KEY POINTS:
Freight industry players have welcomed the Government's $665 million buy-up of Toll Holdings' rail and ferry assets, as long as money is put into further improving the rail network.
Two key rail users, transport firm Mainfreight and dairy giant Fonterra, see their rail usage increasing substantially if services improve.
But Mainfreight questioned the structure of the Toll deal.
"To have completed this deal by providing a rent subsidy for six years to an Australian transport operator is a disgrace," said managing director Don Braid. "And clearly that operator failed to secure a subsidy from OnTrack, so they've merely onsold the business at a $235 million profit, and secured a rent subsidy for the business they're retaining."
The agreement sees Toll retain its freight forwarding business, Tranzlink, which competes with Mainfreight.
But Braid said the deal would ultimately be positive for rail infrastructure as long as the Government made the necessary investments.
"What we do need and what we've been asking for for a very long time is a rail infrastructure that works so that we can move more freight on rail versus road, and by having the Government own the railway, we've got a good chance of getting investment into rolling stock that the business sorely needs."
Mainfreight spends more than $20 million on rail annually.
"We could double that, providing we got the right services. We're hopeful. If the Government adopts a similar position to the way they've acted with Air New Zealand, then there's a good chance we might get a good railway out of this transaction."
Toll's managing director Paul Little has indicated the sale gives it a war chest for aggressive growth in New Zealand, but Braid was not worried about the prospect of increased competition from Toll.
"They say they're committed to New Zealand, but selling rail is not much of a commitment, and frankly Mainfreight's not for sale, never has been.
"From our perspective we're not too concerned. They clearly can't operate a profitable business and need subsidies to be able to operate profitably."
Gary Romano, Fonterra's director of group manufacturing and supply chain, said the deal provides clarity and certainty around rail business ownership.
"While we have had a very good working relationship with Toll, we can now move forward with our plans to increase our use of the rail network."
Around a million tonnes of Fonterra product - half its annual total - travels to port by rail. Romano expects that to rise to more than 80 per cent if the network is improved.
"We want to make the best use of rail to ensure our international competitiveness and keep our environmental footprint as small as possible, especially given the implications of rising fuel prices for our transport costs."
Contractors' Federation chief executive Richard Michael said the Government's move has been a long time coming.
"New Zealand needs a modern rail and ferry network if we are to remain internationally competitive and are serious about integrating our supply chains."
He called on National to honour the purchase if it won the election.
THE DEAL
* The Government is to pay $665 million for Toll Holdings' rail and ferry assets.
* The purchase includes 180 mainline locomotives, 4200 wagons, one rail ferry and leases on two other ferries.
* The Government is to take over the business on July 1.
