NZ - Government bids to buy back trains

[John Ashworth]

Government bids to buy back trains, ferries
5:00AM Friday March 07, 2008
By Paula Oliver

The Government has confirmed it is in talks to spend hundreds of millions of taxpayer dollars to buy back the rail and Cook Strait ferry assets of Toll New Zealand - which the Beehive admits are unlikely to ever make any money.

After months of speculation about a potential purchase, Finance Minister Michael Cullen yesterday confirmed that there had been a Government bid for the assets but it was rejected by Toll's Australian owners.

"The Government made an offer, Toll said that was absolutely no good, we upped the offer, and our offer is actually above quite a lot of the valuations that we have for the business," Dr Cullen said.

He said Toll responded with a counter-offer that was significantly higher than $700 million, but it appears the Government recoiled at that amount and negotiations virtually broke down.

However, Dr Cullen revealed yesterday that he had decided to continue the discussions and hoped for rapid progress and an "amicable" conclusion.

"I've made it clear that Toll has got to come back with a significantly better offer than that if we are to be able to close the gap between us," Dr Cullen said.

The Government has been trying to negotiate an agreed fee with Toll since 2003 for the Australian-owned train company to have access to the Government-owned rail tracks.

But the talks have floundered and a frustrated Dr Cullen has been considering buying the Toll assets and having the Government operate them as a solution. As discussions now restart, it remains possible the pair could come to an agreement on an access fee that would mean the outright purchase by the Government is not needed.

New Zealand's rail network was privatised in 1993, but what played out in latter years is now viewed in many quarters as disastrous.

The company was constantly accused of neglecting track maintenance and generally running down the business, and its fortunes declined.

The Government came under pressure to step in and buy the assets back but in 2003 it instead agreed to buy just the tracks while Toll took over the rest of the business.

In a full circle move, the Government is now again talking about possibly owning and operating trains and ferries.

Dr Cullen explained his thinking by saying the Government was exposed to continued renegotiation, and continued demands for further relief on the access agreement with Toll if things stayed the way they were.

"We believe that with Crown ownership, we'd be capable of creating a more strongly integrated rail system, not just in terms of goods movement but also in terms of the urban passenger systems where there are interrelationships there," Dr Cullen said.

"This is not a business which is ever going to make money, overall, and therefore we either end up subsidising the private sector or we end up subsidising ourselves on behalf of the people of New Zealand."

National's finance spokesman Bill English said the Government should not be thinking about a purchase.

"However difficult the negotiations might be, the rail system needs an operator that knows what it's doing," he said.

Mr English said the idea was a recipe for ferry strikes in school holidays and "feather-bedding" throughout the whole system.

However, the Greens and New Zealand First welcomed Dr Cullen's confirmation that a purchase could potentially be made.

The New Zealand Herald