A week or so ago KiwiRail announced that they would be changing the way they operate their business fairly significantly in the future: splitting off the infrastructure side of the business from the freight side to a far greater extent. This is reported on in the KiwiRail newsletter that was distributed at the time: 
There was also a fairly lengthy discussion of the plans on Radio NZ at the time, which is worth a listen. A lot of the focus is on the ‘write down’ of KiwiRail’s assets, but what is of most interest to me is the greater division proposed between the network side of KiwiRail and the rest of what they do. Effectively, it’s a bit of a shift back to the pre-2008 days when you had ONTRACK looking after the network when the trains themselves were still in private ownership. Some people seem a bit afraid that this is the first step towards selling off KiwiRail again, but I think such an outcome is fairly unlikely – the rail business is still quite a long way from being in a position to be profitable enough for anyone to want to buy it.
I think the proposal is a great idea because KiwiRail really has to achieve two quite awkward roles – being both responsible for a key part of the country’s infrastructure while also having to run a profitable freight business. It’s almost like requiring a trucking company to own and manage the roads. Splitting KiwiRail into these two parts will enable each to focus on their job: the freight/passenger side doing what it can to become profitable without having to worry about rather unrelated matters such as being involved in discussions over improving metropolitan rail in Auckland and Wellington. Meanwhile, the infrastructure side won’t have the pressure of being profitable as its key role will be to simply look after the infrastructure of the rail network – getting track access fees from metro rail operators and from the freight side of the business to help fund that task. Funding injections (whether they be from central government or NZTA or local government) to improve the network won’t be muddied by KiwiRail’s freight business. It will just make more sense.
Hopefully it’s also the first step towards looking at our transport infrastructure (roads, rail, coastal shipping) more holistically. In the future perhaps the infrastructure agency could even be rolled into NZTA to create a single agency responsible for our nationally significant transport infrastructure.
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Only the land is going to be held by the NZ Railways Corporation. All the other assets, including the track and other rail infrastructure, will stay with KiwiRail Limited and will therfore have to earn a commercial return. Taking the land out of KiwiRail Limited means that the asset base that has to earn a return is reduced substantially.
Apparently the KiwiRail Board wanted the infrastructure to go to NZRC with the land, but Steven Joyce didn’t agree.
Hmmm… yes it would be better if the infrastructure went to NZRC. It’s going to be messy until that’s done actually I would think.
Once again another damaging disconnect between parts of the rail business. It seems nothing was learned from the disastrous fragmentation of rail ten years ago.
What it doesn’t tell is _why_ the split off of the land?
Is it just to make the financials _look_ different, because nothing really changes.
BTW: is the Express published anywhere? I’ve been wanting to subscribe to it but can’t find where.
Most Express issues end up here: http://www.bettertransport.org.nz/forum/viewtopic.php?f=4&t=1414&start=180
I have the feeling this is more of a way to allow Kiwirail to be sold off, if lines get closed what’s a bet the land will be sold off almost immediately meaning the line can never be reopened.
That would certainly be consistent with Joyce’s reported insistence that the land be the only part that gets spun off into NZRC. Close the line, KR rips up the rails because there’s a lease cost to have a non-revenue generating asset sitting on someone else’s land, and NZRC then sells the land because there’s no point in holding empty land. And I’m sure that Joyce will forbid NZRC from being landlords other than to KR as part of the split.
Whereas if NZRC owned the rails as well, they could just sit on the capital asset since it’s costing almost nothing beyond stopping it becoming overgrown (and thus a fire hazard) and ignore it until there’s future demand. After all, they’d be holding land that has the potential to be rapidly returned to income-generating status through the expedient of fixing any track damage.
Some stray thoughts
* My first guess is that this has been done to improve the presentation of the accounts, and yes, the track should be included as well in the network, not the operations.
* Splitting infrastructure from operations, to pick up from Ian’s point, does not work well in a railway context, although it’s fine in the aviation and maritime environments. The reason for that, is that a railway needs to be subsidised in a way that most ports or airports do not, and under those conditions you do need a Fat Controller of some sort.
Aso, our Admin observed:
In the future perhaps the infrastructure agency could even be rolled into NZTA to create a single agency responsible for our nationally significant transport infrastructure.
This is how it is now done in Sweden. One central agency operates the state highway and railway networks. It also does the national planning & co-ordination for the main airports and ports infrastructure, which of course are operated as indepedent companies (as in New Zealand). My own view, from having worked in an agency which tries to bring this sort of planning together, is that you don’t need to have road network and rail network *operations* in the same agency; but you do need to have the *central planning* in the same agency. This is what the original Transit New Zealand was set up to do, but it was never given the chance to.
A central land transport infrastructure planning organisation would lessen the likelihood of daft plans to duplicate the existing rail network with brand new highways #RoNS. Unless of course under a Minister determined to do just that.
It’s a trap.