[OPE] Profit from privatization, profit from re-nationalization... a lot of fun with taxpayer's money Down Under

From: Jurriaan Bendien (adsl675281@telfort.nl)
Date: Mon May 05 2008 - 17:55:21 EDT

Taxpayers to pay millions for rail revamp

By COLIN ESPINER - The Christchurch Press, New Zealand | Tuesday, 06 May 2008

The privatisation of railways turned full circle yesterday when New Zealand Finance Minister Michael Cullen signed a deal with Australian Toll Holdings to buy the network for $665 million. (...) The move comes four and a-half years after Toll bought the ailing business from Tranz Rail and 15 years after it was sold to a consortium run by Wisconsin Rail and Fay Richwhite by the former National government. From June 30, taxpayers will own not only the rail track, bought by the Government in 2003 but also 180 mainline locomotives, 4200 wagons, one rail ferry and the leases on two other ferries.

The purchase completes the second major return to government ownership of a transport asset by this Labour-led Government. The first was the $885m purchase of a majority share in Air New Zealand in 2001. 
But unlike Air New Zealand, which has trebled its book value since the Government bought it, taxpayers are likely to have to part with hundreds of millions more to bring the rail system up to scratch, Cullen admitted. (...) Insiders say Toll was more than happy to exit the business, taking with it a $235m profit. In a statement to the Australian Stock Exchange, Toll said it had an estimated book value of just $430m.    


Wikipedia offers a bit of background summary:

For most of their history, New Zealand's railways were administered by the New Zealand Railways Department, with the Minister of Railways being a member of Cabinet. In 1982, the Railways Department was corporatised into a new entity required to make a profit, the New Zealand Railways Corporation. In 1990, the core rail operations of the Corporation were transferred to New Zealand Rail Limited, a state owned enterprise, with the Corporation retaining non-core assets. New Zealand Rail Limited was privatised in 1993, with the new owners adopting the name Tranz Rail in 1995.

During the period of private ownership of the network, Tranz Rail was widely accused of diverting freight to its trucks and forcing other freight off the rails. It was also accused of deliberately running down some lines through lack of maintenance. The Midland Line, which mostly carries coal from the West Coast to Lyttelton, was assessed to be in a safe but poor state by the LTSA government safety body in 2003, and has needed major repairs. One of the reasons often cited for these policies was the cost of using road transport was less than using rail, because the road infrastructure was provided as a public good, whereas the rail network was a private good. Tranz Rail was also alleged to have denied reasonable access to the rail network by heritage operators, who were faced with a lack of access to certification resources and high charges that made their operations marginally economic at best. In recent years heritage groups have also faced increased bureaucratic requirements in the arena of safety certification, as well as problems obtaining suitable public liability insurance.

The Crown purchased the Auckland metropolitan rail network from Tranz Rail for $81 million in 2002. Tranz Rail retained slots for freight trains, and the Auckland Regional Council was granted slots for it to tender the operation of suburban passenger trains. Auckland railway stations not already local authority owned were transferred to Auckland Regional Transport Network Limited (ARTNL), owned by the Auckland territorial authorities, which is being merged into the Auckland Regional Transport Authority (ARTA), a subsidiary of the Auckland Regional Council (ARC).

In 2002 shares in Tranz Rail dropped to a record low price on the New Zealand Sharemarket as a result of its poor financial state. The government then considered various schemes for bailing it out in return for regaining control of the rail infrastructure. Cited reasons included moving freight traffic from road to rail and ensuring access to the tracks for all interested parties. Toll Holdings of Australia made a successful takeover bid for Tranz Rail, subject to an agreement to sell back the infrastructure to the government for $1. The government has since committed to $200 million of taxpayer funding on deferred maintenance and capital improvements via the New Zealand Railways Corporation, now trading as ONTRACK. http://en.wikipedia.org/wiki/Rail_transport_in_New_Zealand

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