KiwiRail mothballs Napier-to-Gisborne line; govt to spend $4M on upgrade

Tuesday 2nd October 2012

State-owned railway KiwiRail has decided to mothball the loss-making Napier-to-Gisborne line, saying the $4 million cost to reopen the track isn't worth forecast maintenance costs, which are set to rise to $6 million a year.

The railway operator decided against closing the 212 kilometre line completely, as the rail assets have a 10-year lifespan and may be worth reopening if circumstances change in the future, chief executive Jim Quinn said in a statement. Mothballing will cost the state-owned enterprise between $2 million and $4 million to make the line safe, with annual maintenance charges of between $200,000 and $800,000.

The decision comes as Transport Minister Gerry Brownlee announced a $4 million package to upgrade State Highway 2 between Napier and Gisborne to allay concerns about shifting freight between the two cities. The investment will be in improved passing lanes.

The New Zealand Transport Agency didn't expect the decision to have much impact on traffic volumes.

Since the line closure in March, an estimated five truck movements a day have been added to the Napier-Gisborne highway.

"We need to ensure we invest in areas of the network where we are able to grow business to a level it is commercially sustainable, and sometimes that means making hard decisions," Quinn said. "The costs of both running the trains and maintaining the infrastructure would mean an annual cash deficit of between $5 million and $8 million a year."

KiwiRail is on a drive to strip out $200 million in annual spending if it is to meet forecast earnings of $64.6 million by 2013. The railway operator missed its statement of corporate intent revenue target of $737 million, as it posted annual sales of $71.58 million in the latest financial year.

The decision to mothball rather than close the line completely means KiwiRail could reopen the link once major forestry harvesting in Gisborne kicks off in 2019, according to a report on the viability of the line.

In the meantime, however, KiwiRail could not see income from the line rising above $2.5 million annually.

BusinessDesk.co.nz

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