Friday, June 06, 2003

Buying back the track

The Greens have been agitating for this for a while, and the government has finally seen the light and bought back the track. Full details can be found in the government's press release on Scoop. The quick version:

  • The government will take a 35% shareholding in TranzRail
  • TranzRail will sell the rail network for $1, the nominal price it paid when it was sold way back in nineteen-ninety-whenever.
  • The government will also buy other assets necessary for maintaining the track for about $50 million.
  • The government will invest $100 million in upgrading the infrastructure, then lease it back exclusively to TranzRail. If they don't meet agreed targets for freight volume, the line will be opened up to competition.

The whole thing is subject to shareholder approval, of course, and if that isn't granted then TranzRail effectively get a $44 million loan at commercial interest rates for a year.

Is this a bad thing? I don't really think so. While Toll seemed interested in buying TranzRail, there was concern over whether they would make the necessary investment in infrastructure or continue to run it into the ground as the previous owners had. And of course there were concerns about monopoly pricing. This solves both problems - it returns a natural monopoly to crown control, where it is less likely to be abused (meaning we can vote the abusers out of office at election time), and it ensures that the infrastructure will be there. If Toll wants to run a railway, then I don't see anything here that stops it from acquiring the rest of TranzRail, and then focus on the core business of moving passangers and freight.