, responding to shareholders' questions by saying that no matter how they looked at the 7 per cent investment in TranzRail, it had been botched.

"You can turn our performance upside down, round about, and at just about every point you can say we've done it wrong," Morrison said of the investment.

"We believed there was more underlying value there. We backed a management process that we shouldn't have."

Morrison said Infratil had shown that it "did not know what it was doing" in that area. But importantly, it had also shown it could handle failures.

It was looking to get out of the rail company, but knew there were other potential bidders and wanted some contestability.

Infratil's three major investments, Trustpower, Wellington International Airport and Port of Tauranga, were all performing well and were businesses to be proud of, Morrison said.

An investment in Glasgow Prestwick International Airport in Scotland, had also been positive.

Passenger and freight volumes were growing, and low-cost airline RyanAir was operating well.

Morrison said low-cost operators had changed the global airline market, and Infratil was on the lookout for similar investments.

Infratil revealed an unaudited profit for the quarter to June 30 of $6.2 million.

Chairman Kevin O'Connor said a long-term investment strategy was paying off in Trustpower and Wellington Airport. Trustpower was getting a more satisfactory return on its assets because electricity prices were beginning to reflect the underlying economics of the sector.

This financial year is the first that Wellington Airport, of which Infratil holds 66 per cent, has been able to charge a levy on airlines for the use of a new terminal.

Air New Zealand has refused to pay, and Morrison said the airline's outstanding bill had now reached $12 million.

Qantas and Origin Pacific had been paying the levy, which averaged $4 a passenger. Air New Zealand had increased its fares to cover the cost, but was not paying.

Morrison said the dispute was headed for court. "The inconsistency is that the others are paying. The Commerce Commission found nothing wrong. This seems like a fruitless, headbanging exercise."

Wellington Airport revealed yesterday that it had signed retailer The Warehouse as an anchor tenant for a $30 million retail park on the southwest boundary of the airport.

O'Connor said Infratil remained well-positioned to increase earnings, and would stick with a long-term investment strategy.