Toll denies stalling on rail deal

By BRIAN FALLOW

An outburst by finance Minister Michael Cullen over a deal to put the rail network into public ownership has left Toll Holdings bewildered.

In testimony to Parliament's finance and expenditure committee, Cullen said Toll could reap tax advantages from delay and hinted that he had threatened the company with legislation to force a conclusion.

But Toll managing director Paul Little said the negotiations were close to a successful conclusion.

"I think the negotiations are going very well now. They were at a low point 10 weeks ago. Both parties needed to change the way they were approaching the negotiations. That has happened," he said.

"I think we are within a few days of being able to sign this thing off now - certainly before the end of the financial year [June 30]."

Earlier Cullen told the committee that negotiations were difficult.

"A range of other issues which were not in our view included in the heads of agreement [signed last July] have been put on the table," he said.

"We are obviously prepared to look at a number of the issues they have raised but it is very important for us that the deal is concluded by June 30. I am not prepared to see Toll gain a tax advantage by delaying the successful completion of the negotiations."

Little said the sale of the network to the Government for $1 would generate a "fairly significant" loss which could be set against future tax liabilities. "That loss becomes more realisable next year than it would be this year." Little said he could not understand why Cullen had gone public on issues as out of date as these.

"These negotiations were always going to be tough. We had to put in place a brand new access agreement. Very complex. Lawyers all over it. The Government team and our team have done a marvellous job in getting this thing all but across the line."

Cullen hinted that he had threatened Toll with legislation in a letter some weeks ago.

"I pointed out to them that the Government has at its disposal sovereign powers to ensure its ambitions and aims in the heads of agreement were implemented ... I am not happy with the way negotiations have proceeded. I don't think it has been a good start to the relationship," he said.

"We are keen to provide a good-quality track system in public ownership which Toll can use to improve the rail system and I believe there is a basis therefore for a strong partnership. But it is a partnership. It is not the Government at the beck and call of the private operator of the trains."

Under the agreement struck last year, but as yet unconsummated, the Government will invest $200 million in upgrading the track over five years, while Toll has agreed to invest $100 million in rolling stock.