Thanks Michael

June 3rd, 2009 at 2:56 pm by David Farrar

Stuff reports:

The assets that cost taxpayers’ $690 million last year are now valued at just $349 million.

The Australians still refer to it as the sale of the century.

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34 Responses to “Thanks Michael”

  1. TripeWryter (715 comments) says:

    Yes, thanks, Michael, for buying the railways back (and, no I am no Labourite).
    The railways were inadvisedly sold way back and cheaply. From memory, the price wouldn’t have even bought a decent ferry.
    The previous two sets of private owners ran down the asset and sucked the life out of it and spat back a husk.
    It was there for anyone with eyes to see: twice a day, usually, she steamed across Wellington harbour, to and from Picton. The Arahura. A handsome ship, and well cared for when she was under the Railways Dept, the Fay, Richwhite, Wisconsin Central people let her become a rust-coloured and dirty old scow. Big brown streaks like tears from her hawsepipes down her hull.
    She was the perfect illustration of what private owners did to an asset that was a vital part of New Zealand infrastructure.

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  2. Murray (8,844 comments) says:

    Since Key is so hot on accountabilty when is Doc Sullen due to help teams of burly men with their investigation into this little gem?

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  3. Hump (25 comments) says:

    What a fantastic asset.. $562 million in revenue for an operating surplus of $4 million over 10 months.
    The $690 million figure also excludes debt assumed, so the overall purchase exceeded $1 billion. Given Labour’s campaign “Kiwi Saver, Kiwi Bank, Kiwi Rail” you could argue that this was an election related expense . Cullen was always going to buy this piece of crap whatever the price as it was part of their election strategy.
    Add this to the money pissed away on the Cullen Super Fund. Quite a legacy Michael.

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  4. Grant Michael McKenna (1,158 comments) says:

    Personally, I am very grateful that Dr Cullen was Minister of Finance when the deal was done- you see, I bought Toll shares in January of 2008 and again in March.

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  5. Murray (8,844 comments) says:

    Party at your place Grant.

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  6. Redbaiter (13,197 comments) says:

    Wouldn’t the government bureaucrats who (in league with Kullen) engineered this travesty still be around? Why doesn’t National go after their arses? Surely there is a price to pay for this kind of professional negligence and absolute waste of taxpayer resources.

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  7. big bruv (13,698 comments) says:

    I know Neville is not keen on breaking promises he made to Labour voters (but more than happy to break every single one he made to National voters) but what is to stop him just parking the train set up and not spending one more bloody cent on the thing?

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  8. Le Grande Fromage (145 comments) says:

    I have said it before but I will say it again Michael Cullen is a cunt.

    [DPF: 20 demerits]

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  9. Chthoniid (2,030 comments) says:

    Trypewryter-

    NZ Rail was running at large losses throughout the 80s, and had $1.3bn in debt written off by the Government in 1990. It was ‘corporatised’ with an injection of $300m, and in 1993 (last year before privatised) made a profit of $18m.

    It was privatised for $400m. You can adjust for inflation, but for a (risky) asset returning $18m a year, $400m isn’t a cheap sale. That’s not a lot of cash to meet reasonable shareholder expectations and invest back into the company.

    This highlights the main problem with rail in NZ. It’s fundamentally unprofitable. We don’t produce goods in volume that suit a rail system. We grow stuff diffused over the country.

    Coastal shipping is for the most part, more competitive than rail for bulk goods. Trucking companies can do most inland transport better. And where rail can compete, there’s not a high enough volume to justify the capital costs of maintaining it.

    THere is a strange myth in NZ that railways can be run profitably. We’ve given state-run management a shot, we’ve given the SOE model a shot, we’ve given privatisation a shot, and basically, nothing works. You can’t make money running a rail network in NZ.

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  10. FletcherB (60 comments) says:

    While I have no doubt we got suckered into paying too much…
    Wasnt part of the purchase price not just for the assets, but also for the forfeiting of other rights and future profits? The cash handed over was never supposed to be only the value of the hardware.

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  11. Chris G (106 comments) says:

    Oh true, I forgot how well TranzRail ran the railways. Thanks for reminding me guys. Rode all the profit to the South of France I think. Great.

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  12. Murray (8,844 comments) says:

    It was worth every demerit point cheesy.

    When you’re right you’re right.

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  13. TripeWryter (715 comments) says:

    Chthoniid — yes, I understand what you say, and yes, I was around in the 80s (and a lot earlier, too), when Railways didn’t make a profit and really was a mustering yard for a good many of the unemployed. The things that went on down the back of the freight sheds …

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  14. Paul Marsden (991 comments) says:

    Le Grande Fromage (8) Vote: 7 1 Says:

    June 3rd, 2009 at 3:56 pm
    I have said it before but I will say it again Michael Cullen is a cunt.

    [DPF: 20 demerits]

    I disagree LGF (they’re useful)

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  15. starboard (2,524 comments) says:

    “Le Grande Fromage (8) Vote: 9 1 Says:

    June 3rd, 2009 at 3:56 pm
    I have said it before but I will say it again Michael Cullen is a ****.”

    Well said….

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  16. emmess (1,420 comments) says:

    Well in every problem we should see the opportunities
    Cullen wasted hundreds of million (or even billions) or his piece of shit trainset
    There is a great opportunity to rip up the rail and replace it with busways in the cities, roads in some cases (the Kaimai and Rimutaka tunnels would be especially useful if widened), and what’s left can be used for the cycleway

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  17. Owen McShane (1,226 comments) says:

    What is it about the word “rail” that turns people’s brains into mush?

    If rail freight did not exist there would be no need to invent it – except for those wonderful long haul single cargo trains in the US.

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  18. workingman (84 comments) says:

    Tripewriter,

    Never let the facts get in the way of a good story.

    2004 Arahura given a major refit. I thought this was a big improvement in comfort

    2005 Kaitaki started service. A fantastic ship and finally bought European levels of comfort to the Interislander

    2008 Arahua given another major refit

    This certainly sounds very much to me like a company that was not taking care of its business and assets.

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  19. pete (428 comments) says:

    $351 million “lost” on rail: “Thanks Michael”

    $8 billion lost by suspending payments into the Cullen fund: “minimal”

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  20. davidp (3,574 comments) says:

    NZ is going to have to bail out railways every few years from now until we decide there are better uses for our money than subsidising trainspotters. As Chthoniid says, the things are just not viable in NZ. The only way I can see to retrieve some of the money Cullen wasted AND to stop future Labour governments tossing billions more dollars at trains is to rip up the tracks and sell the real estate. Rail yards in CBDs must be sitting on hundreds of millions of bucks of real estate. Let’s use it for something productive, rather than as a place to rearrange trains.

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  21. Murray M (455 comments) says:

    Let’s not forget John Key gave this Cullen c**t a well paid job.

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  22. lilman (949 comments) says:

    Cullen should be detained along with that other fine polly aunty hellen for the farce that is NZ Rail.
    What tosser would buy a lemon like that.
    I can never see the day when it will come close to break even ,those two should be made to travel by train every time they need to move about the country,then we would see less of them, even if Clarke is only coming home to charge the BATTERIES..

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  23. Ancient Dan (48 comments) says:

    Governments are suckers for railways.

    Back in 1970 when the government took over the railroads Richard Nixon promised the government would be out in 3 years. He said that this was a short term takeover and that Amtrak would be a private company again within 3 years.

    Today Amtrak is still government owned and loses 1.7 billion dollars a year.
    The President of Amtrak now makes more than the President of the United States.
    No private companies can compete with Amtrak because of the government involvement.

    Frankly those taxpayers who want to lose their money on the railways should stick it in the post and give the rest of the taxpayers a break.
    But now that the US has gone socialist have a look at the guy that will run General Motors.
    http://www.foxnews.com/story/0,2933,524757,00.html
    staggering stuff

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  24. Brian Smaller (4,037 comments) says:

    Of course the Aussie call it the Sale of the Century. They had a buyer who had deep pockets (well, other people’s pockets) and wanted to buy at any cost before the 2008 election. If someone wanted to buy my house, would pay anything for it and wanted to do it by a certain day I am sure as hell I wouldn’t be spending any money on doing it up either. I just bet that Toll are kicking themselves for not asking for a round billion. They would have got it.

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  25. TripeWryter (715 comments) says:

    2004 Arahura given a major refit. I thought this was a big improvement in comfort

    Workingman: Yes, I know, I saw her. And very fetching she looked, too, after her several weeks in Brisbane being painted white again, and getting her new logo on the hull, and even more, her funnel painted a nice, fernleaf green. She was the first of the ‘fleet’ to get the new colour scheme.

    But it wasn’t too many months later that she was looking like an old bucket again. She was a picture of the owners’ neglect of her and the railways.

    She was gutted last year so she would take more freight and fewer passengers. The gutting, according to those who sail her, resulted in an altered balance so that she doesn’t ride heavy seas as well as she used to. I have been told that some of the ship’s masters are more cautious about taking her out into Cook Strait in some seas than they used to.

    Look: I understand what others say about rail and profitability and all that. I like the idea of coastal shipping because we have a lot of small ports. But I imagine that wharves and sheds and warehouses (infrastructure, I believe it’s called) would need to be built if they were to be used. The highways are already crowded. I never knew that SH 1 could be like a raceway after midnight. It would make sense tgo forget about the profitabily of rail and just use it because it’s there.

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  26. wreck1080 (3,865 comments) says:

    the bloody greens wouldn’t care if they were only valued at $1.00. The greens would also like to see kiwis living in caves and eating roots and berries.

    In fact, I believe $349million is way too high.Given that rail never pays for itself.

    Tripewater has the right idea, coastal shipping.

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  27. Fale Andrew Lesa (473 comments) says:

    Okay so the rail assets that cost taxpayers’ $690 million last year are now valued at just $349 million?

    In the short-term indeed this might sound like a big fat waste of time and money but realistically NZ-Rail is very much the least performing in the Western world – Tranz Rail winning the Roger Award for The Worst Transnational Corporation operating in New Zealand on three occasions and being the first corporation inducted into the “hall of shame”. The Awards came amidst critical reports of lax safety standards, inadequate maintenance, asset stripping and insider trading.

    As an early American immigrant to NZ one thing I found particularly disheartening was the state of NZ Rail services and the appalling sight seeing opportunities that Auckland rail has to offer – South Auckland’s industrial areas, graffiti and residential eye-sore. By visiting most Western countries and experiencing the rail opportunities on offer one would easily be surprised at the fast and frequency of service, the great scenery during each journey and the 21st-century typed services i.e underground tunnels, high-speed trains, etc.
    Now if New Zealand is ever to compete with such international rail assets the obvious initial move on the chess board would be to buy back the actual asset to ensure that the state has the power and the accessibility to make the required changes, upgrades and improvements. Ultimately in the long-term I do believe that Dr Micheal Cullen (most people prefer to be referred to by their professional titles, despite Bill English’s average educational opportunity) has made a very strategic decision for the greater good of NZ, but particularly for the benefit of NZ Rail – which happens to play a vital part in the reduction of dezil and petroleum powered vehicles on the road.

    I would like to end with some statements by the former administration –

    “With our rail system back in public ownership, we can make the strategic decisions and investments necessary for rail to play its full part in building a more sustainable New Zealand. Over time, we will be able to move more and more freight off our roads and onto rail. Rail will also play a bigger role in public transport in our major centres.

    “Overall, with our rail system back in public ownership, we can ensure that it works in New Zealand interests, supporting the needs of New Zealand business and New Zealand’s communities,” Helen Clark said.

    ENJOY…

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  28. OECD rank 22 kiwi (2,832 comments) says:

    At least the country wasn’t in recession when this purchase was made. Oh wait…

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  29. Glutaemus Maximus (2,207 comments) says:

    I am not surprised that the valuation is well below the actual headline price.

    That is without factoring the forgiven debt (assumed by the tax-payer), and the very many treats and

    concessions then handed back to Toll.

    In truth it was a gross figure nearer to $1.4billion in total. You have to add back the negative goodwill,

    delapidations, and inescapeable capital expenditure as a result of the two prior items.

    I really do smell a huge furry rodent in the Cullen/Clark/Treasury/Land transport area.

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  30. Anthony (789 comments) says:

    It has been suggested that someone do an OIA to the Minister of Transport asking what advice was given by Treasury to Cabinet and the (previous) Minister about the purchase of Toll’s railway business in NZ? Minsters have responsibilities similar to directors and could be prosecuted for negligence if they did the opposite to what was advised by Treasury and wasted hundreds of millions of dollars of taxpayer money!

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  31. emmess (1,420 comments) says:

    >>Tranz Rail winning the Roger Award for The Worst Transnational Corporation operating in New Zealand on three occasions

    A negative award from John Minto and the like?
    I’d be honoured

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  32. mavxp (496 comments) says:

    Someone may be able to correct me on this. But I think rail was never given a fighting chance when in private ownership under Tranzrail. The road user charges for trucks are still at 1980’s levels and are not adjusted for inflation etc, so essentially the tax-payer is subsidising the trucking companies costs and making the deck more favourable towards the funding going to roading rather than rail.

    If the deck was made even – the true cost of trucks on the roads including the increase in traffic requiring more maintenance (trucks cause ~80% of the damage), widening/ motorway extensions, congestion etc. was factored in, I think rail would stand quite a bit taller. I don’t have the numbers to compare, but the government (whether Nat or Lab lead) needs to set things right in terms of true cost for each method to move goods and people around.

    However, as we have already “chosen” roads over rail, and we have to pay for road asset maintenance anyway, there must be economies made by not having to upgrade both assets to some sort of world standard. It is a complex problem.

    Infrastructure is a beast that relies on a “build it and they will come” approach. We have done this with our roads, but not with rail in our cities, nor with the coastal shipping avenue that has been suggested. Surely a proper benefit-cost needs to be done?

    So far we only have decisions made for political gains in elections. This is precisely why the power of veto should given to the GG or someone elected to that role (“El Presidente”) to stop this sort of waste of taxpayers money.

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  33. Murray (8,844 comments) says:

    Pete explain how NOT borrowing 8 billion dollars to put it in an investment scheme that devalues that sum by a massive ammount is a “loss” and it would be a net gain to just borrow the money to pay the super at the time?

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  34. pete (428 comments) says:

    Pete explain how NOT borrowing 8 billion dollars to put it in an investment scheme that devalues that sum by a massive ammount is a “loss” and it would be a net gain to just borrow the money to pay the super at the time?

    DPF’s estimate: $29b less borrowing, $37b less in the fund: an $8b loss.

    His estimate is probably a bit low: Keith Ng’s take is here.

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