9. KiwiRail—Valuation

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ofInterestNZ
June 30, 2009

[Uncorrected transcript—subject to correction and further editing.]

9. DAVID BENNETT (National—Hamilton East) to the Minister of Transport: What recent valuations has he seen of KiwiRail?

Hon STEVEN JOYCE (Minister of Transport) : I have seen a report from PricewaterhouseCoopers valuing KiwiRails total operations at $388 million. I have seen another report that Treasury has updated that figure to $369 million. Those figures compare unfavourably with what the previous Labour Government spent on KiwiRail, which included $690 million on purchasing the companys operations, $210 million on loans, and $90 million on operational subsidies. It is quite obvious to anybody looking at those transactions that the previous Labour Government significantly overpaid for KiwiRail. Paying that much for KiwiRail has handicapped its future.

David Bennett: What shape was KiwiRail in when it was purchased?

Hon STEVEN JOYCE: The rail company as a whole has a significant backlog of needed expenditure to pull it back into shape. Work done last year by the previous Labour Governments Rail Development Group estimated that it would take approximately $1 billion worth of further expenditure to make the company work properly. That is obviously a very large financial burden, which the public was not told about before the KiwiRail purchase was completed.

Hon Jim Anderton: Would the valuation of KiwiRail be substantially higher if it had not been sold by the previous National Government for less than the value of the wooden railway sleepers and it had not been asset-stripped by Fay Richwhite; if so, can the Minister assure the House that the National Government will not again support the privatisation and disastrous management of New Zealands public transport infrastructure?

Hon STEVEN JOYCE: I am afraid that for somebody as new to the House as I am, a lot of that is very much ancient history. The second part of Mr Andertons question is hugely theoretical because, sadly, nobody in their right mind would pay the sort of money for KiwiRail that the previous Labour Government paid.

David Bennett: What financial capacity does KiwiRail have to expand its operations?

Hon STEVEN JOYCE: What is apparent is that, although KiwiRail has a part to play in New Zealands transport future, it will need more money to do so. Any investments must be made sensibly and with the backing of its key customers. Those who advocate a wholesale shift of freight from road to rail are caught up in some romantic notion of rails role that bears no resemblance to any sort of financial reality. Our focus must be on making sensible and pragmatic transport decisions that reduce costs overall and help the economy grow.

Hon Darren Hughes: If the Minister is unhappy with the valuation of KiwiRail, and therefore Crown ownership of that operation, does he support the scenario known as plan B, in which there is no Crown ownership, and many provincial rail lines would have to be closed?

Hon STEVEN JOYCE: Sadly, it is not as simple as that. Just about every line that KiwiRail has does not make a lot of money currently, so to suggest that there is a plan B in that respect is about as valid as the valuation the previous Labour Government placed on KiwiRail before it purchased the company.

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