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KiwiRail to mothball Napier-Gisborne line

2 October 2012

The Napier to Gisborne line is to be mothballed due to the prohibitive costs to both repair storm damage caused earlier this year and maintain the rail line over coming years.

KiwiRail chief executive Jim Quinn says KiwiRail staff had taken a long and hard look at future business prospects for the rail freight line and had determined it unlikely to generate sufficient revenue in the foreseeable future to cover costs.

Freight rail services to Gisborne have been suspended since March after serious storm damage caused several large washouts north of Wairoa.  Reinstatement of the line was expected to cost around $4 million and would take several months to complete.

However ongoing costs to maintain the rail track and structures along it, such as bridges, were likely to rise from the current level of around $2 million a year, to $6 million a year to ensure the line could continue to support freight services.  For example several of the bridges along the route are nearing the end of their expected life and would need replacing.

The $6 million would be a direct subsidy and using 2011/12 operations as a guide this would equate to a subsidy of $37,000 per trip.

In determining its decision, KiwiRail spent considerable time canvassing local business about current and future business opportunities and taken a 10 year future look at the line. 

Mr Quinn says the review indicated revenue on the line could grow from the current level of around $1 million to approximately $2.5 million per annum in future years.

“However, 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.”

For the 2012 financial year to March, the line carried 44,345 tonnes and generated revenue of $1.04 million.  However there was a cash deficit of $2.4 million after operating costs and annual line maintenance costs.

Mr Quinn acknowledged there had been an upturn in volumes carried on the line in the months prior to March, but it still fell well short of making the line financially sustainable.

“We acknowledge the support given by the local businesses and the wider community for retaining rail to the region.  However, 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,” Mr Quinn says.

“Since 2010 the government has invested $750 million in the rail freight business as part of our strategy to get the business operating commercially and on a more sustainable financial footing.”

Mr Quinn says it is as yet unclear what impact the decision would have on staff numbers, although it was likely there would be a small number of job losses.

“We will be working through that process with local staff and the union over the coming weeks,” Mr Quinn says.

Mr Quinn says KiwiRail recognised the strategic importance of maintaining the option to reinstate the line, should a major revenue generating opportunity present itself in the future.

“Mothballing the line, rather than closing it preserves that option,” he says. It allows us to look at opportunities as they evolve.”

KiwiRail and the Government would now work with the region to consider the strategic value the line has to the wider New Zealand economy, including alternative uses for the corridor and how best to realise that value for the good of the New Zealand economy.

KiwiRail also assessed the option of operating rail services between Wairoa and Napier, but this was also discounted as the majority of freight movements were to, or from, Gisborne.  The traffic expected from Wairoa was not enough on its own to sustain services, Mr Quinn says.

KiwiRail worked closely with NZTA to establish impacts on wider transport networks and their advice concludes that ceasing rail services would have a minimal impact on the overall level of service on the highway.

KiwiRail was also working with the Gisborne City Vintage Railway to explore possible options for continued heritage operations in the region.

Additional information for media: 

The full report which formed the basis for the decision can be found here.

Media Contact: Kimberley Brady, Communications Manager, 021 942 519 or 04 498 3219