Government and Toll seal rail buyback deal

1.00pm

The rail network is back in public ownership, after the Government and Toll Holdings last night struck a deal.

The Government buyback of the rail track from Toll Holdings for $1 was sealed at two minutes to midnight after protracted negotiations.

Finance Minister Michael Cullen today hailed the deal as ending "one of the most disastrous privatisations in New Zealand history".

Toll and the Government had until July 1 to reach an agreement, sneaking inside the deadline by two minutes.

The government would soon start unrolling the substantial investment programme agreed to in the Heads of Agreement between the Crown and Toll Holdings last October, he said.

"Toll Rail will invest $100 million in rolling stock," Dr Cullen said.

"The Government is committed to investing $200 million over four years on upgrading the track and replacing worn out bits of the network.

"I am confident we can get the work under way quite soon.

"The infrastructure is seriously run down so we will want to move as quickly as possible.

"It is also likely that $200 million will not be enough to cover all that needs doing and that we might have to put up some more money in the future."

Dr Cullen said the government objective was to shift people and freight on to rail to ease traffic congestion on the roads.

Rail was seen as a cost competitive and environmentally sustainable alternative to road transport, he said.

Toll Rail will manage the track under contract until September while New Zealand Railways Corporation is setting up the structures and personnel for its new TrackCo role, he said.

Cameron Moore will take over as chair of the board today.

Other board appointments would follow in the next three weeks and a new chief executive was expected to be appointed soon, Dr Cullen said.

"Toll are hard operators but their record in Australia shows that they are also successful," Dr Cullen said.

"I am satisfied that the deal the government has entered with them contains sufficient protections in to safeguard the public and the national interest."

Dr Cullen last month raised the prospect of legislating to enforce the deal.

He told the finance select committee meeting two weeks ago that talks were difficult and he would not allow Toll Holdings to gain a tax advantage from causing delays.

Toll stands to make a gain from the deal because it is making a loss on the sale of the tracks. That gain would have increased had the sale fallen in the financial year starting today.

Government officials also warned Toll that its share price could be hit by a delay as the collapse of the deal would mean the track work still had to be done and the $200 million set aside would have disappeared.

Toll closed up 5 cents yesterday at 160 on light trading.

Toll initially wanted to keep the track but did a deal with a Government eager to get more control over the network privatised together with the operator in 1993.

Toll, an Australian company, bought 84 per cent of Tranz Rail Holdings, New Zealand's rail operator, last year. New Zealand Railways had been privatised in the 1980s.

The Green Party welcomed the buy back, but said the Government must now commit to restoring and expanding the rail network.

Co-leader Jeanette Fitzsimons hailed the deal as "another success in the on-going co-operation on transport between the Government and the Greens".

The Greens, which launched a buy back the tracks campaign in April 2001, said the tracks should never have been sold in the first place.

"Today's deal -- and the hundreds of millions it will now take just to restore our rail network to the position it was a decade ago -- should serve as a salutary lesson to any future government that could contemplate selling off essential public assets," Ms Fitzsimons said.

New Zealanders could now look forward to better passenger rail services and a better rail system that would get freight of the roads and back on to rail "where it belongs", she said.

"With the track back in public ownership there's no excuse for Transfund to continue dragging its heals over rail funding," she said.

"This is an opportunity for New Zealand to build up a sustainable transport infrastructure."

National's deputy finance spokesman John Key said the Government should come clean about the "real size of the taxpayer risk" connected with the purchase.

"It is time for Dr Cullen to reveal the total projected taxpayer investment in the rail tracks. After working for so long on the deal he will certainly have advice from Treasury," Mr Key said.

"It's been pretty obvious all the way through that this deal was going to cost a lot more than the $200 million that Dr Cullen was admitting to."

Mr Key said he had papers from Solid Energy which said the work needed on a small section of the South Island rail network was expected to cost $183 million alone.

Toll NZ chairman Mark Rowsthorn said today deal provided a strong foundation to enable rail transport to be more competitive in the future.

"We are satisfied that we have reached an acceptable framework for a strong relationship with the Crown."

- NZPA