No one would buy it!

July 11th, 2012 at 9:00 am by David Farrar

NZ Herald reports:

Opposition parties say job cuts at are a step towards its sale, but the Prime Minister has assured New Zealanders the troubled company will not go on the block.

Consultation documents released by New Zealand First show the Government-owned company needs to save $200 million over three years.

I doubt we could sell it for even $1. No one would be as stupid as Labour was, and want to buy it.

Prime Minister John Key said the Government did not plan to sell KiwiRail and would continue to invest in the company, but would not intervene to save jobs.

“The Government has been a heavy investor. We’ve put $1.8 billion into KiwiRail in recent years and we will continue to support the business.”

Labour and Greens say the $1.8b is not enough. Kiwirail is a bottomless pit when it comes to money for them it seems.

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33 Responses to “No one would buy it!”

  1. Brad (75 comments) says:

    And we can all thank National for selling it to their mates so they could run it into the ground

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  2. vto (1,128 comments) says:

    Yes, for once I agree with you. Kiwirail is a waste of time and I suggest that you lobby this government to close it down.

    Go on. Close it down. Its unnecessary.

    (such depth of thought on here…)

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  3. YesWeDid (1,029 comments) says:

    DPF seems to treat Kiwirail as one big joke.

    If Kiwirail didn’t exist how would Solid Energy get it’s coal from the West Coast to Lyttelton Port?

    It’s a piece of vital infrastructure and in an ideal world it would be profitable.

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  4. hj (6,359 comments) says:

    I heard Mike Williams say that if railways went there won’t have to be a large increase in spending on roading.

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  5. eszett (2,337 comments) says:

    If it is such a useless bottomless pit and you can’t sell it, then why don’t you advocate to shut it down?

    Yes, it would have been so much easier to have Labour let it go broke and cop the blame for it. But you should come clean and say what you would like to happen to Kiwiril instead of constantly blaming Labour for trying to save it.

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  6. Wayne91 (143 comments) says:

    YesWeDid – “If Kiwirail didn’t exist how would Solid Energy get it’s coal from the West Coast to Lyttelton Port?”

    By sea direct to its destination – would be great to have the money spent on the West Coasts infrastructure to allow that to happen. Especially after all the years of neglet of the Coast by the Labour Party who have forgotten thier roots and now pander to the greens let alone “Self serving unionists and a Gaggle of gays.”

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  7. JeffW (320 comments) says:

    So, eszett, I can it you would be happy to refund to me the portion of the $1 billion Cullen purchase sum that my family and I paid?

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  8. dime (9,441 comments) says:

    trying to save it? lol

    this is how it went.

    Toll NZ Guy : “mate, this railway business is ratshit”

    His boss: “make noises about shutting down vital services. lets see if a dim wit lefty will take the bait”

    two weeks later

    Toll NZ Guy : “mate you are not going to fucking believe this”

    His boss: “whats up?”

    Toll NZ Guy : “you know that mean little midget finance minister??? guess what hes gonna pay???

    His boss: “youre fucking kidding me. lets not screw this up, but lets not make this too easy. demand 200 million more, settle where you have too”

    Toll NZ Guy : “boss, i got 100 million more BAHAHAHAHAAHAHAHA”

    fast forward 4 years. Same guys are still at the we ripped off NZ party.

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  9. YesWeDid (1,029 comments) says:

    @Wayne91 – and that is what Pike River intended to do and then they looked at the numbers and decided that freighting the coal to Lyttelton by rail was the best option.

    Either way you still have the problem of how you get the coal from the mine to the port whether it’s on the West Coast or East Coast.

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  10. berend (1,634 comments) says:

    Don’t rely on John to make any hard decision. Let’s just borrow another $250 million a week. But will our children love John too?

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  11. KiwiGreg (3,177 comments) says:

    YWD is partially correct. The ONLY viable rail in New Zealand is bulk point to point cargo. However, sadly, most of what Kiwirail tries to do isnt that.

    Unprofitable means poor use of resources, particularly capital. New Zealand, through years of undersaving and overspending is capital poor. Profitability is the markets way of telling you “do more of this” and unprofitability is its way of saying “you’re doing it wrong”.

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  12. Other_Andy (2,298 comments) says:

    @yeswedid

    “Either way you still have the problem of how you get the coal from the mine to the port whether it’s on the West Coast or East Coast.”

    Why should that be my problem?
    It is the coal company’s problem.

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  13. Bevan (3,965 comments) says:

    Why do lefties only comprehend that the only alternative to keeping Kiwirail in its present state is shutting it down completely?

    In reality, it probably is just too big for what NZ realistically needs and could be downsized. If the lefties have a problem with that well let them pay a levy to keep the unprofitable routes open.

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  14. Manolo (13,375 comments) says:

    After this Labour lite should make Cullen, the destroyer of NZ economy, a member of the Order of New Zealand (ONZ).
    Thank you, comrade Michael.

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  15. Other_Andy (2,298 comments) says:

    @YesWeDid

    Take the Pilbara in Western Australia as an example.
    The Pilbara iron ore lines are build, run and maintained by FMG, BHP and Rio Tinto.
    They want the ore shipped, so they build, run and maintain the infrastructure to do so.
    Not a cent of the Australian taxpayer is used.

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  16. Bevan (3,965 comments) says:

    Why should that be my problem?
    It is the coal company’s problem.

    Correct, if Solid Energy needs to get its coal from point A to point B, they can pay market rates for it. Surely if the route is profitable then Kiwirail (or another entity) will provide service for that route. But that doesn’t mean routes running at a loss need to be subsidized by the profitable routes.

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  17. YesWeDid (1,029 comments) says:

    @Other_Andy – it’s ‘your’ problem because the alternative is massive coal trucks using the tax payer funded roads.

    Thatcherites like DPF have no problem with pouring billions into roads but laugh at the idea of keeping a rail system working.

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  18. MT_Tinman (2,993 comments) says:

    YesWeDid (735) Says:
    July 11th, 2012 at 9:35 am
    Either way you still have the problem of how you get the coal from the mine to the port whether it’s on the West Coast or East Coast.

    Actually no, you don’t.

    Shutting down NZ rail does not preclude the use of part of the facilities by other entities.

    What it would mean is that the purchaser of the coal would have to pay the full cost of transporting the coal instead of having large amounts of that cost subsidized by the NZ taxpayer.

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  19. Other_Andy (2,298 comments) says:

    @YesWeDid

    “Other_Andy – it’s ‘your’ problem because the alternative is massive coal trucks using the tax payer funded roads. ”

    Are you saying that the coal company doesn’t pay any taxes and is therefore not allowed to use the roads?
    And if roads are the cheapest transport option (Which I doubt is this case here) then there is nothing to keep the council or regional authority from charging the mine extra to upgrade and maintain the road.

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  20. YesWeDid (1,029 comments) says:

    @MT-Tinman – Are you basically saying that Solid Energy should pay for the entire cost of running Kiwirail despite the fact they only using part of it otherwise the NZ taxpayer is subsidizing them?

    It may be that Solid Energy are more than paying for the rail resource they use (I hope they are) but other parts of the rail network are not profitable and that is why it runs at a loss.

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  21. berend (1,634 comments) says:

    YesWeDid: there are no billions poured into roads. They are paid for by motorists. Plus some. 50% if what you pay at the fuel pump is taxes.

    PS: obviously I agree that if it were true you were saying, we shouldn’t be doing it. We should not subsidise anything for which people don’t want to pay themselves.

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  22. emmess (1,371 comments) says:

    Correct, if Solid Energy needs to get its coal from point A to point B, they can pay market rates for it.

    As opposed the Green Party corporate welfare policy of subsidising coal mining

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  23. Rat (383 comments) says:

    please note for lazy reporters that the 1.8 billion does not relate to operating support and that the taxpayer is not subsidising the running of kiwirail, only the capital improvements. There was a small amount in 2010 to maintain the network and infrastructure, but not for operations.

    Kiwirail also showed EBITDA of $100m for 2011 and $50m for 2010

    So I would gladly buy Farrars business for $1, given his financial genius

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  24. Rat (383 comments) says:

    sorry, make that 78 million for 2010… my genius

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  25. PaulD (97 comments) says:

    @hj 9.20 If you are referring to Mike Williams on RNZ Afternoons yesterday he did not say that there wouldn’t need to be a large increase in spending on the roads. He said that if the freight was transferred from rail to road that the cost of road maintenance would rise exponentially. http://podcast.radionz.co.nz/aft/aft-20120710-1635-the_panel_with_neil_miller_and_irene_gardiner_part_2-048.mp3

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  26. tvb (4,208 comments) says:

    Rail went through a similar restructuring in the early 1990′s and a similar cost to the taxpayer. Rail is a dead duck. Except for a few routes the entire network should be ripped up and a dedicated trucking route be implemented. Though the economics of that would need to be investigated. The greens and the Labour Party look at rail taking a whole lot of wagons at once pulled by a single loco and think that must be efficient. But it is not and never has been in this country.

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  27. Viking2 (11,138 comments) says:

    And what about logs, containers and milk. Tauranga would be a disaster scene without rail. POA is and always has been until they decided to tranship some to Wiri

    Happy for the taxpayer to subsidize exports but not imports.

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  28. virtualmark (1,474 comments) says:

    Rat, the lack of financial genius is yours, not DPF’s.

    EBITDA is a poor metric for as capital intensive business as Kiwirail. Yes, they may have had a small positive EBITDA. But you might want to check what the D is.

    And you might want to think about what the return on equity is. Hint: it’s negative. Tell you what though, if you like negative ROE’s then how about you deposit $1,000 with me. I promise to give you $900 back in a years time.

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  29. YesWeDid (1,029 comments) says:

    @virtualmark – given the recent write down on Kiwirail’s value and split into 2 entities then the D (depreciation) should drop substantially. Given revenue of $350m with current depreciation at $155m and making a loss of $45m it’s not hard to see how Kiwirail could become ‘profitable’ in the not too distant future.

    Of course it could be argued that the write off is just an accounting exercise to make the figures look better and other factors like the amount of on going capital Kiwirail requires need to be properly factored in to see the true picture.

    However I won’t be expecting DPF to provide that sort of analysis given his anti-rail bias.

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  30. eszett (2,337 comments) says:

    JeffW (146) Says:
    July 11th, 2012 at 9:27 am
    So, eszett, I can it you would be happy to refund to me the portion of the $1 billion Cullen purchase sum that my family and I paid?

    Feeling childish today, JeffW? Time to grow up and embrace the real world.
    We all pay taxes that are used for something we disagree with.

    My point was that Kiworail was sold off, driven into the ground by incompetent management and now had to be bought back by the givernment. To think letting it go broke would have not cost the taxpayer anything is just naive and misleading.

    Rather than trying to score some cheap political points, i’d rather DPF would try and agrue a workable alternative.

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  31. Mark (1,363 comments) says:

    And you might want to think about what the return on equity is. Hint: it’s negative. Tell you what though, if you like negative ROE’s then how about you deposit $1,000 with me. I promise to give you $900 back in a years time.

    Fuck me I knew it, another kiwisaver manager on the blog

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  32. Mark (1,363 comments) says:

    Not knowing a shit load about Kiwirail but one has to suspect that there are some parts that are profitable and others that are bloody dreadful. Those parts of the business such as Interislander, the coan trail from the West coast, the Auckland Wellington line and the Auckland Tauranga line would probably perform well. But the business seems to have to carry significant infrastructure beyond those profitable areas that drag it into the mire.

    Logic would suggest that someone needs to make some hard calls about this business and cut out the non performing elements to focus the business on those areas that make money. This would result in screaming and gnashing of teeth from unions, some small towns and some industries that are not paying their way but it is about time that the government put in a CEO and Board who are capable of doing this.

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  33. geoff_184 (3 comments) says:

    If the public subsidy of private trucking companies was removed, KiwiRail would be carting a lot more tonnage.

    Time for a level playing field, and require both road freight and rail freight to be commercially viable, and cease the socialist approach to road transport at the expense of rail.

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