The story
Background
Prior to the establishment of KiwiRail, rail transport in New Zealand had been under both public and private ownership. Government operators included the Public Works Department (1873–1880), New Zealand Railways Department (1880–1982), and the New Zealand Railways Corporation (1982–1990). New Zealand Rail Limited was split off from the Railways Corporation (which continued to own the land beneath the rail network) in 1990, privatised in 1993 and then renamed in October 1995 to Tranz Rail. In May 2004 Tranz Rail's rail, ferry and trucking operations were acquired by Toll Holdings and renamed Toll NZ, with the central government buying back the rail network outside of Auckland for $1 (the Auckland metro rail network had already been purchased by the government in 2001) on 1 July 2004. The rail network then came under the New Zealand Railways Corporation (trading as ONTRACK). As part of this acquisition, Toll agreed to pay ONTRACK "Track Access Charges" (TACs) in exchange for exclusive network access for 66 years, subject to a "use it or lose it" clause: if freight and passenger volumes fell below the 2002-2004 average for three or more years, Toll would lose its exclusive access to another operator. The agreement set a base track access fee but left future track access fees open to negotiation between ONTRACK and Toll. After several years of negotiations, the two parties could not come to an agreement on the amount that Toll should pay.
Establishment of KiwiRail
On 1 July 2008, the government announced a $690 million purchase of Toll Rail—the rail and ferry assets of Toll NZ, but not its trucking operation, which continued under the Toll brand. The new company was named KiwiRail and launched on 1 October 2008 at a ceremony at Wellington railway station. The New Zealand Railways Corporation then owned both KiwiRail and ONTRACK, with both companies merging to create one company that controls both rail and ferry operations and rail infrastructure.
Former Prime Minister Jim Bolger became the first chair of the KiwiRail board, a position he held until 1 July 2010. Bolger's government had privatised New Zealand Rail Limited in 1993. A number of commentators, including Winston Peters, view this as ironic. In response, Bolger acknowledged his involvement in privatising New Zealand Rail, remarking that "my life is full of ironies," and added that "the world has changed."
Splitting of land and operations
In 2011, KiwiRail proposed splitting its land and rail corridor assets from its rail operation assets. On 27 June 2012 it was announced by the company that the value of the land and rail operations would be written down from NZ$7.8 billion to $1.3 billion, and KiwiRail would continue as the rail and ferry operator, while the New Zealand Railways Corporation would manage KiwiRail's land. The de-merger took effect on 31 December 2012.
10-year turnaround plan
In 2010 KiwiRail released a 10-year turnaround plan and significant government investment in support of this in the years following. In support of the turn-around plan, from July 2008 to December 2016 KiwiRail received over $2.1 billion of Crown investment, which was mostly spent on infrastructure and new rolling stock.
The focus of the Plan is to increase rail traffic volumes, revenue and productivity, modernise assets and separate out the commercial elements of the business from the non-commercial.
The plan included the following points:
"Step change" on the Auckland – Wellington – Christchurch trunk route:
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Reduce transit time and improve reliability along the route by easing curves, removing speed restrictions, greater investment in renewal of bridges and sleepers and passing loops. An express freight train journey between Auckland and Wellington took thirteen and a half hours. KiwiRail aimed to reduce transit times to 11 hours.
Improve exit and entry from Auckland and Wellington with improvements at terminals and on main lines to reduce transit times and conflicts with commuter services
Increase ferry rail-freight capacity by extending the length of the Aratere (achieved 2011) and make the Kaitaki rail-capable (idea since abandoned)
Improve reliability, capacity and enabling investment:
Increased renewals on "other key routes", including investment in sleeper replacement, bridge strengthening and track formation refurbishment.
Improved IT systems and processes, equipment and facilities at terminals
New locomotives (see DL class) (48 in service by 2017) and 3,000 new wagons (over 1,000 in service by 2017).
Review of minor lines (close or mothball if no anchor customers emerge):
North Auckland Line (partial mothball 2016)
Stratford–Okahukura Line (mothballed 2009)
Napier – Gisborne Line (partial mothballed 2012)
North Wairarapa line (from Masterton to Pahiatua; mothballed).
Clarify and assign costs associated with Auckland and Wellington metro services (resulting in Tranz Metro assets being transferred to the Greater Wellington Regional Council and contracts for running services being made "contestable", as in Auckland.
Two of KiwiRail's major customers, Mainfreight and Fonterra, invested heavily in rail-related infrastructure in line with the Turnaround Plan. Mainfreight has allocated $60 million for investment in new railhead depots, while Fonterra has invested $130 million in a new rail hub complex in Hamilton and another in Mosgiel.
The plan has had mixed success, with company Chairman John Spencer stating in 2013 that for its first three years, rail freight revenue had increased by over 25%. Similar progress in attaining new customers and increasing freight volumes has been made over the life of the Plan to date (other than with coal).
Steady and at times rapid progress has been made on the enabling parts of the Turnaround Plan, such as new locomotives and wagons, lengthening of the rail ferry and track destressing, but not always effectively.
The 10 Year Turnaround Plan was quickly undermined by a series of adverse events, including:
Earthquakes: 2010 Canterbury earthquake, 2011 Christchurch earthquake, and the 2016 Kaikōura earthquake, resulting in significant infrastructure damage and closure of the Christchurch to Picton line from November 2016 to 15 September 2017
Lengthy severing of the rail ferry link between the North and South Islands when the Aratere lost a propeller in 2013
Significant and lengthy problems with the new DL class locomotives
Pike River Mine disaster, leading to the mine's closure and the loss of revenue that had been anticipated from coal freight
International coal price collapse
Solid Energy, the largest NZ coal mining company, entering voluntary administration in 2015. This was the culmination of a downturn that had begun to appear in 2012–13: significantly less coal being moved from West Coast mines
Major rebuilding after fire damage and seven week closure of key freight route Midland line in 2017
2017 update of the Turnaround Plan
Partially as a response to the events outlined above, in the 2017 budget the government announced a further $450 million in capital funding for KiwiRail, and that the company's operations would be placed under another major review, believed to relate to future funding models. The $450 million was earmarked for repairs following the 2016 Kaikōura earthquake and for further locomotive and rolling stock purchases. As part of the Turnaround Plan's agenda to standardise locomotives and wagons, in 2016 KiwiRail announced it would effectively switch off the NIMT electrification in late 2017 and replace the electric locomotives with an additional eight DL locomotives (additional to the 15 as reported in the 2016 Annual Report).
On 30 October 2018 that capital funding was made available to by the new Labour-led Coalition government to refurbish 15 of the surviving 20 EF locomotives at the Hutt Workshops extending the service life by 10 years for their continued use, in line with the Governments energy and emissions policies, and while the government is also actively considering extending the North Island electrification for the first time since the 1980s.
KiwiRail has made use of the Government's Provincial Growth Fund (PGF). In 2019 KiwiRail signed an agreement with the New Zealand Transport Agency, Palmerston North City Council to construct a road, rail and air distribution centre in Palmerston North, following a $40 million allocation to KiwiRail from the PGF.
New Zealand Rail Plan
In 2019, the government began a "Future of Rail" review, and in December 2019 released a draft New Zealand Rail Plan, outlining changes it proposed making to the rail transport industry and KiwiRail specifically. The draft plan proposes a number of major changes, the most significant being future funding of the rail network through the National Land Transport Fund, and charging rail operators to use the rail network via Track Access Charges. A number of other projects are proposed under the draft plan. They include a new train control centre in Auckland, replacing two Interislander ferries and rolling stock.
On 17 March 2020 KiwiRail released a tender for the supply of new mainline locomotives. 2021 New Zealand budget allocated NZD$722.7 million to purchase new mainline locomotives, shunt locomotives and wagons. In October 2021, Stadler Rail announced it had won the contract to supply 57 new locomotives for KiwiRail. Stadler Rail stated the contract was worth 228 million Euros, or NZD$403 million.
The 2022 budget allocated $661.5 million to KiwiRail, with $312.3 million for improving the national rail network and $349.2 million for completing the replacement of "ageing" locomotives and freight wagons, including up to 29 new light-duty locomotives. The total government investment increases to $8.6 billion.
From Wikipedia’s article on KiwiRail, shared under CC BY-SA 4.0.5