The final rail loss
The final valuation of KiwiRail was $369 million – more than half the price the Government paid for it.
The Labour government bought TranzRail from Toll on July 1 last year for $690m. A provisional valuation in the government financial statements in September 2008 put the value at $442m.
Today Transport Minister Steven Joyce said the final valuation by PriceWaterhouseCoopers was $388.29m.
A Treasury report said a fair value for KiwiRail at the purchase date would have been $369.54m.
“This results in a final financial loss on acquisition of Toll NZ Ltd of $320m,” the report said.
It was the deal of the century – for Toll. This is the problem with politicians using our money to buy toys/assets. Cullen was desperate to buy – for political reasons, and Toll knew it. They outsmarted, outwitted and outlasted the Government in the negotiations and we paid for it.
July 1st, 2009 at 9:04 am
Just ‘Effin wonderful!!
It even looks awful.
Who else was going to buy it?
Which other entity could have raised that amount of money, who was credible?
No commercial organisation would have touched it unless it was a nominal dollar.
It has future losses, and capex sink hole written all over it!!
July 1st, 2009 at 9:25 am
Disgusting. Cullen should be sent to jail for this!!!
July 1st, 2009 at 9:36 am
So why the damn hell did John Key reward the author of this catastrophic loss with a top job at NZ Post???
[DPF: Beats me]
July 1st, 2009 at 9:38 am
Damned irresponsible, incompetent and frankly downright criminal.
Remember well New Zealand what a craven Labour government does with your children’s future.
Sacrificed on the alter of “power at any cost”.
July 1st, 2009 at 9:42 am
I am sure there is a perfectly logical and compelling argument for paying over and over and over the top for a rail network that will forever be a mutt requiring regular blood (taxpayer) transfusions …. and I’m sure that sonic/mickeysavage/ratbiter will provide it. So listen up … afterall it’s only our money that Labour wasted to again try and buy an election; makes the $500k pledge card rort look kindergarten stuff ….. 2005 $500k; $2008 $321m.
And nice Mr Goff was right there in the middle of the shambles.
July 1st, 2009 at 9:46 am
Redbaiter … agreed.
July 1st, 2009 at 9:48 am
What really pisses me off is that the advice he received at the time told him Kiwirail was worth in the mid-300 millions. Cullen alone is responsible for mis-handling the negotiations with Toll, and then paying an outrageous price that threw taxpayers money into the pockets of a cunning and avaricious Australian company.
Personally I wish there was some law that we could prosecute him under, but being terminally stupid and careless isn’t criminal. (You could even argue that being terminally stupid is a requirement for a cabinet post in a Labour government).
The best thing the Nats could do is frog-march Cullen on to the Board of Kiwirail, preferably as Chairman, and then force him to live with this turkey for the rest of his life.
July 1st, 2009 at 9:48 am
Just out right disgusting was this whole shame, back then it was criminal….. And now it makes you (puke)
Would love to hear the dribbly mess that will come from these left hookers whom hang out on this blog….
Please Sonic and company, explain to me how this was a good well oiled political party at work ???????
July 1st, 2009 at 9:49 am
Shoving home the dysfunction and depravity of Cullen’s rail purchase adventurism may help turn the soft public support for ‘buying back rail’ into a realization they were dicked around big time for the sake of some big red election campaign billboards.
I can’t believe National gave him an SOE Board position
Our overall economic growth is poor enough without further reducing the public’s long term standard of living with such low quality allocation of scare resources. Quite apart from providing the ultimate example of silly lefty redistribution of wealth upwards, this time with deliberate intent.
July 1st, 2009 at 10:01 am
But wait – didn’t JK spend 146k on airfares? Thats much more important than a mere $300 million overpay for rail, isn’t it?
So lets see 146k in 3 months so thats 584k per year, Soooo if JK stays in power for 513 years then he will blow the same amount as Cullen blew on Rail.
Jeezzz I feel much better now.
July 1st, 2009 at 10:01 am
I would assume the vast majority of New Zealander’s will again let this slide and it will not eat them up and cause spite and upmost dislike for the clowns that were running the show over the past decade, have said it befroe and will say it again. Any Tom, Dick or Harry could have run the country in the global boom times htat were had.
And to move forward and talk up the purchase of the rail only happened because of 9 years in the trough…. Makes me sick…
July 1st, 2009 at 10:04 am
You must wonder, given that the government paid so much over the market value, whether people in the labour government were getting backhanders?
Just think, we had an out of control labour government, who knew they were on their last legs.
The government architects of this deal, must have known knew they were overpaying . Therefore, what would motivate them to go through with such a deal? I think, bribery and corruption must be investigated given the sheer scale of the loss.
If the Fay/Richwite or other such names were attached to this deal, imagine the howls of outrage coming from the left.
July 1st, 2009 at 10:07 am
$369 M loss. That’s nearly $100 for every man woman and child in the country. Sent to Toll Holdings.
Unfortunately, that’s a drop in the ocean of losses that is railway operations in New Zealand.
Dave Heatley at ISCR has found rail has been a net drain on the economy of around $5 billion over the last ten years. His report is here.
July 1st, 2009 at 10:08 am
On the bright side we now have a third class rail network.
July 1st, 2009 at 10:10 am
Selling it in the FIRST place was the crime. Though Wreck1080 has a point. How DID the delta get as big as it got. There is a fishy smell to that. Probably not Cullen himself… that’d be too obvious.
It’s done. Sort of like S59. No point in crying over it, just try to keep it from happening again. Investigate the cause perhaps, but wailing about it won’t fix a thing.
BJ
July 1st, 2009 at 10:27 am
Apparently it was Heather Simpson who really applied the pressure to finalise the train deal. You know Heather – the most powerful unelected person in NZ’s history who “liked people to fear her, but didn’t respect anyone who did”.
Sounds like Cullen just bent over and took it.
I could have free flights to Dunedin for the rest of my life instead of paying for KiwiRail. And I probably won’t even use the friggin train set.
What a rip-off.
Compared to Clark’n Cullen – John Key is super rational. In areas of defence, business, politics.. in fact in all areas I trust Key to make a logical assessment of the facts. With Clark you got the sense there was an ideological, angry post-Vietnam feminist hippy bubbling under the surface… ruling all her decisions.
^ thank god she’s gone.
July 1st, 2009 at 10:40 am
NX why did Heather the BUTCHer like choo choo’s so much?
July 1st, 2009 at 10:49 am
I’m interested in the wording – it pissed me off when I saw it last night. “more than half the price the Government paid for it.” Like that is good news or something. Shouldn’t it say “paid almost double true value”, or something else that actually explains it? It’s like they’ve deliberately chosen words for the first couple of paras that minimise the immediate “that’s outrageous” feeling that readers will get. I suppose I shouldn’t expect anything else from left media though.
July 1st, 2009 at 10:59 am
Left Media ommitted the ‘Tremendous value, and preventing Global Warming’ caveat.
July 1st, 2009 at 11:04 am
PaulL, dont seem so surprised that the media dumbed this down, they have doctorates in dumbing down what is happening when its coming from the left….
We have a large percentage of our population whom feel they are owed a living etc etc etc
July 1st, 2009 at 11:18 am
Not many Lefties in attendance at the moment.
Subject too hard to debate?
Remember one Left footer saying that it didn’t matter what it cost, it simply had to be bought?
Still can’t think why myself. Perhaps I have made too much money for too long, employing many people.
Just blows my mind.
July 1st, 2009 at 11:20 am
^ is that the start of a joke
.
Well, the reason’s a joke.
From what I understand Heather forced the deal through for Labour’s re-election strategy.
You may remember the ‘Kiwibank, KiwiSaver, KiwiRail’ billboards. I suspect those billboards & the accompanying ‘National will sell NZ assets’ strategy was signed-off well before the train-set purchase went through. Heather would’ve been furious with MichaelC (not to be confused with MichaelJ also famous for his reckless spending) if she had to change the billboards.
July 1st, 2009 at 11:36 am
My Australian business colleagues told me at the time that the local Ozzie view was that vendors such as Clark and Cullen only come along once in a lifetime and so it would be unreasonable of them not to take full advantage of the situation
July 1st, 2009 at 11:39 am
why did the usa go to iraq…..?
was in their national interest….?
how much did they spend….?
maybe kiwirail is in our national interest…?
toll never wanted the rail side of the business….it was the trucking arm which they sort….toll has enough of the market to counter competition in the trucking business…?
im glad we took back the rail..!!!
the roading transport models vs rail models dont stack up….trucks dont pay their way…!!!!
keys government however have allocated the budgets to kiwirail….why…..if it is so bad….?
private sector has a couple of goes ….
maybe the market does not have our national interest in mind….?
July 1st, 2009 at 11:44 am
is jim bolger an idiot….?
July 1st, 2009 at 11:50 am
Terry, I was going to write something long and witty in reply to your outstandingly idiotic comment but realised it would be a waste of time.
Terry you are a retard.
July 1st, 2009 at 11:59 am
well can you explain how the roads are going to cope with increasing volumes of freight in the next thirty years….? congestion costs in auckland alone may be up to 900 million dollars a year currently….how may billions of congestion costs shall we have in thirty years….?
export economy … but hang on how the hell to we get it to market…..
im glad to be called a retard….because it only shows your own weakness…..
is jim bolger a retard…..?
July 1st, 2009 at 12:04 pm
Because, love him or loathe him, (and believe me, I loathe him), Cullen was Labour’s ONLY effective opposition MP. Now that he’s gone, what do they have left? Trevor Mallard? (LOL!)
July 1st, 2009 at 12:09 pm
Why Cullen was given NZ Post is something that needs to be asked and an answer demanded. This was a reward, what did he ever do to deserve a reward? If you had just come back to earth from an extended trip to planet Pluto you would be justified in thinking Comrade Helen was still in power and she had given the job to the gnome as a retirement gift.
If I was completely paranoid I might suspect that it is irrelevant who is in power, that cronyism is the name of the game and the whole lot just take turns holding the reins. I mean seriously, why wasn’t Cullen put in charge of Kiwi Rail? He wasted the greatest tax take in the history of New Zealand on nothing. Surpluses year in and out wasted. (Surpluses caused by the housing bubble and credit splurge, not anything he did.)
Remember the 2008 budget? Cullen said to journalists:
“I would not want to repeat the famous Robert Muldoon statement that the cupboard is bare – actually Sir Robert had sold the cupboard off and pawned the house at the same time – but I would say that we are in this Budget reducing the fiscal position to one which is quite tight and does not allow for any significant further loosening at all.”
Afterwards in Parliament he gloated that he had spent the surplus, he was gleeful in telling us how there was no money left for National to spend on anything. This nasty, petty little man wasted OUR money as he taunted Bill English and John Key.
It is what Cullen promised and it is what he delivered.
I would really like to know why he got rewarded. Anyone? Please??
July 1st, 2009 at 12:16 pm
Of course, Labour being such a great bunch of people will pay the people of NZ back the $360,000,000(+).
July 1st, 2009 at 12:18 pm
Yes.
July 1st, 2009 at 12:19 pm
She misunderstood the term “pulling the train”
July 1st, 2009 at 1:26 pm
The Government should have got independent valuations of Toll’s rail operations, and then nationalised at that price. When the rail was privatised, the owners were given a monopoly, and one of the rents you can extract in a monopoly is inflating the takeover cost.
Compulsory valuations happen all the time internationally for this type of asset.
It was criminal that they paid so much.
July 1st, 2009 at 1:37 pm
Terry, please stop typing like that. People will confuse you with phool.
no matter the spin you try to put on it, purchasing a dilapidated rail network for nearly 100% over the current market value is just plain STUPID.
End of story.
July 1st, 2009 at 1:49 pm
I really do believe it was a ‘Brown Envelope’ deal.
God knows who scored though?
Just makes no sense whatsoever otherwise.
July 1st, 2009 at 2:22 pm
Why is it that whenever so many people see or speak or read the word “rail” their brains turn to mush?
July 1st, 2009 at 2:22 pm
Labour are red, National are blue.
Have to say at present the big N is in the colour purple at present, a mixture of Blue and Red. Scary…
Is John Key that scared that he has to weave from the Blue side to the Red side of the road…. Take into account John that your voters put National in, we want you to spend more time on the Blue side of the road… Dont be scared that the large number of Kiwi’s want there hands held….. They only need to take a few steps with no one holding their handsa nd they will be sweet……
July 1st, 2009 at 2:25 pm
My personal belief is that Cullen was installed at NZ Post to act as a convenient fall guy when Post continues to make loss after loss and Key is “forced” to sell it off, saying “if it weren’t for that classic Labour incompetency, I wouldn’t have had to do this!” Then Cullen wibbles his lip and gets bitchslapped by everyone.
July 1st, 2009 at 3:28 pm
Did Cullen go to the same school as Madoff, both seem extremely talented when it comes destroying wealth. It’s way pass time we ordered this clown a container.
July 1st, 2009 at 4:06 pm
..you F*%$#@ ass*&%$ cullen..why isnt NZ up in arms about this..this little bastard should be in prison…and to top it off he gets a cosy little number at NZ Post !!!! Fuck I hate labour and all its suck arse supporters… JK you are losing points man..
July 1st, 2009 at 4:15 pm
The deal was bad to a traitorus degree, one of the worst aspects is that NZ Rail continues to subsidise TOLL Trucking to the detriment of competing New Zealand Companies like Mainfreight.
July 1st, 2009 at 9:00 pm
I didnt get to see any news this evening
…..
Did any media puppet hook into this story and stir things up?
July 1st, 2009 at 9:38 pm
this whole thing has slipped under the radar…
toll would have given it back to keep the trucks.
its not the 390m its the full 700m-1b plus the annual losses to come.
July 1st, 2009 at 9:55 pm
What a waste.
July 2nd, 2009 at 2:28 am
I’ll tell you exactly why Cullen blew that money on nationalising the rail.
It was election year and Labour were behind in double digits. They had to do something that would hamstring the incoming government and yet make it look like they were doing it for NZ. They know that National couldn’t pledge to sell it – nor would Key have the testicular fortitude to do so. That meant National would have less to spend on tax cuts – giving Labour ammunition to say National didn’t keep their promises.
Remember, Labour knew there was a huge hole in ACC as well – so they were hedging their bets on National having no money to spend.
July 2nd, 2009 at 8:36 am
@ Clintheine
Then Cullen and his cohorts behaved treacherously, deceitfully and criminally by wasting money that wasn’t theirs to waste and by covering up the extent of red ink in ACC’s books. He should be on criminal charges.
July 2nd, 2009 at 9:05 am
I am happy to have paid $100 to get the Aussies out of control. All we now need is Sir Roger Douglas in control of the purse strings at Kiwireail to make it pay its way with repair of the neglected system not included in the proffit and loss account. Rail is an essential part of the country’s infrastructure and the folk who sold the train set in the first place should be the ones under attack. Along with the blinkered folk at land transport who can only think about roads and subsidising the truckie, instead of all forms of land transport for people and goods. Dr Cullen did a good job in rescueing rail despite the cost to the Aussie sharks.
July 2nd, 2009 at 9:14 am
If Labour had not been so gutless they would have nationalised rail as suggested above but the current result is as good as could be expected.
July 2nd, 2009 at 10:14 am
Tell you what jcuknz, you can shoulder my share of the $100 as well thanks. Why should we subsidise an industry that is not ever going to be popular again. Rail was losing a million a day before Prebble slowed down the massive hemorrhage in time for the Nats to sell it.
Even the Greens “save rail” campaign failed as not one of their MPs ever used it for the reasons they stood for. Rail as a means of transport is dead. Freight is another thing, but why should a Government own it?
Sir Roger would sell it tomorrow if he was allowed to. Perhaps you’ll chip in again for it?
July 2nd, 2009 at 1:50 pm
Allow me to quote – “Rail as a means of transport is dead”
Clearly this only applies to poor old New Zealand – As an American citizen and someone who has had the opportunity to travel to several parts of the world recently I have been able to experience first hand what a first world rail asset would look like and how it operates and contributes to the growing demands of economic progress.
My argument?
Strategically speaking it was a very wise move for Micheal to pursue and it has my support, and no doubt support from others 100percent.
I think in this day and age and in the midst of a global recession it becomes vital for New Zealand, under its government to explore new ways of thinking and new assets to manage or explore – evident in Obama’s proposal to explore new energy sources and Australia’s recent investment in defense. If New Zealand was to one day “stack up” to the demands and expectations of a first world country I would argue that it begins with a solid performing infrastructure, alongside a progressive transport system. New Zealand has neither and thus does little in terms of stacking up to the rest of the world – previous owners of the rail were given no incentive what so ever to invest in such a service and therefore no improvements were ever explored.
As for the cost?
If it doesn’t beat the compensation we’re about the pay to “Tangata Whenua” over seabed and foreshore issues I see no reason to ponder over it any further.
Clearly this government hasn’t…
July 2nd, 2009 at 2:00 pm
The biggest issue is the price….
You would be pissed if your superfund paid that for it.
Oh, they kind of did.
July 2nd, 2009 at 7:26 pm
Ha ha, enter the Obama voter who’s solution to everything is to spend taxpayers money to keep something unsustainable afloat. Nice thinking pal, I guess you were creaming yourself when Obama started loosening the purse strings!
I have travelled on some majestic railways on my travels, India Rail is a sight to behold. But in NZ it is not at all sustainable. Your talk of progressive transport systems makes me wonder if you’re also a Labour voter – good god. So you’re perfectly comfortable with the Govt paying double for it? Pretty much sums up the “economic” nous of a Labour apologist.
July 2nd, 2009 at 7:52 pm
Rail in NZ is unfortunately, simply not a viable economic option.
We have tried running rail through he state, and finished the 80s with it needing a massive capital injection and grants to cover its losses. We have tried the corporate and the privatised model. Nothing has worked.
The reason is simple. For rail to be viable it basically needs to move on product out en masse from one rail head, to one final destination (e.g. coal fields to steel mills). This situation also occurs internationally. NZ, Chile and Australia can export logs into Southern China and down the Yangtse far cheaper than Russia can move Siberian timber down railheads into China. And we’re much further geographically from this.
In NZ we don’t have concentrated products- we have wool, dairy and timber that are produced in a dispersed fashion away from most rail heads. It would simply be uneconomic to establish rail heads close to the multiple sites.
We also have the other geographical issue that in many cases, coastal shipping can move bulk products more efficiently than rail. This is just a smaller replay of the forestry issue (indeed, the original Labour transport strategy for GHG reduction emphasised coastal shipping and ignored rail entirely).
In effect, we produce the wrong products that suit rail transport and rail is not competitive against coastal shipping and road transport. Rail requires a heavy investment to establish and sustain, and for that reason needs products, sources and destinations that suit its network. These don’t exist in NZ.
The brutal reality is whatever the charms or attractions people feel towards rail, it is not a strategic asset or a vital part of our infrastructure. It is a giant sucking hole that will vacuum taxpayer money until all parties finally get it. We don’t need a rail network and we can’t bloody afford one. Put the money into coastal shipping and roads and forget the rail.
Spending twice the market value on a purchase is a stupid and reckless use of taxpayer money when the economic case for rail is at the charitable best, is dubious. A realistic assessment is that burning taxpayer money on bonfires will do more to advance the economy that pouring it into rail.
July 2nd, 2009 at 10:47 pm
Clintheine, “enter the Obama voter who’s solution to everything is to spend taxpayers money to keep something unsustainable afloat”.
Clearly evident in this picture is the fact that you’re so anti-liberal you fail to see past the typical “trickle down” theories of Conservatism, Obama’s plan is indeed to invest in areas that have received little in the past but in the midst of a recession it is in fact wise to pursue. Which probably explains why the Republican camp received so little support – even from its traditional group of Conservatives.
You see in the midst of such changing economic times it is smart politics to question current processes and protocols, policies and government organized initiatives – Obama is doing exactly that with the exploration of alternative energy sources and supplies, ending wars that seem to be more of a roundabout than anything close to an end and offering rescue packages to sinking ships of once economic prosperity.
If you looked at McCain and his alternatives to the economy you might find that “trickle down” theories have failed the once great American economy as evident in the recently climbing huge disparities in areas like education, employment, health care and overall security. The top percentage of global tax payers have failed to help stimulate economies through spending and thus Obama has taken the opposite avenue – trusting the mid to low earners to do exactly that.
“Unsustainable” is the entire American economy in a nutshell, would you rather Obama do nothing?
Sour grapes perhaps?
July 2nd, 2009 at 10:52 pm
P.S
“I guess you were creaming yourself when Obama started loosening the purse strings!”
The purse was long gone before Obama was even elected, haha – your confusion with George W Bush and his so-called “economic stimulus” is hilarious.
July 2nd, 2009 at 11:30 pm
Is your name *really* Fale? Does it sound like it is written? Is your middle name Epic?
I think you may have missed the entire Obama rescue package. But you’re just living up to your name
Oh and I am liberal – and your sad assed excuse that Bush spent less than Obama is nothing but revisionist nonsense.
July 2nd, 2009 at 11:41 pm
No, I prefer to name myself a failure because it helps me sleep at night and my parents could secretly predict my future failures.
Don’t be silly – No, it is not pronounced the way it sounds because clearly it’s origins are not in the English language – the name is Fale Andrew Lesa, I am of Samoan descent and it recognizes a family bloodline of “Samoan warriors”.
Who in their right minds would name a child “fail”.
As for being liberal – good on you.
I won’t be loosing any sleep regardless.
p.s
the name is pronounced: fa-le
July 3rd, 2009 at 2:26 am
@Fale Andrew Lesa
On a completely different note, you say – “The purse was long gone before Obama was even elected”. I’d like someone to tell me where he got the new purse from? Doubling the deficit in a year – scary shit.
July 3rd, 2009 at 1:03 pm
The US current account deficit reached $850–875 billion in 2006. It has exceeded annual rates of $900 billion in a couple of recent quarters, including the latest for which full data are available (the third quarter of 2006). It now accounts for about 7 percent of GDP, more than double the previous modern record of 3.4 percent in the middle 1980s (as a result of which the dollar dropped by 50 percent against the other major currencies over the three-year period 1985–87).
Our external deficit has risen by an average of $100 billion annually over the past four years. It has climbed by an annual average of $80 billion for the past nine years. The trajectory, as well as the level of the imbalances, is clearly unsustainable.
As a result of these pervasive deficits, the United States has compiled a net foreign debt that reached $2.7 trillion at the end of 2005.
An even more important number is our gross foreign debt of almost $14 billion because this measures the huge stock of dollar assets held around the world, most of which could be converted into other currencies or assets at almost any time.
If this was taken back in 2005/06 imagine what it’s like now, indeed it is “scary shit” but I would say Obama has a credit card or even a bank loan – NOT A PURSE.
haha
July 3rd, 2009 at 9:43 pm
So it is fail. Thanks for clarifying it for me.
Obama has mortgaged the futures of every single American – more than Bush, Regan… you’re right it isn’t a purse. It’s more like a big fuck off knife.