25 May 2012

Govt pressuring KiwiRail to lift performance

10:43 pm on 25 May 2012

Official papers show the Government has been pressuring KiwiRail to lift its performance.

The state-owned enterprise is entering the third year of its 10-year turnaround plan.

A year ago, KiwiRail fell $20 million short of its pre-tax earnings target, and it has signalled it will fall $24 to $34 million short of its $139 million goal in this financial year.

Documents obtained under the Official Information Act show that the SOE has been told repeatedly it must get closer to targets.

One report from the Treasury says officials and the KiwiRail board have vigourously challenged management to set and achieve targets that are closer to those proposed in the original turnaround plan.

KiwiRail chief executive Jim Quinn says the past two years have been tougher than expected, and operations have been affected by earthquakes, Pike River, rock falls, a drought and a flood.

The Rail and Maritime Transport Union says the documents illustrate a lack of awareness on the Government's part, as KiwiRail won't be able to turn around years of neglect in just three years.

The documents show KiwiRail might turn to sellilng off assets in a bid to raise money.

In a February letter to the State Owned Enterprises Minister, KiwiRail chairman John Spencer said it is exploring the use of alternative funding mechanisms, including asset-based leasing. That could involve KiwiRail selling off an asset and then leasing it back.

Rail and Maritime Transport Union general secretary Wayne Butson says that would be a mistake, as this was the method used to strip assets when the railways was in private ownership.

But KiwiRail's Jim Quinn says asset based leasing should not be discounted.