24 Aug 2015

West Coast coal cartage under dispute

8:39 am on 24 August 2015

KiwiRail and Solid Energy are in dispute over the price the miner pays to cart coal from the West Coast.

Huge trucks move high-grade coal from a stockpile at the Stockton Mine near Westport.

KiwiRail and Solid Energy are in dispute over the price of carting coal from the West Coast. Photo: 123RF

The tussle has been going on since before Peter Reidy took over at the helm of the rail operator in March last year.

KiwiRail has said that it believes the pricing for the transport of Solid Energy's coal from the West Coast does not fairly reflect the cost it bears for operating the services.

The dispute has been described to Radio New Zealand as a fight to see which company will book the smaller loss.

Mr Reidy would not go into details of the discussions it had had with Solid Energy, but he said the contract the rail operator had with the miner was an historical issue.

"The contract is not commercial in a number of respects as your volume comes off there is a fixed cost there that we have to keep on supplying.

"That contract was settled many, many years ago and we are in the process of looking to de-risk that whole contract over the West Coast and try and protect our infrastructure we have on the West Coast."

Mr Reidy said the volumes from Solid Energy have dropped from around 2 million tonnes of coal annually to around 1 million, which was a concern because there were a lot of fixed costs KiwiRail had to cover on the coal route whether or not it was carting product.

He said the miner was a big part of KiwiRail's revenue.

"Without Solid it definitely has an impact. We I think have been pragmatic, we have an obligation to make sure that we work with Solid, but at the same time we want to make sure we've got a commercial arrangement.

"We're currently working through that, when you're in voluntary administration they are working with all their creditors and suppliers to try and come up with arrangements and we're just one of them and we're working with them closely."

Labour's state owned enterprise spokesperson Clayton Cosgrove said this was the time for the Government to be asking tough questions of boards.

"Look it sounds like sadly a race to the bottom from both KiwiRail and Solid Energy's point of view and I've always argued for years that ministers need to be taking an active, not a controlling interest."

KiwiRail transports coal from Ngakawau on the West Coast, through the Southern Alps to Lyttelton Port.

Rail and Maritime Transport Union general secretary Wayne Butson said it was concerned about employment and the future of an entire rail line.

"If there's any further scaling back in Solid Energy then actually it's going to have severe implications for that route. We've got track workers that are based in Westport, they haven't been touched to date and we've got track workers based in Greymouth and Otira as well.

Mr Reidy said a lot of money had gone into the coal route line, which he described as "not economic" in the current state of play, but he said KiwiRail did have other growing customers for the line, like Westland Milk.

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