KiwiRail’s response to request from Hawkes Bay Regional Council

12 March 2015 4:04PM

KiwiRail has written to the Hawke’s Bay Regional Council today declining its request for more time in which to confirm its interest in leasing the mothballed Napier–Gisborne rail line.

In the letter to council chairman Fenton Wilson, KiwiRail cites concerns over the significant number of fundamental outstanding issues yet to be resolved, and signals it will now begin looking at rail enabled tourism ventures as possible users of the line.

KiwiRail has been working with the council and its potential operator for almost two years on options to re-establish a rail operation, KiwiRail chief executive Peter Reidy says. In November last year KiwiRail wrote to the council giving them the option of leasing the line and asking for a decision by the end of February this year.

Meanwhile, KiwiRail has been aware for two years of other parties with an expressed interest in operating tourism ventures on the line, Mr Reidy says.

"We have not progressed any of these options (other than registering that interest), in order to give the Council first preference for leasing the line. We are however reluctant to cause further delay to progressing these discussions.

Mr Reidy said that in a meeting last week with the Council Chairman and Chief Executive, they acknowledged the difficulties they faced in resolving the outstanding issues and developing a viable business case.

In light of that acknowledgment, and the interest expressed by other parties KiwiRail had decided it would not grant the request for more time.

The line will remain mothballed, which leaves the opportunity for it to reopen to rail operation should sufficient freight volumes and/or additional funding be secured to enable a commercially viable operation.

KiwiRail would ensure the Council is kept abreast of other discussions taking place around future uses of the line.

Mr Reidy said the outstanding issues in the business case for the proposed rail operation were significant.

The potential operator had yet to secure long term contracts with guaranteed volumes, with forestry companies, or other cargo owners to provide revenue certainty.

There were no confirmed private investors to fund the establishment of the proposed operating company and to cover the expected shortfall not covered by revenue earned; or suitable operational and risk management expertise identified to manage the proposed rail operation.

Fit for purpose rolling stock had yet to be found that can be made available for use in a timely and cost effective manner (noting KiwiRail has consistently advised it cannot provide suitable wagons).

In addition there was no clarity about the long term plans for maintenance of the Wairoa to Gisborne section of the line and accommodation of Gisborne City Vintage Rail’s requirements.

 

Media Contact: Jenni Austin, 021 961 495