Kiwirail considered abandoning freight

  • 27/04/2016

KiwiRail proposed leaving the rail business altogether as one of four options that came out of a commercial review, it has been revealed.

The review in late 2014 concluded that the best option for the Government on a purely commercial basis was to quit the freight business.

The three other options involved a slimmed down version of the rail business if it continued.

The review became the basis for a Government decision to maintain a national rail network, despite it having no prospect of running profitably, and led to led to a $400 million two-year funding commitment.

KiwiRail is starting negotiations for a new funding package and is looking for a small number of rail upgrade projects to demonstrate that there is a value of rail to New Zealand beyond purely commercial returns.

Chief executive Peter Reidy said one such project was in Wiri, South Auckland, where 3km of new track could unblock a major rail freight and passenger bottleneck and help alleviate road congestion.

Also in his sights is a plan that would remove trucks travelling through central Christchurch to the Port of Lyttelton.

"Our shareholder will need to continue investing in infrastructure, but at a reduced rate over time," said Mr Reidy.        

"The next three to four years is very much about getting to some of the tough bits of infrastructure requiring investment.

"We're sticking to the plan of productivity and efficiency and some of the hard commercial decisions we have to make," he said.

"If we just stick to that plan and be really clear about we can help the Government in Auckland, then I think the funding will flow."

He said freight volumes have been sliding as state-owned coal miner Solid Energy's export volumes have plummeted and the dairy industry has pulled back production volumes in response to falling global prices.