Kiwirail

August 24th, 2012 at 10:41 am by David Farrar

The Herald reports:

The Labour Party has asked tough questions about the state of after it won a temporary injunction preventing the publication of sensitive material from a leaked business plan.

The state-owned company yesterday won a temporary High Court order after it was leaked to Radio New Zealand.

But parts of it were read in Parliament yesterday by Labour MP Phil Twyford under the absolute privilege MPs have, without the source document being identified.

Kiwirail should dump the injunction. It won’t work. Inevitably the document will end up on a website somewhere, not hosted in NZ. The injuncion just increases interest in it.

On the substantive issue, it is no surprise that Labour’s “sale of the century” purchase of Kiwirail is proving to be a disaster. They paid almost $700 million for a business that is incapable of coming even close to covering its capital and operating costs.

Despite the massive deficit the Government has, it has committed $3 billion towards . Labour, Greens and NZ First cry out this is not enough. They would no doubt throw even more at it, hoping that they can fill up the black hole that is Kiwirail.

The solution is not to keep throwing money at it. The solution is to auction it on Trade Me with a $1 reserve and hope there is someone stupid enough to bid for it.

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37 Responses to “Kiwirail”

  1. MarkF (89 comments) says:

    Maybe the Gweens super fund should buy if it is such a good idea!

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  2. Brian Smaller (3,915 comments) says:

    All the Unions could chip in and make it the great enterprise they think it can be.

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  3. Pete George (21,789 comments) says:

    Here’s details on what Twyford and Curran said on it in parliament yesterday.

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  4. ross69 (3,637 comments) says:

    So Labour is to blame for National’s decision to go to China to buy crap engines? It’s great when you can blame the Opposition for all your mistakes.

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  5. Pete George (21,789 comments) says:

    But Labour’s pseudonym at The Standard, ‘Eddie’ blames National for censorship. That’s the height of hypocrisy from someone who famously tried to censor me for challenging previous lying smears.

    Twyford and Curran are doing what they think is right and at least using actually documented information.

    So why does Labour black ops run smears at the same time? Typical ‘Eddie’, appalling Standard.

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  6. ross69 (3,637 comments) says:

    This is the same KiwiRail which Gerry Brownlee has called a “dog”. So what’s the government going to do about this so-called dog?

    “Over the next few years $750 million would be invested in upgrading the network, including an $80 million a year maintenance plan.”

    Hmmm the government seems to have a lot of confidence in KiwiRail to be committing this sort of money.

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  7. Mr Nobody NZ (396 comments) says:

    Brian : “All the Unions could chip in and make it the great enterprise they think it can be.”

    At the time of the sale back to the Government I was working for Toll NZ and attended several of the staff briefings held to advise the general staff of what was happening and what it meant.

    They were the most depressing things I have ever been to. I watched grown men who when told that the rails had been sold back to the company and that their jobs were going to move to the new rail organisation (Kiwirail as a name hadn’t been thought up at that stage) reduced to tears. Men making immediate approaches to Toll Management that their particular position shouldn’t be shifted and requesting to stay with Toll.

    In all of these cases these men were Union members, had been with the organisation since before the original sale of rail and all remembered what it was like the last time the government own them.

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  8. Keeping Stock (9,786 comments) says:

    Kiwirail; Michael Cullen’s gift to New Zealand

    Sounds like the stuff of a Tui billboard!

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  9. James Stephenson (1,880 comments) says:

    @KS – yeah, the gift that keeps on taking.

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  10. Paulus (2,289 comments) says:

    Who ordered the Engines and trucks from China ?
    Must be John Key !!!!

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  11. tas (527 comments) says:

    So the govt bought Kiwirail for $700M and are spending $3,000M just to maintain it?! If I had an “asset” like that, I’d get rid of it. Presumably the opposition are criticising the govt’s wasteful spending…

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  12. Keeping Stock (9,786 comments) says:

    Actually no Paulus; the board of Kiwirail makes the decisionsm and the government simply keeps writing out the cheques; exactly as Dr Cullen intended. He knew he was going out, so not only did he leave the pantry bare, but he left a bottomless pit into which he knew that money would have to be poured.

    Little wonder that at the time that Labour bought back Kiwirail from Toll, one of Toll’s senior executives is reported to have gleefully announced that “You only get one Helen Clark in your lifetime”.

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  13. flipper (3,261 comments) says:

    It would be wonderful if once, just once, the idiot who describes himself as Ross69 demonstrated that he has a brain.

    Having spent $700 million to buy a Toll dog, the Key Government (us, Ross69) got saddled with $300 million more between 2008 and 2011, bringing the total to $1 Billion plus. Now we are being sucked in for a further $750 million and other Labour, red melon and peters party twits want even more.

    There is only one reason why Kiwirail (aka cullenrail) is not on the list of those SOEs about to be partially divested – no one, but no one, wants any of it.

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  14. greenjacket (346 comments) says:

    I am sure that 100 years ago there were also calls by the equivalent of Labour-Greens-Luddites for the government to “invest” in the horse and cart industry. It has nothing to do with economics – trying to keep Kiwirail alive is just romanticism.

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  15. RRM (8,987 comments) says:

    “Labour’s Sale of the Century purchase of Kiwirail” = what your National Government borrows every 14 days.

    Just so you don’t forget ;-)

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  16. KiwiGreg (3,127 comments) says:

    @ RRM I hear you but they don’t seem to have the appetitie to make the needed cuts to the health, education and welfare budgets.

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  17. Mr Nobody NZ (396 comments) says:

    Paulus: “Who ordered the Engines and trucks from China ?”

    At the time of the Sale, Toll was significantly through the decision making process around the purchase of new Engines and an order for new Rolling Stock had been placed (though this was actually delivered after the sale had occurred).

    At that time the decision was leaning heavily towards the Chinese suppliers as the alternatives was roughly 3-4 times the price and studies done by the Hillside Engineering teams had evaluated them to being equal in quality to what other suppliers were offering.

    Once the Sale process had begun the purchase decision of new engines was placed on hold by the Government though at the time the order was finally made (sorry can’t remember if this was pre/post the 2008 election as the actual Toll/Rail separation took over 12 months to achieve) it was due to an urgent briefing by rail staff to Government advising that they needed to make a decision around new engines as the state the current engines was causing significant concern around the ability to maintain service levels.

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  18. Mr Nobody NZ (396 comments) says:

    Flipper:- “Having spent $700 million to buy a Toll dog,”

    Flipper you should understand that Toll did not want to sell the railway and viewed it as a key part of their transportation network, capabilities and points of difference with their competitors.

    The key problem was though that following Toll’s purchase of the Railways they discovered a rail network that while has some areas of profitability there were significant areas that weren’t profitable and were likely never going to be profitable. They had effectively made the decision that they were going evaluate each of the lines and if necessary shut down relevant sections down, however when this plan was learnt by the Helen Clarke Government they had a massive panic attack about the public outcry and started talking with Toll. The end result was that the rail lines were sold back to the government for $1 (yes $1 which by all accounts Cullen took great pleasure in being paid and arranging a receipt for).

    The agreement was though that both Toll and the Government would invest in rail, Toll would maintain exclusive rail access and the two parties would negotiate Track Access Charges.

    I believe that this was about 2004.

    Between then and the time the Railways were renationalised Toll and the Government were in constant negotiations around those access charges. The sticking point being that once the Government purchased the railway lines back they began to understand the problem however were now stuck owning a rail network that wasn’t profitable, they were liable for maintaining and couldn’t shut any of it down. So began trying to negotiate access charges at a rate that simply weren’t viable.

    At the time the sale occurred Toll was feeling confident that they and the Government were coming close to an agreement so the decision to re-nationalise the railways was very much a surprise to them.

    As for the Railways being a Toll dog, the lines were very much a dog however they were a Labour Dog after having already purchased them for $1 and the freight side was doing pretty well after Toll had spent a lot of time investing in people, processes and systems to address historical issues like theft and damage. As a result freight levels were increasing.

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  19. anonymouse (651 comments) says:

    it has now been released by KR and is here

    http://www.kiwirail.co.nz/uploads/Publications/Infrastructure%20and%20Engineering%20Business%20Plan%202013-2015.pdf

    Kiwirail Requests Injunction Lift And Releases Plan
    Press Release by KiwiRail at 1:45PM, 24 Aug 2012
    ———————————————–

    Reports that we have something to hide because we sought an injunction to prevent media reporting on the leaked Infrastructure and Engineering Business Plan are extremely frustrating, says KiwiRail Chief Executive Jim Quinn.

    The injunction was sought because the plan outlines detailed and technical aspects of the rail network repairs and renewals for internal use, for our people who know the business to do their jobs.

    Successful planning of this sort by our staff relies on their ability to be free and frank in their identification of priorities, risk and mitigation steps. It is extremely important that staff are free to report blatantly on the ‘lay of the land’ in these kinds of internal documents.

    After all, the very purpose of having things like risks outlined so openly in the plan means they are highlighted to us so we can put mitigation plans in place to ensure they are minimised. This is good basic business practice.

    I was determined to pursue an injunction to show to my staff that I felt strongly that the risk of media reporting on the document once it was leaked put the ability for staff to report in a free and frank manner in jeopardy.

    Not only that, having the contents of the plan reported on without detailed knowledge of our operations could be misleading. This has already occurred with misleading reports of asset decline and safety risks.

    This is simply not the case and illustrates why a document like this was not meant for public consumption. While I understand that the public have an interest in our operations as a state owned enterprise the detailed nature of the planning document can easily be taken out of context by anyone without a detailed understanding of our business.

    Just like any other business, KiwiRail has to make calls around priorities when managing our assets and use our money prudently. We have a 30 year task ahead and need to balance our priorities according to the needs of safety followed by our market needs.

    And, as we have previously and repeatedly said, over the short-term we are spending less than we had originally planned to spend, but we are still investing far more in rail than we have in decades. Over recent years we have invested to improve the network and suggestions that it will return to the state it was in 10 years ago have no basis at all. Furthermore over the next three years, we will still invest $1 billion in the business, with a significant amount going directly on the network.

    The planning document was leaked through a breach of confidence, this is a very serious matter that I am extremely concerned by and will be pursuing.

    The nature of the document being leaked in this fashion has given it a greater profile that it should have. As such I believe that it is now in our interest to release it and provide the public with the necessary context to its content.

    I will be outlining this at a press conference this afternoon.

    The document and a guide to its contents is available on this link –
    http://www.kiwirail.co.nz/uploads/Publications/Infrastructure%20and%20Engineering%20Business%20Plan%202013-2015.pdf
    ENDS

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  20. ross69 (3,637 comments) says:

    > Now we are being sucked in for a further $750 million

    But Gerry says he’s an intelligent guy…are you saying he is grossly mismanaging taxpayers’ money? That seems to be what you’re saying.

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  21. thedavincimode (6,102 comments) says:

    ross69, just fuckoff.

    There are two options. Stick it on Trademe for $1 and write off the money that Kullen lied about not spending as part of his wastrel pre-electioneering. Or spend more to make something of. Personally, I’d prefer they just threw the whole fucking lot in the tide. But there is no escaping that you evil fucking pricks brought this on by paying through the nose for this crock of shit for purely political purposes and lied about the cost; just like WFF and making student loans interest-free. So just fuck off you thieving lying little prick.

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  22. Keeping Stock (9,786 comments) says:

    @ thedavincimode (2.55pm) – why don’t you tell us what you REALLY think :P

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  23. Ross12 (925 comments) says:

    Mr Nobody NZ —thanks for that background detail . It is very enlightening reading.

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  24. backster (2,000 comments) says:

    I don’t understand why Labour can make such a fuss over the ACC failing to keep the names of some claimants anonymous by mistakenly sending an email to some malcontents not entitled to it, yet they deliberately and contemptuously publish illegally obtained copies of a confidential business report prepared by KiwiRail and distribute it to all their media stooges.

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  25. campit (438 comments) says:

    At that time the decision was leaning heavily towards the Chinese suppliers

    That would be the suppliers that Pansy Wong’s husband went to see in Dalian, funded by the tax payer.

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  26. campit (438 comments) says:

    @Mr Nobody, also worth remembering the Labour Government buying the access to the Auckland rail track from Toll on behalf of the ARC for $81m, announced on Christmas eve 2001, largely to allow passenger rail services to run.

    Fast forward to the present day, and now the Auckland region pays about $20m annually in track access fees to Kiwirail. Funny old world, innit?

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  27. Mr Nobody NZ (396 comments) says:

    Campit:- “That would be the suppliers that Pansy Wong’s husband went to see in Dalian, funded by the tax payer.”

    Yes though I believe you’re barking up the wrong tree as the visit by Sammy Wong to CNR (who won the contract) was in 2005 when the company was still owned by Toll and the Labour party in power.

    You could perhaps argue that Toll was political due to the donation that they made to the National party in 2008 ($10k from memory) however it worth noting that they also made matching donation to the Labour party and I believe also to several smaller parties. As for direct contact with National I don’t recall ever seeing anybody from the National Party visiting however we were visited by Helen Clark and several other Labour Ministers/MP’s fairly regularly while I was there.

    If you want to look for conspiracies though I would suggest having a close look at the Board Membership and Shareholdings of Toll’s competitors for some interesting links back to the Labour party along with the locations of where the initial announcements in particular the that delayed a key freight train for over 2 hours to allow for photo opportunities with Labour Ministers.

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  28. Mr Nobody NZ (396 comments) says:

    Campit:- “worth remembering the Labour Government buying the access to the Auckland rail track from Toll on behalf of the ARC for $81m, announced on Christmas eve 2001″

    You might want to check your dates Toll NZ didn’t buy their controlling 85% stake in Tranz Rail until 2003 but equally I think its difficult to look at such historical cost increases/reductions in isolation and you need to look at not only the entire transport network but what else was happening in the business and industry at the time.

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  29. Rick Rowling (776 comments) says:

    Kiwirail is the best way yet to get John Key’s national cycleway complete.

    It’s already there with bridges & tunnels, too.

    We just need to get rid of the steel rails & sleepers and we’re done!

    / Actually, I’d love to see the valuation of
    (a) our complete rail network as a going concern, vs
    (b) our rail network as scrap metal and land.

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  30. campit (438 comments) says:

    You might want to check your dates Toll NZ didn’t buy their controlling 85% stake in Tranz Rail until 2003

    Right you are – it was Tranzrail that the money was paid to.

    Yes though I believe you’re barking up the wrong tree as the visit by Sammy Wong to CNR (who won the contract) was in 2005 when the company was still owned by Toll and the Labour party in power.

    September 2006, which was subject to an investigation.

    To be fair, that investigation said “Pansy Wong was attending the Fourth General Assembly of the International Conference of Asian Political Parties, hosted by the South Korean Government, and Sammy Wong accompanied her and then accepted an invitation to visit friends in Dalian, which is close to Korea.”

    The report doesn’t say exactly who Sammy’s friends were in Dalian, but the conclusion was that it wasn’t business related.

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  31. duggledog (1,097 comments) says:

    Keeping stock

    ‘so not only did he leave the pantry bare, but he left a bottomless pit into which he knew that money would have to be poured’

    Yes one of the many traps set by Labour for the incoming Govt. Kind of like a retreating army poisoning wells behind them. Cullen also knew the romantic attachments Kiwis have for rail, what an utter bastard.

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  32. ISeeRed (244 comments) says:

    Mr Nobody NZ: stop bringing facts, data, information. You’re ruining a good story!

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  33. wreck1080 (3,514 comments) says:

    toll holdings would have taken 50 million to be rid of kiwirail.

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  34. MH (558 comments) says:

    Another revival of Pettycoat Injunction with Arnold at the trough,darlinks,with the Greens aching.

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  35. Mr Nobody NZ (396 comments) says:

    Wreck, that simply is not true.

    Toll saw the Rail and Ferry network as providing them a significant advantage over their competitors. If you consider their main competitors at the time, if they were transporting freight within the same island their choices were to transport their customers freight via trucks at considerable cost and added risk of damage occurring or placing it onto Tolls Trains.

    If they were transporting it inter-island they could choose to ship to Wellington/Picton via truck but was stuck with the choice of again putting it onto their competitors ferry service or using Bluebridge which at the time they either had less movements across cook strait, capacity or both (sorry don’t remember the exact point of differences between the two services at the time).

    Either way it meant business on a Toll service or the opportunity to undercut their competitors by being able to charge lower freight costs via owning the entire network to their customers.

    While there were some immediate pros (namely 800 million of them) from the sale the from Tolls position they didn’t own the Lines which were the biggest issue and were in n excellent position to grow th freight levels. The only issue was negotiating the ongoing access charges whh was considered a fairly basic negotiation (in the early days at least) however what they found was a Government that after purchasing the lines wanted a level of payback that exceeded the amount of revenue able to recovered from using them.

    In hindsight it seems clear that the Government was trying to not only use Toll to rebuild the network but to profit from it however what thy found was that Toll wasn’t simply going to agree with to those demands. Then facing a loss of control of Parliment in 2008 they were faced with a choice of either having A) Settling With Toll B) Letting the negotiations continue and for them to likely be settled by the next government or C) Changing the game.

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  36. Lazybum (259 comments) says:

    The Kiwirail wagon went woof woof woof, woof woof woof. woof woof woof.
    The Kiwirail wagon went woof woof woof, woof woof woof. woof woof woof.
    All day long.

    The Maori council say the natives own the water, NZ own Kiwirail. Gee what a fucked country we live in.
    I know what I would rather own!

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  37. Michael (880 comments) says:

    A $3 Billion subsidy for a company with 4000 employees? Holy crap, that’s three quarters of a million per employee to keep the enterprise running!

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