The deal of the century

Fran O’Sullivan writes:

The Sydney Morning Herald’s Matt O’Sullivan joked “you only get one Helen Clark in your life” as he told the story of how Toll’s Paul Little stitched up the Kiwi Government for a whopping $665 million to buy back the nation’s trains and rail ferries.

Yes, we are no doubt the toast of the Australian business community for donating so much money to

The reality is that Little’s $665 million Government-backed cheque is three times the valuation that Toll put on the trains and rail ferries when it launched its takeover for the financially stressed Tranz Rail in 2003.

Toll also gets to keep Tranzlink, the company’s NZ-based rail and road forwarding business, together with warehousing and contract logistics operations and gets a six-year rent-free period on its existing premises.

This is where they are very smart. They will still make money from sending freight over rail, and they know the Government will not put prices up because they want more use of rail.

It gets the profit-turning part of the business and despite the fact it was required to pump $100 million into new rolling stock under the agreement it reached with the Government in July 2003, much of what the Government has now bought on the taxpayers’ behalf is a mere hotch-potch of assets masquerading as a business.

I wonder who will be silly enough to accept appointment as a Director.

Surely the Government – as owner – would want the national railway to at the very least break even? The proposed state-owned enterprise may not have to post a dividend and commercial returns to shareholders (like Toll has to) but the reality is that unless some strong financial disciplines are instituted it will simply be another sump-hole for taxpayer funds for years to come.

The dividend policy, if there is one, will be interesting.

The problem is that this is really an election year move by the Labour-led Government to try and make ownership of state assets a campaign issue.

If the Government was truly serious about strengthening the role sustainable transport will play in a carbon-constrained future it would not have stymied plans for regional councils to apply local fuels taxes to fund projects like the $500 million proposal to electrify the Auckland suburban rail network.

As it is it has mopped up an out-of-date railway with taxpayers’ cash – but effectively put a blocker in the way of proposals that would get more people out of cars.

Not a very bright outcome really.

Very astute. Helen giveth to the environment on one hand and taketh on the other.

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