Area served New Zealand Headquarters Wellington, New Zealand Founded 2004 | Services Land ownership Revenue 31,000 USD (2013) | |
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Key people John Spencer (Chairman) Website www.comu.govt.nz/portfolio-entities/sector/transportation/new-zealand-railways-corporation/ Type of business State-owned enterprise, Statutory corporation | ||
Financial review new zealand railways corporation part 1
New Zealand Railways Corporation (NZRC) is the state-owned enterprise that owns the land beneath KiwiRail's railway network on behalf of the Crown. The Corporation has existed under a number of guises since 1982, when the old New Zealand Railways Department was corporatised followed by deregulation of the land transport sector. In 1986, the Corporation became a State-owned enterprise, required to make a profit. Huge job losses and cut backs ensued, and the rail network, rail operations and ferry service of the Corporation were transferred to New Zealand Rail Limited in 1990. The Corporation retained ownership of the land beneath the railway network, and charged a nominal rental to New Zealand Rail, which was privatised in 1993, and renamed Tranz Rail in 1995. In 2004, following a deal with Tranz Rail's new owners Toll NZ, the Corporation took over responsibility for maintaining and upgrading the rail network once more, trading under the name ONTRACK. However negotiations with Toll over track access charges concluded after four years with no agreement reached, so the government purchased the entire rail and ferry operations, naming the service KiwiRail. ONTRACK's railway infrastructure and employees were then transferred to KiwiRail in 2008, which itself was initially a subsidiary of the Corporation. However, on 31 December 2012 the Corporation once again became the land owner.
Contents
- Financial review new zealand railways corporation part 1
- Financial review new zealand railways corporation part 2
- History
- Creation
- Booz Allen Hamilton report
- Break up and asset sales
- National rail landowner
- Network provider
- Track access negotiations
- Renationalisation of rail operations
- KiwiRail
- De merger
- Performance
- References
Financial review new zealand railways corporation part 2
History
The NZRC was created as a statutory corporation by the New Zealand Railways Corporation Act 1981 from the New Zealand Railways Department. It took over the operations of the department from 1 April 1982. Since then, NZRC's role has changed with various governments' policies.
Creation
Like the Railways Department that preceded it, the Corporation had a responsible Minister, the Minister of Railways. Along with rail operations, the Corporation inherited New Zealand Railways Road Services bus, truck and parcels services and SeaRail interisland ferries.
During the 1980s NZRC faced many business challenges, such as the growth of competition from road freight operators following the deregulation of the land transport industry from 1983 by the repeal of the Transport Licensing Act 1931. The Corporation's revenues were halved by the new competition.
Booz Allen Hamilton report
In April 1983 the Corporation engaged international consultants Booz Allen Hamilton to review the effectiveness and efficiency of the Corporation's operations.
In May 1984 they consultants reported back to the Muldoon National government. The report identified three major events that had critically influenced the Corporation:
The report recommended, amongst other things:
This prompted the then opposition New Zealand Labour Party to launch a campaign called "Save Rail". Despite this, rationalisation of the NZRC began with the election of the Fourth Labour government in July 1984. In 1985 NZRC began a major corporate restructuring program, transforming the old functionally based branch structure into three core business groups:
In 1986, the Corporation became a state-owned enterprise under the State-Owned Enterprises Act 1986. Staff cuts were drastic and infrastructure was reduced or closed. The Corporation closed a number of unprofitable branch lines, including:
Older and smaller classes of locomotives were withdrawn and scrapped, including the DE class, DI class, DJ class, DB class, and the DA class. Workshops at Addington (Christchurch), East Town (Wanganui) and Otahuhu (Auckland) were closed.
Guards vans (aka Brake vans) were withdrawn from the rear of all freight trains on 30 May 1987, and were replaced with Flashing rear-end devices (known as FREDs).
By 1989 large operating losses and interest had generated a debt of $1.2 billion.
Break up and asset sales
The Fourth Labour Government passed the New Zealand Railways Corporation Restructuring Act 1990 on 28 August of that year. New Zealand Rail Limited (NZRL) was established as a Crown Transferee Company under the provisions of the Act, and took over NZRC's rail transport and shipping activities, including the railway tracks, on 28 October 1990. NZRL leased the railway corridor from NZRC for $1 per year. Branding initially remained unchanged, except that suburban passenger trains were rebranded CityRail.
Non-core assets remained with NZRC prior to their disposal. Many of these assets were written down by the Government, for $830 million. Speedlink Parcels was sold to New Zealand Post, and InterCity bus services were sold in 1991 to Intercity Group New Zealand Limited, a group of four of the country's largest private coach companies – Ritchies Coachlines, Tranzit, PTL Route Services and Nelson SBL. Railway stations in Auckland, Rotorua, Christchurch, Dunedin, Napier and Oamaru were sold, along with substantial tracts of land previously used for rail operations. Cityline bus services were sold to various purchasers.
National rail landowner
Ownership of the railway corridor underneath the tracks remained with NZRC, which managed the lease of the corridor to New Zealand Rail Limited (Tranz Rail 1995—2003, Toll NZ in 2004) until 2004, when the Government re-acquired the rail track infrastructure from Toll Holdings. A separate deal transferred ownership of the Auckland metropolitan rail network from Tranz Rail to the Government in 2001.
Network provider
From 1 July 2004 NZRC assumed the Crown's responsibilities under the rail access agreement with Toll, and adopted the trading name ONTRACK. ONTRACK began Project DART, a major $600 million upgrade of Auckland's suburban railway network, and the Wellington Regional Rail Program (WRRP) to upgrade parts of Wellington's suburban network. These upgrades, along with other projects around the country, followed years of under-investment in the rail infrastructure.
Track access negotiations
ONTRACK and Toll NZ were in dispute about track access fees from mid-2006 and an independent arbitrator, Bill Wilson QC, was called in to resolve the issues. Separate talks continued between Toll and the Government on long-term access arrangements. On 31 January 2007 Toll stated that "...the discussions with the Crown on a long term sustainable access regime have generally been positive", but "Toll NZ is still concerned that the Crown appears to be unwilling to recognise the inequality of the funding support between road and rail and the need to adopt a more commercial approach to track access management".
Renationalisation of rail operations
The Labour Government announced in May 2008 that the rail and sea operations of Toll NZ Limited, less its trucking and distribution operations, was to be purchased for $NZ665 million. The purchase was completed on 1 July 2008 and the company renamed KiwiRail. It planned to spend an estimated NZ$1 billion over five years to develop a modern effective rail system. Most of this expense is in purchasing new locomotives to replace aging stock.
KiwiRail
On 1 October 2008 KiwiRail became a subsidiary of NZRC, the ONTRACK brand continuing to be used by KiwiRail's infrastructure arm. In 2011 the ONTRACK brand was dropped and renamed KiwiRail Infrastructure, a division of KiwiRail (although ONTRACK Infrastructure Limited continued to be directly owned by NZRC).
De-merger
On 31 October 2011, KiwiRail proposed splitting its land and rail corridor assets from its rail operation assets. On 27 June 2012 it was announced by the company that the value of the land and rail operations will be written down from NZ$7.8 billion to $1.1 to $1.3 billion, and KiwiRail will continue as the rail and ferry operator, while the New Zealand Railways Corporation will manage KiwiRail's land. Minister of Finance Bill English and Minister of State Owned Enterprises Tony Ryall said the New Zealand Railways Corporation will continue to hold the 18,000 ha of railway land, "from which no financial return will be expected." The arrangement is similar to that which existed between New Zealand Rail Limited and the New Zealand Railways Corporation in the 1990s.
Today, the Corporation has assets comprising the railway corridor land, valued at $3.2 billion and the Wellington Railway Station at $17.4 million.
Performance
From its inception in 1982 coinciding with land transport deregulation, the Railways Corporation struggled to retain market share, and its performance in terms of freight tonnage carried reflected this: