August 15, 2012

KiwiRail unable to fund turnaround plan, says minister

Written by  Richard Worrall
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THE credibility of KiwiRail's $NZ 4.5bn ($US 3.6bn) plan to turn the state-owned railway into a profitable business has taken a major hit after the New Zealand government minister for state-owned enterprises, Mr Tony Ryall cast doubt on KiwiRail's ability to generate the necessary revenue.

Ryall says KiwiRail will not be able to fund its $NZ 3.85bn share of the programme from future profits, as originally envisaged. KiwiRail has struggled to achieve profitability in the wake of the global economic situation and the Christchurch earthquake, which has dampened inter-island freight demand. The government has only committed $NZ 750m towards the total costs of the plan.

Meanwhile KiwiRail has suspended the delivery of the final batch of 20 DL class diesel-electric locomotives it has ordered from CNR Corporation, China, due to problems with mechanical equipment on the locomotives already delivered. The issues range from software glitches in the control system, to faulty bearings causing traction problems as well as cracks in alternator fans and water pipes, and faults with the alternator design.

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