Investors stick with Tranz Rail

By DANIEL RIORDAN

David Richwhite and Sir Michael Fay have taken their 15 per cent stake in Tranz Rail off the selling block and say they are keen to remain investors - at least while the company finishes its restructuring.

After Tranz Rail's annual meeting in Auckland yesterday, Mr Richwhite, a Tranz Rail director, said he was no longer seeking a buyer for the stake he and Sir Michael had been trying to sell for more than a year.

Wisconsin Central (recently acquired by Canadian National) has also been trying to sell its 24 per cent stake but it is not known if Wisconsin has changed its mind.

Both parties have reportedly struggled to find buyers here or internationally.

The restructuring took another big step yesterday. Tranz Rail is focusing on freight and interisland transport, and wants to farm out most rail services. It has now chosen Transfield Services and Alstom New Zealand to provide infrastructure and locomotive services.

Transfield has a $150 million contract to provide infrastructure services (track maintenance, overhead lines and points) and Alstom has a seven-year $200 million contract to provide locomotive services.

Tranz Rail expects most of the 800 staff affected to be offered employment by the new owners, who should be in control by March.

Negotiations are continuing over other operations including wagon maintenance and freight terminal services.

Tony Shepherd, deputy chairman of Sydney-based Transfield Services, said Transfield would rely on former Tranz Rail staff to maintain the rail infrastructure, which includes 4200km of track, 600km of overhead electrification, 1550 road crossings, 152 tunnels and 1756 bridges.

Transfield in New Zealand employs about 500 staff in maintenance roles, including looking after properties in Auckland and Hamilton for Housing NZ, roadwork between New Plymouth and Hamilton and work for electricity lines company Vector.

It maintains more than 3500km of rail infrastructure in Australia. About 500 Tranz Rail staff are employed in the businesses Transfield is about to take over.

In New Zealand, Alstom employs about 1300 staff, and has a turnover of $170 million. Its key clients include Transpower and Telecom.

Internationally, the company services London Underground's rolling stock, railcars in Melbourne and locomotives in Mexico and North America.

Tranz Rail expects to save about 10 per cent a year from the restructuring, and resulting internal efficiency gains.

The Rail and Maritime Transport Union, which is opposed to the break-up of a vertically integrated rail system, said the decision was a further blow to its Take Back The Track campaign.

Meanwhile, board changes are likely at Tranz Rail next year.

The company has had essentially the same group of directors since it was privatised in 1993.

Though chairman Robert Wheeler acknowledged continuity was a good thing, he said directors were looking at broadening the board's composition.

After the meeting, managing director Michael Beard spoke of the need to have more New Zealanders on the board.

Four of the company's nine directors are US-based former directors of Wisconsin Central but have no links with Canadian National.

Yesterday's annual meeting was the company's first since it moved head office from Wellington to Auckland, and the empty seats at the Sheraton outnumbered the 60 or so shareholders present.