THE group chief executive of New Zealand’s national railway KiwiRail doesn’t mince words when describing the importance of the state of change currently being experienced by the country’s rail sector. “It’s going through a significant overhaul, and I’d probably describe it as the most significant since Julius Vogel raised the money to build the thing in the late 1800s,” Mr Greg Miller says.
Rail was one element of the platform the current Labour-led government campaigned on before it was elected in September 2017, and it has since followed through with significant funding to both upgrade and expand the roughly 3700km 1067mm-gauge network stretching across both main islands.
The 10-year government policy statement (GPS) on land transport, released in 2018, signalled the government’s intention to increase investment in rail projects and reduce spending on major highways.
KiwiRail received a major funding boost in the national budget announced in May 2019, with more than $NZ 1bn ($US 652.4m) made available over two years, including $NZ 375m for new rolling stock, including replacing 50 old locomotives and 900 wagons; $NZ 35m to start procurement of two new road and rail-capable Cook Strait ferries; and $NZ 331m towards addressing legacy issues with the network, including upgrading regional lines.
The 2019-20 budget also included up to $NZ 300m for regional rail projects through the Provincial Growth Fund (PGF). From this, KiwiRail has received $205 million to upgrade the North Auckland Line between Swanson in West Auckland and Whangarei, which was facing closure, reopen part of the mothballed line further into Northland from Whangarei, and purchase land for a potential future spur line that would link Northland’s port into the national network. One of the key elements of the investment was lowering the track in tunnels on the North Auckland Line, which will allow hi-cube shipping containers to be transported in and out of Northland by rail.
Budget 2019 also saw an additional $NZ 534m cash injection for the Auckland City Rail Link (CRL) (IRJ October 2018), which is being developed by the government and Auckland council, including $NZ 400m to cover cost escalations and $NZ 134m to cover the cost of increasing station capacity on the line.
Additional funding of $NZ 1.1bn was announced in January this year as part of a $NZ 6.8bn transport infrastructure investment plan, with the bulk of this earmarked for improvements to the Auckland rail network. Specifically, four schemes have been identified:
- $NZ 315m to upgrade the Wiri - Quay Park line in Auckland, including laying a third track to relieve congestion
- $NZ 371m to electrify the 19km Papakura - Pukekohe line, essentially extending the electric metro commuter network
- $NZ 247m to build new stations around Drury in South Auckland, and
- $NZ 211m to upgrade the network in Wellington and Wairarapa, and refurbish coaches for the inter-regional passenger service between Palmerston North and Wellington.
The government allocated $NZ 1.2bn to rail in its 2020 budget released on May 14 as it looked to ease the effects of the deep recession brought on by the coronavirus pandemic.
The funding includes:
- $NZ 421m towards replacing rolling stock that is at the end of its useable life, including funding towards new mainline and short-haul locomotives
- $NZ 246m investment in track and supporting infrastructure, to further address network legacy issues, plus an additional $NZ 148m top up through the National Land Transport Fund (NLTF) for future network investment; and
- $NZ 400m towards the new ferries and associated landside infrastructure.
The $NZ 246m infrastructure funding, spread over two years, includes increased investment in track, bridges, tunnels and signalling around the country, including replacing rails, sleepers and ballast; drainage works; civil works to strengthen railway infrastructure and prevent coastal erosion; and upgrades to the train control system.
December 2019 marked the release of the first draft of the New Zealand Rail Plan, which outlines changes to the way the country’s network is managed and funded. The government announced its intention to establish a new planning and funding framework under the Land Transport Management Act (LTMA), which will enable the development of long-term strategy for the network.
Rail investment has previously been provided on a year-by-year basis through budgets, but the government says this is not suitable for long-life infrastructure assets such as rail. The plan was produced as part of the ongoing Future of Rail Review, which found that parts of the network were facing a “state of managed decline.”
Under the changes, KiwiRail is now required to develop a three-year investment programme for the network, with the Rail Network Investment Programme (RNIP) to also include a 10-year forecast.
Funding for the network will be channelled through the NLTF, in a similar way to New Zealand’s road network, creating a more sustainable and balanced basis for funding both rail and road infrastructure. This funding will be spent on continuous programmes of rail maintenance, renewal and management with additional improvement projects considered where an investment case is demonstrated.
The reasons behind the surge in support for rail in New Zealand are multi-faceted, Miller says, but include a recognition of the important role the sector plays in the wider transport network, and better self-promotion of its strengths. These include its environmentally-friendly credentials, ability to easily scale up at low cost, resilience and ability to support New Zealand’s important export sector.
New Zealand is also dealing with the cost of heavy lorries on the road network. Logging lorries that can weigh around 55 tonnes and high productivity motor vehicles (HPMVs) that can weigh more than 60 tonnes are causing increasing amounts of damage.
“The nation is actually asking itself now, what is the cost of road maintenance - it is really high,” Miller says. “What is the frequency of heavy traffic? What is the degradation? What is the risk profile? And on the other side of the equation, can rail support the distributors of logs, heavy containers and domestic freight on a rail programme that brings some value inter-city? The answer is we can.
“Through Covid what we’re seeing is significantly larger road operators in New Zealand aligning closer with the railway as tenants, as users of our networks.”
Greg Miller
“There’s driver shortages like never seen before and there’s inflationary pressures on the road sector that are unavoidable. So, rail’s coming into vogue, you might say.”
This is not to say that KiwiRail is looking to push road haulers aside, but instead wants to work with them to maximise efficiency while increasing its multi-modal offering. To do this, Miller is drawing on his previous experience as managing director and chief executive of Toll, KiwiRail’s largest rail client and operator of one of the largest road fleets in New Zealand. Toll was the owner of TranzRail until it was sold back to the government in 2008 when KiwiRail was created.
“The story is about integration with road, how we work with the road operators to assist them in their challenge of logistics movement,” he says. “Through Covid what we’re seeing is significantly larger road operators in New Zealand aligning closer with the railway as tenants, as users of our networks, as customers of our intermodal hubs and aligning with us on our commercial vehicle decks on our ships as well. There’s been quite a significant shift in the industry dynamics in the last couple of years especially.”
Much of this export traffic is bound for China, New Zealand’s largest trading partner, and this international partnership goes two ways with KiwiRail benefiting from the strong development of the Chinese rail sector over the past two to three decades, which Miller says has surpassed European and North American standards.
“That Chinese supply base as a whole new provider is at a standard we’ve never seen before as an industry,” he says. “The Belt and Road engineering and mechanical capability, the products for rail that they’re building for metro right through to luxury cars and tourism - that domain has been Bombardier and Stadler and GE’s, it’s been European and North American dominated, but the Chinese supply base has changed a lot technically in provisioning, which has also helped the rail sector to emerge.”
Miller adds that this has resulted in modern locomotives that are more economical compared with the 30 to 40-year-old locomotives KiwiRail is currently operating, with lower environmental emissions and increased tractive effort at a fraction of the fuel consumption, as well as lower maintenance costs.
While the increased investment will have a major impact on the infrastructure and assets KiwiRail owns, operates and manages, Miller says one of the biggest goals within the company currently is developing the internal culture to implement this expansion.
“We’ve got five fantastic years of investment and growth.”
Greg Miller, KiwiRail group cheif exectuive
“I think that the key thing for me is the vision is able to be delivered through an excellent world class team that we’ve assembled,” Miller says. “We have got a very good supply chain-centric, world-class team running this business now. And that’s going to be the difference.”
KiwiRail is also developing a new technology platform to improve staff access to internal operational management, productivity and performance measures in order to improve the level of service provided to customers.
The company also received support in 2019 to proceed with the purchase of two new road-rail ferries to replace the three aging ferries it currently operates across Cook Strait, between the North and South islands. The new ferries will be 220m-long, up from the current 160m, and 30m-wide, up from 20m, doubling rail patronage and commercial vehicle and passenger numbers across the strait. KiwiRail will also be upgrading the terminals with new infrastructure on either side of the strait to accommodate the new vessels.
“All of this is happening along with CRL in Auckland, and all of this is landing by 2025,” Miller explains. “So we’ve got five fantastic years of investment and growth.”
Covid-19
Progress has not been heavily impacted by the Covid-19 pandemic that sent much of the world into lockdown. New Zealand went into lockdown on March 21, with some of the tightest restrictions in the world before they were partially lifted in April and May following the elimination of the virus in the country. New Zealand has since been moved back into partial lockdown following the re-emergence of the virus in the community in August.
Despite revenue halving almost overnight, KiwiRail continued to operate some freight trains as an essential service. Miller says the company was more prepared than others to deal with the effects of the virus due to a simulation prepared just months before the pandemic hit.
“Last November we did a simulation from a safety perspective of how we would run the company if a pandemic hit us that took out our ferries, our passenger business, our metro business and half of our staff,” he says.
“Little did we know that November’s simulation would turn into a reality in March. So we blew the dust off the practice session, which actually had us in really good stead as we saw the potential for a Covid-19-related impact through the backend of February and into March. So our team was pretty well drilled and our serious incident management team responded immediately.”
Miller says it was “uncanny and very important” to have had the drill so close to the outbreak of the virus, and meant the railway had a pre-established plan of how to operate a remote train control centre, separate staff with shift rosters, and manage workshop areas.
“When we pulled out the lessons learned, we had eight or nine out of 10 of the considerations that you’d go into,” he says. “In our significant incident management room we’d plastered the wall with our mimic board that was pre-drafted. So it was a significant step ahead of where we might have been.”
Core to KiwiRail’s businesses is the movement of freight, and this is a sector that is continuing to grow. In response to this, KiwiRail has launched the development of a multi-modal regional freight hub on the outskirts of Palmerston North, in the lower North Island. The city sits on the main trunk line from Auckland to Wellington, and also acts as the interchange with branch lines to Taranaki to the west and Hawkes Bay and Gisborne to the east.
“When we pulled out the lessons learned, we had eight or nine out of 10 of the considerations that you’d go into.”
Greg Miller
Miller says the hub is designed to combine around 11 supply chain industries in a single site with capacity for a log yard, bulk freight silo, container terminal including free trade zone capability for exports, warehousing for freight partners, and KiwiRail’s operations.
The hub is expected to attract $NZ 2-4bn of logistics investment into the Palmerston North area while servicing the entire central and lower North Island.
Miller says the hub could also use automation to increase value, and bring together services including an export centre incorporating staff from the Ministry for Primary Industries (MPI) and Ministry of Agriculture and Forestry (MAF), a Belt and Road consolidation terminal, and freight depot space for other transport operators.
Miller says while the hub is being designed on a large scale, he also foresees the roll out of smaller versions across the country to create a full transport network that can provide value for the next 100 years.
KiwiRail is currently in the process of acquiring the required land before development starts, but has also been in discussions with a number of experts to ensure the hub provides the best value for money. The operator has also been investigating the financial benefits of extending train lengths to 1.5km, including how this would improve its competitiveness with road.
Tourism
While freight currently comprises a large section of KiwiRail’s operation, Miller says there is room to increasingly grow its passenger operation, especially the tourism sector.
Prior to the country shutting its borders due to Covid-19, New Zealand received an average of three and half million international passengers a year, with KiwiRail carrying around a million domestic and international passengers on its tourist services. Miller says he can see this rebounding once tourism begins to reopen, and KiwiRail could benefit from tourists’ reluctance to travel on international cruises by offering rail cruising packages that whisk passengers between hotels on luxury trains. The operator spent a year and a half researching the possibility of introducing glass-topped coaches to improve its passenger experience, and this is still on the table.
In the meantime, the operator is trialling what services it can provide for domestic holidaymakers who can no longer travel overseas.
KiwiRail relaunched its TranzAlpine passenger service between Christchurch and Greymouth in June and sold 15,800 tickets at $NZ 75 per seat within eight days, a record for the company. “We got the train size right, we’ve got the price point right and a lot of people are seeing New Zealand’s ‘staycation’ opportunities,” Miller says.
This was due to be followed by the relaunch of the Northern Explorer between Auckland and Wellington on September 30 and Coastal Pacific services between Picton and Christchurch on October 13, subject to New Zealand returning to “Covid alert level one.”
“The tourism luxury train option I think in the long run could be as big as our freight company,” Miller says. “We’re looking at how we utilise our assets and grow that market, and we’re working with a number of international rail tourism operators on alliances.”
Miller says KiwiRail is also undertaking preliminary discussions with local authorities along the main trunk line to see whether a regional rail service, offering more stops than the tourism-focused Northern Explorer, might be supported.
“We’re aware that many towns and regions would like to have a passenger train serve their area and our initial engagement with stakeholders has been positive,” he says. “We also know that New Zealanders are increasingly interested in reducing their carbon footprint when they travel, and rail offers that opportunity. We’ll work with local councils to come up with a proposition that offers more New Zealanders the chance to choose rail to get around the country.”
Enthusiasm
This interest is evident in the enthusiasm for the new Te Huia Hamilton - Auckland commuter rail service, which is due to launch later this year under a five-year trial. The government is providing $NZ 79.8m towards the $NZ 92.37m cost of establishing the service with Waikato Regional Council funding the balance, including refurbishing 12 passenger coaches for the locomotive-hauled train and limited infrastructure upgrades.
The rebuilt former British Rail Mark 2 coaches have been equipped with new interiors including power sockets and Wi-Fi. Two return services will operate each weekday at peak travel times, with one return service on Saturdays. The service will seat 150 passengers but can be expanded with a fifth coach to accommodate 200 passengers if demand warrants.
The service will link Frankton with Rotokauri on the northern outskirts of Hamilton, before travelling to Huntly and terminating at Papakura in South Auckland. Passengers will have to change to Auckland Transport electric metro services to reach central Auckland.
“We’ll work with local councils to come up with a proposition that offers more New Zealanders the chance to choose rail to get around the country.”
Greg Miller
The build-up to the launch of the new service comes at the same time as the release of a report into the development of a potential high-speed line between Auckland and Hamilton, which found the proposal has merit but requires more investigation.
The Hamilton to Auckland Intercity Connectivity interim indicative business case outlines four scenarios ranging from upgrading and electrifying the existing line to constructing a new 250km/h alignment between the two cities. All scenarios would provide a faster journey time than the Te Huia service, which will take an estimated 2h 30min, and include the construction of an underground station north of Hamilton with five stations along the line.
While it may be some time before high-speed trains become a reality in New Zealand, other proposals have been put forward to introduce rail as an option to a wider range of passengers, including the introduction of an Auckland - Wellington passenger service that is more price-friendly than the tourism-focused Northern Explorer.
Mr Greg Pollock, the CEO of Auckland commuter rail operator Transdev New Zealand, suggested in July that there was a potential market for an overnight sleeper service between the country’s biggest city and its capital, and floated the idea that Transdev could be willing to operate it if KiwiRail was not interested in the proposal.
It may take some encouragement for people to move from their cars to rail, but this will become possible if an attractive proposition is provided. Rail is making a comeback in New Zealand and could be poised to become engrained as a major player in the transport market beside the current major players, road and air.
