More cash for KiwiRail?

One of the main concerns held by interested observers of KiwiRail's Turnaround Plan has been its ability to fund the necessary capital works required of the plan. 

The Turnaround Plan - known as TAP for short - is KiwiRail's long term plan to create a business capable
of standing on its own two feet financially.  It's a ten year plan for the period 2010 to 2020, and is estimated to ultimately cost $3.1b, in the form of government cash injections and reinvestment of income from the business.

Back in 2010, the government initially stated that it would provide three grants of $250 million each over the first three years of the plan (i.e., $750 million total for 2010-2012 inclusive), after which KiwiRail would need to continue funding the task from its own income.

2013/2014 was to be the first "self funding" year, but numerous observers were skepical of whether or not KiwiRail would be in a position to go it totally alone that soon - and with just cause.  The first three cash injections were spent very quickly, on track work, new locomotives, rolling stock and track maintenance machines, new IT systems and an upgrade of the Aratere rail ferry.  Meanwhile, economic conditions and unforseen natural events resulted in income not rising as much as anticipated.

Earlier this year the government surprised many by announcing a fourth cash injection, this time of $94 million, bringing the total to $844 million.  This wasn't a surprise to KiwiRail though, as the additional funding had been sought, and was granted in response to a request for additional funding.

This begged the question, will the government provide any further funding beyond the current financial year?

Information has now come to light that negotiations for further funding have been taking place over the past few months between KiwiRail management and central government officials.  KiwiRail is seeking $203 million, broken down into two payments, of $81 million for the 2014/2015 financial year, and $122 million for the 2015/2016 financial year.  If these sums are agreed to, it will bring the total cash injection amount to $1.046 billion since 2010.

Photo by Steve McElney, courtesy KiwiRail

As to what it will be spent on, it would seem "more of the same" applies.  Beyond the current eight DL locomotives on order from CNR in China, a further ten are planned to be purchased in 2015.  Then there's yet more flat top container wagons planned, including 175 in 2015, and 200 in 2016.  No doubt the continuing network upgrade will feature in this funding as well.