Stories Included:
- Tranz Rail signals last day of travel for four services SEP 2001
- Gravy train for patient investors THE EVENING POST, 30 AUG 2001
- Tranz Rail sees 'huge potential' on roads - Annual result 3 AUG 2001
- Tranz Rail plans to close, sell services , 27 JUN 2001
- Tenders in for sale of passenger services: THE EVENING POST, 8 MAR 2001
- Rail at a crossroads THE DOMINION, 23 FEB 2001,
- Longterm Review of changes THE DOMINION, 22 FEB 2001,
- Unloved Tranz Rail doggedly restructures The Independent - 8 February 2001
- Tranz Rail rejects monopoly claims THE EVENING POST, 26 JAN 2001,
- Ferry service problems, THE EVENING POST, 25 JAN 2001
- Fay Richwhite and Wisconsin Central selling, I THE DOMINION, 23 JAN 2001,
- Marlborough Residents vow to fight fast ships in the night THE EVENING POST, 12 DEC 2000,
- Fay Richwhite and Wisconsin Central selling II WAIKATO TIMES, 11 NOV 2000,
- Fay, Richwhite silent on Tranz Rail sale THE DOMINION, 13 NOV 2000,
- East Coast rail (closure) threat DOMINION, 18 NOV 2000,
- BROADSIDE AT FAY RICHWHITE The National Business Review - 27 Oct 2000
- Tranz Rail quits the train business The Independent - 11 October 2000 :
- Restructuring plans THE SOUTHLAND TIMES, 11 OCT 2000,
- Outsourcing plans - 3400 jobs affected THE DOMINION, 11 OCT 2000,
- Freight rival pans rail downsizing THE EVENING POST, 11 OCT 2000,
- Exec Salaries THE DOMINION, 4 OCT 2000,
- Accidents Inquiry report THE PRESS, 8 SEP 2000,
- TRANZ RAIL MOVES TO LIFT ITS VALUE The National Business Review - 25 Aug 2000
- Interisland Pricing and truckies THE PRESS, 1 AUG 2000,
- Accident inquiry hearing THE PRESS, 4 AUG 2000,
- Comparison with SOE Productivity Performances THE PRESS, 21 JUN 2000,
- CEO's landmark retirement The National Business Review - 12 May 2000
- Notes Accidents, ownership and change on the Railways THE DOMINION, 12 MAY 2000,
- Tranz Rail 2000 Result- losses THE DOMINION, 2 FEB 2001,
- Tranzrail 1999 Result THE EVENING POST, 3 FEB 2000,
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New Zealand Herald — business — dialogue — Jul 13 2002 5:00AM
Brian Gaynor: Shares in a downhill train-ride
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Tranz Rail went on the offensive this week after questions were raised about its accounting policies.
The company's comments brought some relief to its battered share price, but left unanswered questions.
Does Tranz Rail have creative accounting policies? Did Wisconsin Central and Fay Richwhite sell investors a pup when they sold out this year? What are the company's long-term sustainable earnings and does it have a future?
Tranz Rail was incorporated on July 7, 1993, and two months later bought New Zealand Rail from the Government for $328.3 million.
The original Tranz Rail shareholders - Fay Richwhite (31.8 per cent), Wisconsin Central (27.3 per cent), Berkshire Fund (27.3 per cent), Alex van Heeren (9.1 per cent) and Richwhite family interests (4.5 per cent) - contributed $107.4 million of equity.
The rest of NZ Rail's purchase price was borrowed against the rail company's assets. This is reflected in the big increase in debt between 1993 and 1994.
In 1995, $91 million of a $100 million capital repayment went to the original shareholders, leaving them with a net equity contribution of $16 million or an average cost of 20c a Tranz Rail share.
Ron Russ was appointed chief financial officer in December 1993, three months after the acquisition of NZ Rail. Russ, who was to play an important role in the group's accounting and financial operations, was previously treasurer of Wisconsin Central Transportation.
One of the first decisions of NZ Rail's new owners was to change the company's accounting policy on track renewals.
Under Government ownership, all track renewals were treated as an expense and deducted against revenue.
The new board treated all track renewals as capital expenditure. Costs incurred in this area were treated as an addition to fixed assets and were not deducted from revenue.
Renewals were then depreciated on a straight-line basis over 40 years. Tracks were not previously depreciated because all costs were charged to revenue as they occurred.
The change had an extremely positive impact on Tranz Rail's reported profit.
Restated profits for the 1992 and 1993 year, shown in the 1996 IPO prospectus, showed net earnings of $80.9 million for the two years under the new accounting policies compared with $53.2 million under the old approach.
Tranz Rail also took a more liberal approach towards depreciation.
The depreciation life of wagons was extended from 25 to 30 years, ships from 18 to 20 years, tunnels and bridges from 45 to 80 years and locomotives from 13 to 23 years.
The longer economic life of these assets led to a dramatic drop in the annual depreciation charge as a percentage of total assets.
In the June 1993 year, the last under Crown ownership, the depreciation charge represented 9.1 per cent of average fixed assets. In the June 2001 year, the charge was down to 6.4 per cent.
Russ also took a fairly aggressive approach towards other forms of capitalisation. His attitude was to capitalise costs unless accounting standards made it absolutely clear that they had to be expensed. This approach is now being widely criticised in the US.
On Wednesday, Tranz Rail revealed it had capitalised $186 million of track renewal since 1993 and charged depreciation of $45 million.
Some of the depreciation relates to track expenditure before 1994 that was retrospectively capitalised after Tranz Rail acquired NZ Rail.
Tranz Rail said: "This treatment is entirely consistent with New Zealand and US accounting standards, and is consistent with treatment applied by comparable international railroad companies."
This statement is highly debatable. Section 4.13 of New Zealand Accounting Standard 28 says repairs must be expensed but expenditure that increases the service potential of a fixed asset can be capitalised.
A few years ago, rotten sleepers were replaced on the Dargaville line because freight trains could not travel at their normal speed.
The cost of the new sleepers was capitalised, but there is a strong argument that this was a repair and should have been expensed against revenue.
Expenditure can be capitalised only when it adds value. The true test of this is whether revenue and profits are increasing as rapidly as the value of fixed assets.
This is not the situation at Tranz Rail. Its fixed asset values have increased 208 per cent since 1992. Revenue has risen by 27 per cent and net profit has fallen over the same period.
Whatever the accounting argument, the commercial reality is that Tranz Rail has capitalised far too much expenditure and its assets are over-valued.
The role of the auditor is important in this area. KPMG has received audit fees of $2.1 million in the eight years since privatisation and $20.5 million for non-audit work.
How can shareholders have full confidence in KPMG when 91 per cent of its Tranz Rail income has come from non-audit work?
Another change made while Russ was chief financial officer was the sale and lease-back of assets. In December 1996, the company sold rolling stock for US$93 million and leased it back for twelve years.
Two years later, the new Aratere ferry was sold for US$55 million and leased back for the same period. The two sales generated a profit of $90 million, amortised over the period of the leases.
But Tranz Rail has also taken on huge lease obligations. On June 30 last year, it had unrecognised profits of $61 million associated with these two deals and lease commitments of $542 million based on the then US$/NZ$ rate.
This amount has fallen because of the rise in the New Zealand dollar, but will still take a huge bite out of earnings.
The sharp drop in Tranz Rail's share price follows the sale of Wisconsin Central's 23.7 per cent stake for $3.70 a share and Fay Richwhite's 14.5 per cent at $3.60 in February, and the resignation two months later of chief financial officer Mark Bloomer, who replaced Russ in February 1999.
But the blowtorch was turned on the company when accounting scandals surfaced on Wall Street and investors started looking at accounting policies round the world, particularly in companies closely associated with the US.
Wisconsin Central and Fay Richwhite have sold shares in a company severely weakened by an over-emphasis on creative financing and accounting and a poor business strategy.
Its financial situation is not strong, but it has received a temporary boost from the $81 million sale of the Auckland Rail Corridor.
Tranz Rail's sustainable earnings are probably far lower than analysts are forecasting. It will have to adopt more realistic accounting and financing procedures and has yet to develop a robust business plan (the good result in 1999 was achieved after a tax credit of $57 million).
Institutional shareholders are fuming over the share price decline but have only themselves to blame. They did not recognise the unreality of Tranz Rail's accounting policies, its huge lease commitments and the absence of independent directors to curtail the self-interest of the controlling shareholders.
The board is still dominated by Wisconsin and Fay Richwhite appointed directors five months after they sold out. Why did the institutions not insist on their resignation and the appointment of strong independent directors, when they bought into Tranz Rail this year?
* Disclosure of interest: none.
* bgaynor@xtra.co.nz
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THE PRESS, 11 JUL 2002, Edition 2, Page 4.
Sack Rail directors: Burkhardt
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Former Tranz Rail chairman Ed Burkhardt has urged a shareholder revolt to change the board at the troubled rail operator.
Mr Burkhardt, ousted in a boardroom coup three years ago, said the directors representing Fay Richwhite and Wisconsin Central interests should have been immediately replaced when the companies sold their controlling stake in February.
"After provoking the management change and adopting the policies that have led to ruination, they managed to get out before the numbers became apparent," said Mr Burkhardt.
"If the market's correct, that board ought to be forced out. If it takes a shareholder revolt to do it, well, that's the way it works."
Tranz Rail has confirmed it is looking for New Zealand-based directors and expects to make an announcement soon.
Yesterday, the company disclosed that its operating profit for the year to June would be $24 million to $26m -- about $10m below analysts' forecasts.
The Tranz Rail announcement came four working days after the Stock Exchange slapped it with a "please explain" notice over its dramatic share-price slide.
The market erupted, and twice marked the stock down savagely to new lows after Tranz Rail said late on Friday that its fourth-quarter earnings would be significantly below expectations. After more details, the shares firmed 10c yesterday to close at 250c.
Institutional holders, many of whom bought in when Fay Richwhite and Wisconsin Central sold out, indicated that they would let the company know they were "disappointed" at its lack of prompt disclosure.
While they were concerned by the big drop in operating profit, they were heartened at the company's statement that its cash position had been improved by around $85 million, allowing it to significantly reduce debt.
Tranz Rail's largest shareholder, Australia's Colonial First State, which has a 13% holding, has delayed plans to increase its stake.
Colonial First State and other institutional holders have been discussing the appointment of new directors with Tranz Rail management.
Fay Richwhite and Wisconsin were part of a consortium which bought Tranz Rail, formerly NZ Rail, from the Government for $400 million in mid-1993.
Tranz Rail is chaired by former Wisconsin Central chairman Robert Wheeler. Other Wisconsin- associated directors on the Tranz Rail board are Thomas Power and Thomas Rissman.
Fay Richwhite founder David Richwhite and former associate Leigh Davis remain as directors.
Shares in Tranz Rail began tumbling in late May. On Tuesday, the shares fell to 235c, at the time, their lowest point since Tranz Rail was privatised in 1993.
Tranz Rail said it had consistently indicated that the benefits of the changes would not become apparent until the 2003 financial year.
It also rejected claims that the company had capitalised routine maintenance expenditure and used it to inflate the book value of its network by more than $300 million.
About 60% of Tranz Rail shares are held by New Zealanders. --NZPA
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______STUFF — BUSINESS — 10 JUL 2002
Tranz Rail says operating profit up to $26 million for 2002
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Tranz Rail is forecasting a profit before restructuring costs of up to $26 million for 2002, about $10 million below expectations.
Tranz Rail's statement to the stock exchange today comes amid fallout from its announcement on Friday that its fourth quarter result would be significantly below expectations.
Shares in Tranz Rail began tumbling in late May, reaching record lows this week before closing today up 10c at $2.50. On Monday, the shares fell to $2.56, then their lowest point since Tranz Rail was privatised in 1993.
The market had been picking an operating profit before reorganisation costs of $36 million, but the actual result would be in the order of between $24 million and $26 million, Tranz Rail managing director Michael Beard said today.
"To put that announcement in perspective, we have consistently indicated that the 2002 financial year will be most affected by the change programme, with the first signs of benefits coming in the 2003 financial year."
Tranz Rail posted a net after-tax profit of $2.8 million for the three months ended March 31, down from the $13.1 million profit recorded previously because of restructuring costs.
Analysts at Multex Global picked Tranz Rail to post a net profit of $27 million for 2002, rising to $55.7 million in 2003.
He said claims in the media yesterday from Tranz Rail critics that the company had "capitalised routine maintenance expenditure and used this to inflate the book value of its track network by more than $300 million since 1993, enabling it to report higher profits" were incorrect.
"Unfortunately, the company's announcement last Friday has resulted in some speculation reported in the financial press that is both erroneous and ill informed," Mr Beard said.
Since 1993 the company had invested a total of $169 million on track renewals and a further $17 million on track destressing.
"Over the same period a depreciation charge of $45 million on track has been applied to Tranz Rail's accounts. This treatment is entirely consistent with New Zealand and United States accounting standards and is consistent with the treatment applied by comparable international railroad companies.
"None of the asset write-downs currently being considered by the company relate to its track infrastructure.
"It should be noted that while the company's 2002 financial year result is below market expectations, we will achieve an operating profit before reorganisation costs of $24 million to $26 million and improve our cash position by around $85 million, as a consequence of which we have significantly reduced the company's debt," he said.
The Market Surveillance Panel is studying the company's response to its "please explain" request, issued last Thursday, after its shares fell significantly.
Credit rating agencies warned they are keeping an eye on Tranz Rail, which is in the process of transforming into a long distance cargo operator, as it struggles to achieve profitability.
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STUFF — THE PRESS — BUSINESS — 3 JUL 2002
Tranz Rail goes to appeal court over search
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Tranz Rail is taking its fight against Commerce Commission tactics to the Court of Appeal.
In March 2001, Commerce Commission investigators obtained a warrant and raided Tranz Rail's headquarters, seizing a large number of documents as part of an investigation into the rail and ferry operator's practices.
The raid was sparked by a complaint by Christchurch businessman Brooke McKenzie, who claimed Tranz Rail forced the Top Cat ferry operation out of business.
The Road Transport Forum has also complained to the commission about Tranz Rail, alleging predatory pricing, collusion, and discriminatory pricing by the company which has 90 percent of the Cook Strait market.
But Tranz Rail took the Commerce Commission to court, claiming its search warrant had not been valid and the scope of documents seized under it was too wide. Tranz Rail had co-operated with the commission, so the warrant had not been necessary, the company argued.
In May, Justice Hammond ruled that the Commerce Commission's warrant was essentially valid but the range of documents taken under it had been too broad.
"And, the overly zealous collection of documents was harmless error, in the sense that (by definition) those documents cannot yield up anything of use in the proceeding," the judge said.
Now the company is going to the Appeal Court, to try to get the High Court's decision that the warrant was valid overturned.
A Tranz Rail spokesman confirmed the company's lawyers had filed an appeal, but declined to comment further. It is expected to be heard on August 7.
The Commerce Commission investigation is continuing.
"Tranz Rail is seeking a stay of judgment to stop us looking at the documents we have but we are continuing to work on it. I couldn't put a time limit on when the inquiry will be complete," a commission spokeswoman said.
Mr McKenzie alleged that Tranz Rail colluded with Tasmanian shipbuilder Incat Australia to obliterate fast-ferry competition on Cook Strait.
Mr McKenzie was a co-founder of the Fast Cat Ferries company that challenged Tranz Rail on the Cook Strait run.
Incat bought into the company in July 1999, but the Top Cat ferry service folded after Tranz Rail leased a rival ferry -- the Lynx -- off Incat Australia to compete on the Cook Strait service.
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© Independent Newspapers Limited 2002, All rights reserved.
New Zealand Herald — news — general — Jun 25 2002 5:00AM
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By CATHY ARONSON transport reporter
Tranz Rail is significantly under-reporting rail track problems and the Land Transport Safety Authority should be given wider powers to monitor the company's safety records, says an independent review.
Tranz Rail experienced 150 broken rails in the 18 months to December but reported only 22 to the authority.
It reported only 29 of 89 heat-buckling incidents, some of which led to derailments.
When the authority learned of the heat-buckling problems, in March, it made Tranz Rail slow trains to 40km/h in warm weather.
Authority chief executive David Wright said it would have enforced the safety restrictions sooner had it known about the problems.
The review, by Australian consultants Halliburton KBR, said the authority should be given more safety information so it could assess potential risks.
A significant number of incidents had not been reported.
Tranz Rail spokesman Alan McDonald said the company had not under-reported problems.
It had reported incidents or accidents but under current legislation was not required to report problems picked up in general maintenance checks.
The Transport Services Licensing Act states that a rail operator should report any accident or incident it is aware of on services it manages.
Mr Wright said the authority would meet Tranz Rail executives to define what should be reported.
He agreed with the review's recommendation that the authority should have stronger powers to monitor Tranz Rail's safety management.
"We have a hands-off approach in New Zealand.
"If we had more information we would have a better indication of risk and could make proactive safety decisions rather than reactive ones."
It was important to have stricter reporting and controls because railway operations in New Zealand were becoming more complex and diverse, he said.
Tranz Rail was contracting out its non-core activities and new operators, such as the Auckland Regional Transport Network, were running passenger train services.
The Ministry of Transport will consider the review in a rail amendment to the Transport Services Licensing Act.
The amendment was drafted after a ministerial inquiry into Tranz Rail in 2000 learned of its poor safety record.
The review shows that Tranz Rail's record on personal safety has significantly improved in the past year - with a 39 per cent reduction in injuries - since it began new safety precautions.
It showed there were no immediate risks to safety under Tranz Rail's new infrastructure maintenance company, Transfield, but Tranz Rail needed a formal performance monitoring system.
The report also raises concerns about the number of redundancies among maintenance staff, and says there should be enough local knowledge for the transition period and for emergencies.
The last stage of the review, to examine the state of the infrastructure,
will be released before the end of the year.
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STUFF — RURAL — 22 JUN 2002
Tranz Rail moves milk to Taranaki
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Tranz Rail carried record volumes of milk - more than 700 million litres - to Taranaki during the past dairy season.
The company's national manager of bulk cargo, Steve Muir, said that it ran freight services four times a day between tanker depots at Longburn in the Manawatu, and Oringi in Hawke's Bay, and the big Whareroa factory near Hawera.
At the peak of the season, the trains were moving up to 3.2 million litres a day.
Two years ago, they carried 553 million litres of milk for the season.
A spokesman for Tranz Rail said additional smaller quantities of milk had been carried between Northland and the Waikato, and between South Canterbury and Southland.
Since the peak of the season some of the company's 66 stainless steel tank wagons had been cleaned out and used to transport the viticulture industry's record harvest of grape juice from vineyards in the South Island to North Island wineries.
Tranz Rail was now overhauling tanks and locomotives in preparation for the next milkflows in August.
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THE EVENING POST, 30 APR 2002, Edition 3, Page 1.
Tranz Rail backtracks on sale
By: BEDFORD Dean
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Tranz Rail has thrown a spanner into negotiations over a joint venture to run Tranz Metro by saying it might want to hang on to the commuter trains after all.
The transport company announced in late 2000 that it was determined to sell the service. But it's rethinking that position since a change in the shareholding of the company.
Wellington Regional Council is on the verge of selecting a joint venture partner to bid for Tranz Metro. But yesterday Tranz Rail said it now wasn't determined to sell, and whether it would do so would depend on price.
But one potential operator of the train service suggested Tranz Rail's comments could be nothing more than talking up the price.
Tranz Rail strategy and development manager William Peet told a Wellington Regional Chamber of Commerce meeting yesterday: "It depends on the price . . . at a low price, no, it's not for sale."
WRC is now saying it's open to a deal with Tranz Rail, but only if it meets criteria already set for its own planned joint venture: that any deal is a long-term commitment, that the company is ready to write big cheques to replace ageing trains, and that there is a commitment to some form of transparency so the council can see how its money is spent.
Tranz Rail isn't committing to all that yet. Wellington's commuter trains are heavily subsidised, both by the regional council and by the Government through Transfund. Anyone ending up in control of the trains, and wanting long-term funding, would need to have a deal with the regional council.
Tranz Rail change manager Jeff Heisler told yesterday's meeting that management changes meant the company had been able to improve its efficiency in a way it hadn't anticipated. The emphasis had been on freight services so far, and attention was now going back on passenger services.
It was now committed to waiting for the council to go through the processes it was following.
He said the company was interested in looking at alternatives, including different forms of contracts to that which it currently had with the regional council.
Tranz Rail's change of position may be linked to its change in shareholding. The major shareholders which ordered the fire sale, Wisconsin Rail and Fay Richwhite, are both now out of the picture and, since then, some analysts have questioned whether Tranz Rail wants to cut off so many revenue streams.
Regional council deputy chairman Terry McDavitt said today he believed the council would now have to talk to Tranz Rail, but equally the council had to make progress with its own negotiations on a joint venture partner.
The council is still in discussions with three potential joint venture partners: Connex, Stagecoach and Transdev. Connex couldn't be reached for comment. Transdev representative Bruce Kohn said there was an element of "pre-negotiation price-setting" in Tranz Rail's comments.
Stagecoach chairman Ross Martin said he didn't agree that the company was worth a lot. He said it was "a bunch of falling down trains".
Both Transdev and Stagecoach said they had plans to improve the rail services and would continue to negotiate.
The region's mayors are still hoping to pursue alternatives to the joint
venture. Wellington Mayor Kerry Prendergast said she wasn't opposed to a new
contract with Tranz Rail as long as it was an improved contract.
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THE PRESS, 27 MAR 2002, Edition 2, Page 6.
Short reprieve for 124 Tranz Rail staff
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WELLINGTON -- Two-thirds of 184 Tranz Rail maintenance staff due to be laid off on Friday have been given a reprieve while the risk to rail safety of such losses is reviewed, says the Rail and Maritime Union.
Secretary Wayne Butson said about 60 people employed at Lower Hutt's Woburn Railway workshops finished work after the transfer of locomotive maintenance work to international engineering conglomerate Alstom, which is now operating the workshops. But the 124 track maintenance staff declared redundant by Tranz Rail had been re-employed on temporary contracts pending a review of the adequacy of track maintenance.
The review is being carried out by Australian consultants Halliburton KBR for the Land Transport Safety Authority (LTSA) before it approves a variation of Tranz Rail's operating licence to allow track maintenance to be contracted to Transfield Services.
Late last year Tranz Rail announced all track maintenance was being transferred to Transfield on a three- year, $150 million contract. About a quarter of the 500 track maintenance staff were given notice.
However, concerns about maintenance prompted an inquiry by the LTSA, which would not approve a variation of Tranz Rail's operating licence until it was satisfied there were no safety implications from the redundancies.
Mr Butson said that, pending the outcome of this, Transfield would take on the redundant staff for between three and six months. --NZPA
Supplied by New Zealand Press Association
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STUFF — BUSINESS — 7 FEB 2002
Tranz Rail posts $43.3 million profit
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BREAKING NEWS
Tranz Rail Holdings has reported a net profit of $43.3 million for the six months to December 31, boosted mainly by several asset sales.
The national rail and ferry operator, which has been going through a major restructuring, made a $50 million improvement on the same period a year before, when it made a $6.7 million net loss.
No dividend was declared.
Boosting the profit was the sale of Tranz Rail's Auckland rail corridor back to the Government ($58.9 million) and the Tranz Scenic long distance passenger business ($5.8 million).
It also includes a $14.1 million provision created at the end of last year to cover redundancies and costs associated with the contracting out of some of Tranz Rail's engineering functions which will take place in the next quarter.
Chief financial officer Mark Bloomer said Tranz Rail had made excellent progress on its restructuring programme announced in October 2000.
"Most of the projects have been completed or will be concluded in the latter half of this financial year, allowing the company to start the next financial year with a clean slate," he said in a statement.
The plan involves selling certain non-core businesses and assets and rationalising its core freight operations through its rail, distribution and ferry services.
Sales revenue for the half year was $366.8 million, compared with $305.6 million in the previous corresponding period.
Operating surplus before unusual items and tax was $2.550 million compared to $5.746 million.
Tranz Rail's quarterly profit also improved. For the three months to December, the company made a net profit before abnormals of $12.5 million, up one million on the same period a year ago.
In selling its Tranz Scenic business, the company surprised analysts by buying back a half stake in the business, going into partnership with an Australian rail company.
Other changes include a shake-up of its freight operations. The company has introduced a year-round freight capable fast-ferry service, and re-engineered the entire rail freight business around fixed capacity and scheduled train services.
Mr Bloomer said such changes had involved some pain.
"For example, we have had to take a hard look at some of our freight business to ensure that we were operating profitable services. This has been particularly so in forestry, where we have rationalised low-margin traffic that was not providing a sufficient return."
Total freight revenue declined by 4.3 percent on the same period the year before.
A weaker economy and decline in forestry revenue were blamed for lower volumes of manufactured product, but offset by a revenue gain from commercial vehicle traffic using the ferries.
Mr Bloomer said the second half of the financial year would focus on bedding in Tranz Rail's new containerised freight services which were already improving efficiency.
The move means freight is lifted on and off flat-top wagons in containers, reducing the need for shunting of wagons.
It would also concentrate on progressing the sale of its Tranz Metro rail passenger services in Wellington.
Tranz Rail shares last traded at $3.95, down 1c.
Supplied by New Zealand Newspapers Association
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New Zealand Herald — business — transport — Apr 20 2002 5:00AM
Tranz Rail freight rates soar
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By DANIEL RIORDAN transport writer
Tranz Rail is seeking hefty increases in freight charges - in some cases over 50 per cent - adding to the pressures business is facing from other transport modes.
Tranz Rail negotiates individual contracts with each major customer, with charges set for fixed periods, typically six or 12 months.
Fletcher Forests transport manager Doug Robertson said his company, which last year moved about two million tonnes of logs by rail, recently renegotiated its contract. He declined to say what increase Fletcher Forests had agreed to.
Weekend Business has heard of customers being asked to pay 30 per cent to 40 per cent more for their new freight contracts.
Robertson said Tranz Rail had been seeking increases of 50 per cent or more in some cases.
He said Tranz Rail was trying to justify the increases on the basis of returns to its shareholders, and sustaining its business.
Fletcher Forests has the option of moving more of its logs by road (it sends about three million tonnes that way), although Robertson declined to say if the company was likely to do that.
He noted that 10 years ago disputes between Tranz Rail and its forestry customers led to a complete switch to road.
A Tranz Rail spokesman said the company did not discuss contract negotiations or the state of existing contracts, and declined to say what kind of overall increases Tranz Rail was looking for.
But he referred to comments by managing director Michael Beard at December's annual meeting, when he talked of lifting service levels alongside any rate increases.
Businesses seeking to move freight by rail, air and sea are having a rough time lately.
South Island exporters have been hit by Air New Zealand's reduction in freight capacity out of Christchurch, which has also affected capacity out of Auckland.
Maintenance on Auckland Airport's runway, due to be finished next month, has also reduced the fuel and freight capacity of some planes. And transtasman shipping companies on Thursday signalled a new series of price rises, some as much as 85 per cent, for the fuel-charge component of their fees, as well as lifting their emergency bunker surcharges. The rises reflect world oil prices.
Although analysts are bullish on Tranz Rail's prospects as it comes out of its 18-month restructuring, credit rating agency Moody's last month changed its outlook on the company from stable to negative, citing a weaker operating environment and a disappointing interim profit. Moody's said the next 12 to 18 months would be critical for the company as it sought to lift its profitability.
Tranz Rail is also battling with Solid Energy, which is barging coal from the West Coast to Lyttelton and sending the bill to the rail company.
Solid Energy says Tranz Rail cannot provide enough capacity and there is no choice but to barge the rest.
Solid Energy chief executive Don Elder said this week that Tranz Rail would have to pay the "substantial" cost of barging, as required in its contract.
Tranz Rail replied that it had had to cancel 27 trains since January because of washouts and was spending $3 million on improving the lines.
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STUFF — THE EVENING POST — BUSINESS — 21 FEB 2002
Tranz Rail cornerstone stake sells
By PHIL LOVE
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Tranz Rail's share price sprang to life this morning as the sale of Canadian National Rail's cornerstone stake of 23.7 per cent was confirmed.
The 28.7 million shares were sold at $3.70 each, 10c above yesterday's closing price, which brokers said was a good price.
Tranz Rail stock surged 25c to $3.85 shortly after the news of the sale.
Brokers said it appeared the shares had been bought by a range of local and overseas institutions, and there was no cornerstone shareholder who stepped in. The sale was done by broker JB Were.
ABN Amro broker Nigel Scott said it was a good transaction for Tranz Rail and for the market. The stronger-than-expected price had been a mild surprise.
"Clearly there was demand there and it was well marketed," Mr Scott said.
The stock would become more attractive now that the shares weren't so tightly held.
Today's purchase price is 10c more than the $3.60 a share fetched for the 14 per cent Tranz Rail stake sold a fortnight ago by merchant bankers Fay Richwhite to a range of institutions and pension funds in a private placement.
But it's not as if Geneva-based Fay Richwhite has been short changed.
The merchant bank has been the recipient of hundreds of millions of dollars in capital payments from the rail company since buying it in a consortium from the Government for $400 million in 1993.
Tranz Rail's share register has had a clean-out in the last couple of years with the departure of long-term investors, United States' based investment group Berkshire Fund and high-profile businessman Alex van Heeren. Mr van Heeren owns Huka Lodge, near Taupo.
Tranz Rail, which is now in the final throes of its overhaul into a freight-and-ferry business, still has a Wellington flavour even though its head office is now in Auckland.
Wellington-based infrastructure investor Infratil owns 7.2 per cent of Tranz Rail; it is understood not to have increased its stake despite a swarm of shares being up for grabs.
As part of Tranz Rail's restructure, Wellington commuter business Tranz Metro has yet to be sold. Wellington Regional Council is looking for a partner to buy the Wellington operation, and that's likely to be finalised before June.
Brokers say investors, particularly retail investors in New Zealand, are still shy of investing in Tranz Rail.
One broker said investors were waiting for the overhaul to finish.
"They (investors) like certainty, they don't like a lot of risk."
Since Tranz Rail's share price reached a high of $9 in mid-1997, it's been a poor performer.
Tranz Rail expects to benefit from an the upsurge in log exports over the
next 10 years. It's a preferred vehicle for transporting logs to port companies
such as Wellington's CentrePort and Port of Tauranga.
______________________________
THE PRESS, 14 DEC 2001, Edition 2, Page 14.
Tranz Rail deal to let services
By: CLARIDGE Anna
--------------------------------------------------------------------------------
Tranz Rail has appointed international companies Transfield Services and Alstom New Zealand to provide infrastructure and motive power services to its rail business.
Transfield Services has secured a three-year $150 million contract to provide infrastructure services (track maintenance, overhead lines, points) to Tranz Rail, and Alstom New Zealand has a seven-year $200m contract to provide locomotive services.
Tranz Rail managing director Michael Beard said the new rail business partners would bring fresh skills, talent, technology, and attitude to rail business in New Zealand.
"The injection of technology, and the service and attitude changes associated with performance-driven contracts, will bring significant benefits to both Tranz Rail and its customers.
"The training opportunities available, and the chance to work with the latest technological developments, should give a fresh impetus and enthusiasm to staff working with our new partners," he said.
Tranz Rail expected total annual savings of about 10 per cent because of the out-sourcing initiatives, Mr Beard said.
Some job losses would occur because of the changes, although most of the 800 staff employed in the infrastructure and locomotive power activities would be offered jobs by the new contractors.
Details of the redundancies should be available before Christmas, Mr Beard said.
The appointments follow Tranz Rail's decision to sell the Auckland rail corridor to the Crown for $81m and the sale of Tranz Rail's long- distance passenger business for $33m.
"We are effectively creating a new rail industry that is no longer run by one vertically integrated business -- Tranz Rail. We will soon have separate providers of infrastructure and locomotive power, and we are still working through plans to out-source our wagon engineering."
Alstom New Zealand managing director Geoff Huntsaid international interest in the contract had been intense.
"It introduces the New Zealand rolling stock maintenance and servicing industry to the international Alstom network, which includes everything from the servicing contract for the London underground passenger trains, to locomotives similar to Tranz Rail's in Mexico and North America."
______________________________________________________
THE DOMINION, 25 JAN 2002, Edition 2, Page 2.
Tranz Rail jobs cuts `threaten safety'
By: RUSCOE Kim
--------------------------------------------------------------------------------
TRANZ RAIL'S decision to cut 60 of its Lower Hutt locomotive workshop staff threatens rail safety, says Green Party transport spokesman Sue Kedgley.
"Tranz Rail is cutting corners to answer to its shareholders and, in the process, it may be risking public safety," she said.
Tranz Rail announced on Wednesday that staff at the Woburn workshop were to be cut from about 180 to 120 at the end of next month.
Its locomotive fleet was to be reduced and maintenance services contracted out. Nine Dunedin staff were also to be laid off.
Ms Kedgley said the Government should negotiate to take back ownership of railways. "If the rail network was transferred into government ownership, track safety could be given high priority. Private operators could be left to run services, as is the case with roads."
Ms Kedgley called on the Land Transport Safety Authority to investigate concerns raised by the Rail and Maritime Transport Union that Tranz Rail did not have enough staff to deal with routine track maintenance and that its plans to slash maintenance crews could jeopardise safety.
Tranz Rail spokesman Alan McDonald said that the affected staff maintained locomotives only.
He said staff at the Hutt locomotive workshop did not work on railway tracks.
However, Tranz Rail and its new track infrastructure contractor, Transfield Services, were in the process of reviewing track maintenance staff numbers, he said.
Although numbers had not been confirmed, they would be reduced, with maintenance staff being cut from about 60 to 50 in the greater Wellington region.
The number of track inspectors would remain the same.
Mr McDonald said Tranz Rail expected to improve its safety record considerably by contracting the work out to specialists who had access to greater resources.
LTSA spokesman Andy Knackstedt said Tranz Rail was required to comply with an approved safety system and to show how it would meet the required standards.
"That system is audited regularly and we will continue to ensure they
comply with that system," he said.
_______________________________
STUFF — BUSINESS — 13 DEC 2001
Tranz Rail outsources service contracts
--------------------------------------------------------------------------------
Tranz Rail today contracted out its infrastructure and motion power services to Transfield Services and Alstom NZ.
Under today's deal, Transfield has secured a three-year $150 million contract to provide track maintenance, overhead line and point services to the rail operator, while Alstom has a $200 million, seven-year contract to offer locomotive services.
Tranz Rail is in the process of restructuring its business to focus on long distance freight services.
Today's announcement follows hard on the heels of a decision to sell the company's Auckland rail corridor to the Government for $81 million and the sale of its long-distance passenger business to Don Gibson and Gary McDonald, the principals of Australia's West Coast Railway (WCR), for $33 million.
"We are effectively creating a new rail industry that is no longer run by one vertically integrated business," Tranz Rail chief executive Michael Beard said.
The company is working on plans to outsource its wagon engineering division.
Mr Beard said Tranz Rail expected total annual savings of around 10 percent as a result of today's outsourcing initiatives.
Some job losses will occur as a result of today's announcement, Mr Beard said, although most of the 800 staff employed in the infrastructure and locomotive power operations would be offered employment by the new contractors.
Details of the redundancies should be available before Christmas, he said.
Share in Tranz Rail last traded down 7 cents at $4.08.
______________________________________________________
New Zealand Herald — business — transport — Dec 4 2001 5:00AM
Tranz Rail surprises analysts
--------------------------------------------------------------------------------
By DANIEL RIORDAN transport writer
Tranz Rail's move to take a 50 per cent stake in the joint venture that will run its Tranz Scenic operations has surprised some in the investment community, given the company's commitment to quitting passenger operations.
The rail company on Friday sealed the sale of its long-distance passenger business to Don Gibson and Gary McDonald, the principals of Australia's West Coast Railway (WCR), for $33 million.
Mr Gibson and Mr McDonald will become equal partners with Tranz Rail in a new company which will take over Tranz Scenic's operations this month. Each partner will contribute $5 million to the new company. The remaining $23 million will be financed by the ASB Bank.
The joint venture will manage and operate five Tranz Scenic routes and will own all of Tranz Rail's long-distance passenger rolling stock.
Tranz Rail will have board representation but no active management role.
Tranz Rail spokesman Alan McDonald said the company had never put a figure on the share it would take of the joint venture.
He said it took as much as it did because it saw the financial benefit it would bring.
However, investment analysts said they were surprised Tranz Rail took such a large stake, given that it was quitting passenger operations in favour of freight.
Mr Gibson said France-based rail operator Connex was interested in the deal but pulled out after it took a significant direct stake in WCR.
"The gap left had to be filled up - I think Tranz Rail would rather have less than it got."
Mr Gibson said WCR would look to build on Tranz Scenic's existing success and develop new routes.
CS First Boston analyst Andrew Mortimer said he was surprised at the level of equity retained by Tranz Rail. He had expected a minority position.
He said the price of $33 million ($28 million of which goes to Tranz Rail) was close to expectations and he was waiting to hear more details on track access arrangements. Mr Mortimer valued the shares at $4.39.
Another analyst with a leading broking house, who asked not to be named, said he was also surprised at the size of Tranz Rail's stake.
The sale price was slightly above his expectations and he valued the shares at $4.50.
Tranz Rail shares closed 5c higher yesterday at $4.15.
_____________________________________________
Gravy train for patient investors THE EVENING POST, 30 AUG 2001, Edition 3, Page 9.
By: ROBSON Toby
--------------------------------------------------------------------------------
Tranz Rail's long suffering shareholders are finally seeing their investment heading in the right direction and analysts are picking it could go higher.
Tranz Rail shares jumped 20c to a year-high of $4.50 yesterday after the Government announced it would be making a decision on the sale of the Auckland rail corridor tomorrow. Today the share price was down 5c to $4.45.
Former State-owned Tranz Rail's shares listed at $6.19 in 1993 but have languished since 1997.
Rob Mercer, Forsyth Barr's head of research, said Tranz Rail's future looked bright and the share price still had room to move.
"We certainly don't think it is expensive. They've had a difficult year, but the outlook now is pretty encouraging," he said.
Tranz Rail had benefited from recovery of earnings and restructuring assets, he said.
It has been restructuring its operations to focus on its freight business and looking to get out of commuter transport, recently selling its long-distance passenger service Tranz Scenic to Aussie company West Coast Rail.
Macquarie Equities senior investment analyst Arthur Lim agreed Tranz Rail's prospects were positive, with further corridor sales, including Wellington's, likely in the future.
The Government has not ruled out buying back the national rail corridors, which would include Wellington.
But Mr Lim said the share price had probably done its dash for now and there was unlikely to be another big reaction after the sale is announced tomorrow.
The market had known about the sale of the lease for a long time, but investors had waited until now to buy the shares, he said.
"The New Zealand market is infamous for buying everything at the very last minute."
Analysts are unsure what price the Government will pay for the Auckland corridor, but agree Tranz Rail is in a strong bargaining position.
The Government is committed to the $261 million Britomart project to alleviate growing traffic congestion in the Auckland region.
--------------------
CAPTION:
RUNAWAY TRAIN
Tranz Rail's share price has soared
to a year-high pending the sale of its lease on the Auckland rail corridor.
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: RAIL TRANSPORT ADMINISTRATION
; RAIL TRANSPORT ; STOCK EXCHANGE
© Wellington Newspapers Limited 2001, All rights reserved.
Tranz Rail sees 'huge potential' on roads - Annual result 3 AUG 2001
--------------------------------------------------------------------------------
Tranz Rail's road transport business already accounted for about one-third of the company's freight revenues and had "huge potential to grow", Tranz Rail chief financial officer Mark Bloomer said yesterday.
Tranz Rail barely broke even for the year, making just $1 million before a $4 million tax boost, on revenues of more than $600 million.
Tranz Rail came under fire last week from road transport operator Mainfreight for poaching Mainfreight drivers and managers and for allegedly running down its rail network in preference to road. However, at yesterday's Tranz Rail annual profit announcement Mr Bloomer said the road division had never been allowed to operate "mode neutrally" in the past and that as a result both road (or distribution) and rail divisions had lost money.
"The rail business can't make money going after distribution type business," he said.
"However, once the distribution business, which tends to be shorter haul, and smaller quantities are consolidated, it does use rail as a solution. But it has to be consolidated by the distribution first so that the fact that the distribution business is growing really does not have a negative impact on the rail business. In fact, if it was taking business away from the rail business it would be business that the rail business wasn't doing well at and was probably losing money from anyway."
Mr Bloomer declined to say what Tranz Rail's road income projections were but said there was potential to grow "quite substantially". The company's Tranz Link road business employed about 250 owner-drivers. That had not changed over the past year when the "improved focus" on the business had begun.
Tranz Rail reported yesterday a much reduced after-tax profit for the year to June of $5.6 million though total revenue of $628.4 million was a 5.7 per cent increase on the 2000 result.
Operating profit before abnormals however was down $25.6 million to $45.2 million and after abnormals $46.9 million or 36.2 per cent down on last year's $70.8 million. Interest and finance costs of $22.9 million left a net profit of $1 million swollen to $5.6 million by tax losses.
Mr Bloomer said the result was within market expectations.
The company had gone through significant restructuring that was ongoing, he said, with the head office shifting from Wellington, and "reconfiguration" of the inter-island ferry service.
Both freight and passenger revenue increased, with freight up 3.9 per cent to $463.5 million and passenger revenue up 13.2 per cent to $143.9 million. The increase in passenger revenue came from more people using both ferry and rail services, Mr Bloomer said, along with a fare increase.
Tranz Rail has an agreement with Australian company West Coast Rail to sell some of its passenger services that should be finalised next month and will close the remainder unless West Coast decides to take them up.
Revenue was marginally up in most freight areas though forestry haulage fell 7.4 per cent to $73 million and manufactured revenue 6.3 per cent to $71.5 million.
Price increases masked some fall-off in tonnages, Mr Bloomer said, with manufactured goods tonnage down about 15 per cent.
Mr Bloomer said rationalisation of rail operations was continuing, with new methods set to reduce the number of locomotives to 115 by the end of the year. Wagon numbers would be cut to 3400 from 5300 over the next 12 months. The number of sidings would be cut from 1100 to 300.
The company had a shortlist of 10 companies to take over key maintenance functions along with their 1100 employees.
There should be "good savings" from the move, Mr Bloomer said.
Tranz Rail was still negotiating with the Government about the sale of the Auckland rail corridor and while the original target date of the end of this month could be met, there was no guarantee this would happen, he said.
The company had deferred the sale
of Wellington Metro till the Auckland outcome was known.
--------------------------------------------------------------------------------
© Independent Newspapers
Limited 2001, All rights reserved.
Tranz Rail signals
last day of travel for four services
STUFF — THE DOMINION — HAWKE'S
BAY — 1 SEP 2001
--------------------------------------------------------------------------------
Tranz Rail nailed down the coffin on four passenger services yesterday saying they will end on October 4.
The national rail company is selling passenger services and retreating to its freight business and inter-island services.
The services closing are the Wellington-Palmerston North-Napier service (Bay Express), the Tauranga-Hamilton-Auckland service (Kaimai Express), the Hamilton-Auckland service (Waikato Connection) and the Rotorua Auckland service (Geyserland Express). The lines will still be used for freight.
The axe has also been hanging over the Southerner, the Christchurch to Invercargill service, since Tranz Rail announced the sale of some passenger services to West Coast Railway, an Australian company.
A spokeswoman for Transport Minister Mark Gosche said the Government wanted more time so South Island regional authorities could examine the possibility of subsidising the Southerner.
Tranz Rail and the Government
had failed to reach a deal over the sale of the Auckland rail corridor to
the regional councils in Auckland by yesterday's deadline. The purchase of
the Overlander, the Northerner, the Coastal Pacific and the TranzAlpine was
still to be settled, Tranz Rail said.
--------------------------------------------------------------------------------
© Independent Newspapers
Limited 2001, All rights reserved.
Former
boss slams Tranz Rail management
STUFF — THE EVENING POST —
BUSINESS — 7 SEP 2001
-------------------------------------------------------------------------------
Critics are baying for Tranz Rail's
blood today with a former chairman calling its management incompetent and
the Greens accusing the company of "sabotaging" the rail system.
The Evening Post revealed yesterday that three aging two-carriage Wellington commuter units had been withdrawn in three months, increasing the likelihood of service cuts as spare capacity dwindles. Tranz Rail wants to sell the commuter service and won't pay for units to be replaced. Wellington Regional Council wants to buy the service but needs a law change to allow it to do so.
Former Tranz Rail chairman Ed Burkhardt said current management was providing "the worst of all worlds" with service suffering while financial performance also lagged.
In a recent e-mail, Mr Burkhardt said Tranz Rail's current management had "no competency in running railways".
"Their move to hive off the passenger service will simply weaken the overall railway industry in New Zealand by creating corporate barriers to what should be integrated management responsibility."
Ironically, the reorganisation was also a financial flop, Mr Burkhardt said. As a shareholder he was seeing progressively weaker financial returns while the New Zealand economy was quite robust.
Mr Burkhardt said it was sad that privatisation would be blamed for problems with the rail service, when the real problem was "poor management".
Mr Burkhardt has been a critic of Tranz Rail and its major shareholder, US company Wisconsin Rail, since he was ousted from both boards two years ago. Politicians have also criticised Tranz Rail.
Green Party co-leader Jeanette Fitzsimons said Tranz Rail was "basically sabotaging New Zealand's rail system (and) holding a gun to the head of central and local government".
Wellington list MP Sue Kedgley said the Green Party would like the Government to buy the railway tracks and also supports Wellington Regional Council buying the passenger trains.
Ohariu-Belmont MP and United Future NZ leader Peter Dunne is also critical of the Government taking so long to resolve the issue. This was the "worst nightmare" come true and the Government should be giving priority to resolving the problems of the biggest commuter train network in the country, she said.
Two Wellington mayoral candidates,
Crs Mary Varnham and Andy Foster, are calling for the regional council plan
to be supported by the region's other councils. Currently, only Wairarapa
mayors support the regional council's plan. Other mayors are yet to be convinced
and have asked for more study of the council's plan.
--------------------------------------------------------------------------------
© Independent Newspapers
Limited 2001, All rights reserved.
Tenders
close for trains THE EVENING POST, 8 MAR 2001
Edition 3, Page
15.
By: SCHOUTEN Hank
Tranz Rail's move to rid itself
of passengers is about to get its first big shunt, with tenders closing tomorrow
for its long-distance train services.
As many as 10 overseas and domestic
companies are understood to be interested in buying the eight Tranz Scenic
services, which are being offered in one package by Tranz Rail. It called
for expressions of interest last October.
It is understood about 10 parties
have been through the due diligence process which entitled them to look closely
at TranzRail's books.
A sale announcement could be made
within three weeks.
The Tranz Scenic package includes
the daily Northerner and Overlander services between Wellington and Auckland,
the Wellington-Napier Bay Express, the Auckland-Tauranga Kaimai Express, the
Geyserland to Rotorua, the Southerner main trunk service between Christchurch
and Invercargill, the Tranz Coastal between Picton and Christchurch, and the
Tranz Alpine from Christchurch to the West Coast.
These last two scenic services
are seen as the "stars", as Tranz Rail regards them as premium rides offering
high-class trips for tourists.
They are in a high-value market
compared with the other long-distance services which compete head-on with
air and road transport, a battle which rail has been losing for decades.
Tranz Rail claim its Tranz Scenic
services carry 465,000 passengers a year, providing revenue of $20-30 million.
Profitability figures are not available.
The package on offer includes between
10 and 15 DC class locomotives, 57 carriages and 50 second-hand former British
Rail Intercity carriages which are awaiting refurbishment at Woburn railway
workshops in Lower Hutt.
Also on offer, if wanted, are the
Christchurch, Palmerston North and Hamilton railway stations.
About 100 Tranz Rail staff employed
specifically on Tranz Scenic services are expected to be taken on by the new
owner.
In its bid to concentrate solely
on its more lucrative freight business, Tranz Rail also wants to dispose of
its Wellington and Auckland commuter rail services.
These include the units on the
Hutt, Kapiti and Johnsonville lines, and the daily commuter runs from Palmerston
North and Masterton.
The future ownership and operation
of these services is the subject of continuing discussion with Wellington
Regional Council.
Section: BUSINESS
Topics: PASSENGER TRAINS ; RAIL
TRANSPORT ADMINISTRATION
© Wellington Newspapers Limited 2001, All rights reserved.
_________________________________________________________
Tranz Rail plans to close, sell services THE PRESS, 27 JUN 2001, Edition 2, Page 1.
By: MOFFAT Andrew
--------------------------------------------------------------------------------
The axe hangs over the century-old rail service between Christchurch and Invercargill, as Tranz Rail divests itself of passenger services.
Tranz Rail yesterday announced it would close four of its nine Tranz Scenic passenger services, including the Southerner, and sell the remaining five services to Melbourne-based West Coast Railway (WCR).
The TranzAlpine service between Christchurch and Greymouth, and the TranzCoastal service between Christchurch and Picton are among the services being sold.
Tranz Rail said the Southerner was expected to cease operation within two months, once the WCR deal was finalised. About 80 Tranz Rail jobs would go, but all staff would be offered employment with West Coast Rail.
Tranz Rail managing director Michael Beard said all nine passenger services had been offered for sale, but no buyers had been found for four services, including the Southerner.
"It is sad to be closing services that have been there for 100 years.
"You won't be able to get the train from Christchurch to Dunedin any more, but we're not pulling up any tracks or closing any lines," Mr Beard said.
"Tranz Rail will be focusing its efforts on its freight operations.
"The proceeds of this sale will be used to pay off loans, and put back into locomotives, rolling stock, and tracks."
Passengers arriving in Christchurch yesterday said the demise of the Southerner was a cruel blow.
Joan Mann, a rail enthusiast, who has made the Dunedin to Christchurch journey many times, said she would be upset to lose the service.
"I will miss it very much. It's my way to travel," she said.
Mrs Mann said it looked as if the writing was on the wall for the Southerner, but she was still hoping for the best.
Bill and Eleanor Hart said losing the rail link would be a further blow to the south.
"I have had a gutsful of everyone trying to take things out of Dunedin. It's just about going to be a backwater," Mrs Hart said.
Mr Hart said: "We are not too happy about it. Once services are gone, you can never get them back."
Tranz Rail also wants to sell its metropolitan passenger services in Auckland and Wellington.
Mr Beard said modern travellers preferred faster modes of transport, such as cars or planes, and this was reflected in passenger numbers on routes such as the Southerner.
"There are people with time to kill, and they are called tourists.
"We need someone with greater skills in tourism, putting in overnight stays and other tourist packages, to make these routes more viable," he said.
"With the TranzAlpine you spend four hours travelling to Greymouth, stay there for two hours and go home.
"You need to turn that trip into much more of a tourist experience on the West Coast," Mr Beard said.
The Kaimai Express between Auckland and Tauranga, the Geyserland service between Auckland and Rotorua, and the Waikato Connection between Auckland and Hamilton wll also close.
WCR will acquire 22 locomotives, 76 carriages, three railcar sets, 16 observation vans, brands, selected station buildings around the country (including the Addington station), and the Christchurch and Otahuhu maintenance depots.
The sale price has not been given, but analysts say it could be about $25 million.
WCR director Gary McDonald said the company was excited about Tranz Scenic's potential.
"We want Tranz Scenic to grow from strength to strength, to build tourist services, and develop new services that meet the market.
"The demand on scenic tourism routes is growing, and that is where we plan to concentrate our efforts," he said.
WCR managing director Don Gibson said the TranzAlpine service was a good example of the growth potential.
"It has grown by more than 30 per cent in the past five years."
WCR would consider fresh proposals to run services being shut down by Tranz Rail, such as the Southerner. However, any proposals would have to be commercially viable, and probably linked with tourism.
Rail and Maritime Trade Union general secretary Wayne Butson said the union was looking to business leaders, tourist operators, and the Government to work together to retain the train services.
Transport Minister Mark Gosche said the Government would meet WCR as soon as possible.
Tranz Rail had only signed a non- binding term sheet, he said. That was "just another step in the negotiating process".
"Discussions on what happens from here will include local government and unions.
"I am very pleased that WCR have indicated their keenness to work with those groups, and that they have also given an undertaking to employ all existing Tranz Scenic staff," he said.
"This deal is by no means complete, and all the details remain to be finalised," he said.
Green Party co-leader Rod Donald has said he wants a cross-party accord to save the threatened services.
But Prime Minister Helen Clark has said: "I think we're some way short of that. At the moment we're focusing on the Auckland (transport) issue, which has been more pressing."
Mr Donald said yesterday: "It (the Government) is fiddling while Rome is burning. We are just going to avoid the Government on this because they have demonstrated an appalling lack of leadership."
Mr Donald said he and Greens transport spokeswoman Sue Kedgley expected to meet WCR this week to discuss how the threatened services could be kept running.
"We are confident that with the right attitude and marketing strategy, the new owners of Tranz Scenic will be able to turn around all five threatened services," Mr Donald said.
`These services can be saved. They are important for tourism and local passenger travel, and have been poorly promoted in the past."
Tranz Rail announced last October it was getting out of passenger services to concentrate on freight.
* Auckland deal, page 27
--------------------
CAPTION:
PHOTO: ANNETTE TURNBULL-DEW Goodbye,
old friend: Joan Mann, from Dunedin, has a pat for the Southerner after it
safely delivered her to Christchurch yet again. She has travelled on the train
eight times in the last few months. GRAPHIC: Southern rail shake-up
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: NATIONAL
Topics: PASSENGER TRAINS ; BUSINESS
; TOURISM
Sub-Topics: ISLANDS AND STRAITS
© The Christchurch Press Company Limited 2001, All rights reserved.
_________________________________________________________
SOE
Productivity Performances
THE PRESS, 21
JUN 2000, Edition 2, Page 22.
Uneven performances from SOEs,
says study
A nine-year study of State-owned
enterprise productivity showed a wide variance in performance, with just one
-- the Airways Corporation -- registering strong productivity gains.
The others in the study, which
looked at their performance from 1989 to 1998, were Landcorp Farming, TVNZ,
Vehicle Testing NZ, and NZ Post.
The study, done for Treasury by
the New Zealand Institute for the Study of Competition and Regulation, said
big differences in the competitive status, life-cycle, and technological change
faced by the five SOEs meant "only limited generalities should be made" when
comparing the results.
It suggested more work was needed
in how those factors impacted on the SOEs' operations.
It did say, however, that the SOEs'
productivity gains did not compare well with Telecom and Tranzrail -- former
SOEs that had been sold.
Airways showed the strongest productivity
gains -- a 6.6% average increase -- and did so through the whole period.
The study's author, David de Boer,
said Airways faced the least competition of the five. Its gains, he said,
were shared between shareholding taxpayers and its customers, with real prices
falling.
TVNZ, alone among the five in facing
competition throughout the study, showed an average annual gain of 3.5%.
Mr de Boer said there was some
evidence that the threat of competition was a spur to increased productivity.
But it also found that moving into competition led to costs that cut productivity.
Worst performer was Vehicle Testing
NZ, which has since been sold. It was the only SOE in the study to raise its
prices and showed it had incurred productivity losses from 1995 through to
1998.
The study showed that NZ Post posted
an average yearly gain in productivity of 3.23%, while Landcorp Farming returned
an average gain of 1.4%.
Section: BUSINESS
Topics: GOVERNMENT CORPORATIONS
AND SOES ; STATISTICS
Sub-Topics: NEW ZEALAND CITIES
AND REGIONS
© The Christchurch Press Company Limited 2000, All rights reserved.
Tranzrail
1999 Result
THE EVENING POST,
3 FEB 2000, Edition 3, Page 11.
Bellwether Tranz Rail posts solid
profit rise
Tranz Rail yesterday reported
a net profit for the December quarter of $15.5 million, compared with $10.6
million in the year-ago quarter.
Tranz Rail, considered a bell-wether
stock for the economy, reported a six-month profit of $21 million, up from
$13.1 million. The company announces its dividends at a later date.
It reported a solid pick-up in
volumes and revenue but a squeeze on margins which had limited profit increases
and which it planned to rectify.
"There are clearly signs now flowing
on from the first quarter where we are seeing an across-the-board improvement
in the New Zealand economy - both on the export side, and now, more significantly,
on the domestic side," chief financial officer Mark Bloomer said.
"Revenues are now increasing by
more than market share growth; they are clearly being driven by the state
of the market and growth of the market."
He said the company was in the
process of increasing its prices about 5 percent to offset higher fuel prices.
Fuel costs account for about 8 percent of Tranz Rail's costs and diesel in
the quarter had risen 26 percent over the 1998 quarter.
"The second quarter saw a continuation
of the positive revenue trends experienced in the first quarter and further
supports the view that the New Zealand economy is at last recovering," Mr
Bloomer said.
During the second quarter, freight
revenue was 6 percent higher at $118.4 million, with volumes up 14 percent.
General manager Francis Small said
the company's target was to extract some recovery in margins. He said the
rise in fuel prices would put the squeeze on trucking and would help Tranz
Rail gain market share.
Increased revenue in manufactured
products (up 11.7 percent), fertiliser, minerals and aggregates (up 11.4 percent)
and other freight (up 13.6 percent) was partly balanced by a 7.6 percent decline
in coal revenue - reflecting price cuts for one of its largest customers,
Solid Energy.
Tranz Rail announced it had signed
a 10-year contract with Solid Energy to rail its coal from the West Coast
to Lyttelton.
Dr Small said he hoped the deal
would encourage Solid Energy to boost its exports and that should improve
both revenues and volume.
Tranz Rail also reported a squeeze
in its passenger division due to intense competition against its Cook Strait
ferries.
Passenger revenue fell 4.1 percent
from a year ago to $5.8 million in the quarter while costs rose 6 percent.
Dr Small said there was likely
to be an announcement on a new managing director when the company chairman
visits New Zealand later this month.
The profit was announced after
the market close. Tranz Rail opened today up 5c at $3.40. - NZPA AT A GLANCE
--------------------
TranzRail's results for the half-year
to December.
--------------------
1999 1998
$m $m
Revenue 298.9 281
Expenses 265.8 253.6
Operating profit 33.1 27.4
Tax 2.5 5.6
Bottom-line profit 21.0 13.1
Staff numbers 4259 4561
Dividend yet to be announced.
--------------------
CAPTION:
Francis Small
Supplied by New Zealand Press Association
Section: BUSINESS
Topics: RAIL TRANSPORT ADMINISTRATION
; GOODS TRAINS ; BUSINESS
© Wellington Newspapers Limited
2000, All rights reserved.
End
of the line: East Coast rail threat DOMINION, 18 NOV 2000,
Edition 2, Page 21.
By: BAIN Helen
The rumble of trains is already
a rare sound on the Napier to Gisborne railway line. Soon, they may not be
heard at all. Helen Bain reports on the community's fight to save the link
they say is being underused by Tranz Rail.
--------------------
Just three freight trains a week
travel the 200-kilometre line between Napier and Gisborne, which, with its
30 tunnels and several viaducts, is believed to be among the most expensive
in the country to maintain.
Eight months ago there was one
freight train a day, but following the closure of the Best Friend petfood
factory and the freezing works, trains were reduced.
Now Tranz Rail says it can't make
a profit on the line and looks set to close it--but not if locals have their
way.
New Zealand Rail was bought from
the government in 1993 for $400 million by what was then a two-thirds American-owned
consortium. However, its financial performance has been less than spectacular.
Its profit for the year to June was $46.9 million, down from $70.2 million
the previous year. For the quarter to September, Tranz Rail posted a $16.4
million loss, blaming restructuring, redundancies, falling freight volumes
and rising fuel prices.
In October, Tranz Rail announced
a new strategic direction. It would sell its passenger rail and other services
to concentrate on core operations: the Cook Strait ferries, large-scale freight
between major centres and door-to-door delivery of smaller consignments.
Tranz Rail explained its position
in full-page advertisements in the major metropolitan newspapers (though,
interestingly, not in the daily Gisborne Herald) headed "A Message to All
New Zealanders From Tranz Rail".
"Most of our rail network will
remain, but there are a few lines that, despite our best efforts, have not
been attracting enough traffic to cover the costs of maintaining them . .
. Neither we nor local and central Government want to see them closed, but
we can't justify keeping them open on our own," the ad read.
"We're making Tranz Rail a much
more flexible organisation with the ability to be more responsive to the market,
more profitable for our investors and a more robust part of New Zealand's
transport industry."
Tranz Rail external relations manager
Nicola McFaull says Tranz Rail tried to find alternative freight customers
on the Gisborne line, but the business simply wasn't there--a symptom of the
stagnating local economy.
Ms McFaull says Tranz Rail is "aware
of community concerns" about the future of the line, but says Tranz Rail has
to be able to justify the investment to shareholders.
"We believe we should be a good
corporate citizen, but we also have a responsibility to our shareholders .
. . If the Government thinks there are other social reasons to keep the line
open, then maybe they are the ones who should pay for it."
"Bullshit!" East Coast MP Janet
Mackey shouts down the phone. "That's just self-serving babble."
Ms Mackey says the line is not
making a profit because Tranz Rail has done very little to promote its services.
She says Tranz Rail has neglected maintenance on the line, leaving it in a
state where a lot of money has to be spent.
"Closing the line is not an option.
I hate to think what will happen to this region if the railway goes. We now
have to look at the alternatives and make bloody sure we keep it open."
Gisborne Mayor John Clarke agrees
that retaining the rail link is critical for the region's future economic
development. Though unemployment in the region dropped three percentage points
to 12.3 per cent in the June quarter, that figure is still more than double
the national unemployment rate, and the highest in the country.
Other economic indicators for the
period are also gloomy. Gisborne needs a rail closure about as much as it
needed the cloudy millennium dawn.
If the rail closes, customers will
switch to road transport, putting thousands more trucks on the Napier-Gisborne
road, Mr Clarke says.
The windy, hilly road, which includes
such aptly-named stretches as Devil's Elbow, would suffer substantial damage
and the hazard to other motorists would be considerable.
Federated Farmers president Roger
Haysman says he is also worried that fertiliser prices will rise if farmers
have to pay more to truck it in.
Gisborne District Council and Hawke's
Bay Regional Council are investigating whether they can get money to support
the railway from Transfund -- which pays for alternative transport if the
cost is less than putting that money into roading. Tranz Rail has agreed not
to take any action till the study is completed in January.
Meanwhile, Mr Clarke says he is
sceptical about Tranz Rail's claims that the line is not profitable. Tranz
Rail has said it needs 120,000 tonnes of freight a year to make a profit,
up from the 40,000 tonnes (mostly fertiliser) it has now.
By Mr Clarke's calculations, if
Tranz Rail secured the freight of fuel and meat (currently moved by road)
it would meet its 120,000-tonne target. And with huge volumes of timber expected
to be produced in the region over the next decade, the railway's future should
be rosy, Mr Clarke says.
However, he shies away from the
idea that local government should have any ownership role in the railway.
"We don't own trucking firms, so why should we own railways?"
But Mr Clarke says Tranz Rail seems
to be actively discouraging customers.
Wairoa meat processors Affco make
an interesting case in point. Affco chief executive Ross Townshend says Affco
would have preferred to use rail to freight its 20,000 tonnes of meat a year
out of Wairoa, but Tranz Rail couldn't come up with a deal to suit Affco's
needs.
Other businesses -- producing everything
from steel to cider -- relate similar frustrations.
However, in the June quarter, Port
Gisborne seemed to find no shortage of custom, shipping out 140,000 tonnes
of cargo -- up 21.7 per cent.
Gisborne Chamber of Commerce spokesman
Morrin Hardy says businesspeople say, in the main, that Tranz Rail has been
"unhelpful".
"I'm a free-enterprise person.
I believe that if something is not profitable, then it shouldn't be there,
but I don't believe Tranz Rail has made the necessary effort to make it profitable."
Local leaders are not the only
ones questioning Tranz Rail's practices. Ed Burkhardt, founder of Wisconsin
Central Transportation Corporation, which has a 23.75 per cent stake in Tranz
Rail, has been strongly critical.
Mr Burkhardt, who was sacked as
president and chairman of the corporation 15 months ago, told the National
Business Review he was "sickened" to see how Tranz Rail had gone downhill,
and said its plans to turn things around were "some of the strangest he had
ever seen".
Deputy Prime Minister Jim Anderton,
who heads the taskforce responsible for rejuvenating economic development
in the Gisborne region, says a working group the Government has set up with
Tranz Rail is looking at alternatives to closing the line.
"We have three options: either
we let it go, or Tranz Rail alone upgrades the line, or the Government plays
some role."
The first option "doesn't seem
to be too bright", and Tranz Rail seems unwilling to go along with the second
-- which leaves Government involvement.
"If the Government puts in money
to prop up the railway, at what point should we say `We might as well own
the damned thing'?" Mr Anderton asks.
"I've got a bottom line about how
much money I am going to put into a private, overseas-owned corporation."
A determined opponent of privatisation,
Mr Anderton wants to buy back the railway -- not just the Gisborne line, but
the whole shebang, nationwide.
However, that proposal does not
find favour with his Coalition partner Labour, particularly not with Finance
Minister Michael Cullen.
Tranz Rail has valued the line
at $4 million, and the Government has first right of refusal if it is put
up for sale. Whether a return to Government ownership provides the answer
for Gisborne remains to be seen, but Mr Anderton says he is committed to finding
a workable solution.
"The private sector has not done
what it said it could do, which was make a profit out of railways," he says.
"I could just sit back and say
`I told you so,' but what we really need to do is just make sure we do whatever
we have to do to keep the trains running."
--------------------
CAPTION:
BILL KEARNS
Gisborne Mayor John Clarke believes
that the rail link is vital to his region's future economic development and
if it closes, he says, customers will switch to road transport, putting thousands
more trucks on the windy, hilly Napier-Gisborne road
Section: FEATURES
Sub-Section: GENERAL
Topics: RAIL TRANSPORT ; ROADS
AND MOTORWAYS
Sub-Topics: EAST COAST-POVERTY
BAY ; HAWKES BAY
© Wellington Newspapers Limited 2020, All rights reserved.
Industry
of myth and might (accidents, ownership and change on the Railways)
THE DOMINION,
12 MAY 2000, Edition 2, Page 13.
By: WILLIAMS Murray
--------------------------------------------------------------------------------
Tranz Rail chief executive Francis Small steps down today after 36 years with an organisation that bears little resemblance to the one he joined as a cadet. Murray Williams reports.
--------------------
IT WAS not the news Francis Small would have wanted on the eve of his retirement. He had always planned to leave Tranz Rail today, after a 36-year career on the railways that began as an engineering cadet and ended in the chief executive's office.
But his departure has been overshadowed by a Government announcement that it will be holding an inquiry into Tranz Rail's safety record.
The inquiry decision came after the death of a fifth Tranz Rail employee in just seven months. Deputy Prime Minister Jim Anderton says the inquiry is needed because of Tranz Rail's history of dealing with accidents.
In an interview with The Dominion given before the latest death and the inquiry announcement, Dr Small defended his company against accusations from some that it is heartless and profit-driven.
Tranz Rail is accused of not spending enough on its infrastructure, of allowing trains and carriages to become uncomfortable and unreliable, and of letting stations become graffiti-covered, unwelcoming and unsafe.
Dr Small says he is hurt by accusations that Tranz Rail is more concerned with avoiding liability than with showing common compassion, and points to the Morgan Jones case.
The High Court threw out the criminal nuisance case Tranz Rail faced after Morgan, 6, fell from the Coastal Pacific in North Canterbury, losing the lower part of his right leg and becoming blind.
Dr Small says Tranz Rail willingly helped the Jones family, which reached a confidential settlement with the company in 1996. "Very few people know exactly what we did and still don't . . . it shouldn't be a matter that's in the public domain. We felt compassion for him and his family then and we still do.
"The judge said there was no case to answer. We strongly defended our patch because we believed we were right. If we are wrong, we put our hand up."
Despite having to do that on a number of occasions -- most recently last month when the company was fined $37,500 after admitting that a badly maintained release hook caused a lifeboat to drop into the sea, killing a crewman and injuring three others during an exercise on the Arahura -- Tranz Rail has a better safety record than the old New Zealand Rail, Dr Small says.
Critics who say accidents such as Morgan's would have resulted in multimillion-dollar lawsuits in the United States are ignoring the benefits of New Zealand's accident compensation system, he says.
"There was never any question that he was going to receive the right medical attention."
Nor, he says, did Morgan's parents have to face making judgments about the affordability of treatment, or the reality of the low success rate of such damages cases in the US.
Dr Small says Wisconsin Central, head of the consortium that bought NZ Rail when it was privatised in 1993, has been pro-active about safety, which he says has improved considerably. He believes that the US connection has been good for Tranz Rail.
Wisconsin has taken a hands-off approach to management of the company, in which Fay Richwhite's Pacific Rail is the other big shareholder, and its first chairman, American Ed Burkhardt, was a railwayman, "someone who knows something about rail" and about ploughing money back into the business.
Mr Burkhardt was reportedly the victim of a Wisconsin boardroom coup in July 1999, and was dumped from Tranz Rail's board, too. However, Dr Small says he announced that he was standing down ahead of Mr Burkhardt's mysterious departure.
Dr Small is remaining on the Tranz Rail board as vice-chairman. He is also staying on the Wisconsin board and hoping to do some specialist consulting work, as well as chairing Meridian Energy and heading the Government's inquiry into the police Incis computer project.
DR SMALL maintains a long interest in scouting -- currently as national president -- and says outdoor education programmes such as those run by the Scouts still have a place in keeping kids on the rails, just as Tranz Rail has a place in keeping commuters out of cars.
"Train travel is a great way to see the country, warts and all . . . we move through everybody's back yard and we are part of everybody's community and we are sensitive to it."
Part of that sensitivity is putting 150,000 school children through a rail-safe programme and helping run a rescue helicopter service, with five aircraft and a sixth on the way.Sometimes, he says, people do crazy things.
"The most bizarre case was in Christchurch, where someone with a car full of kids got a kid to lift a barrier arm when a train was coming. Fortunately, they escaped . . ."
Tranz Rail is aware of passenger complaints about the state of commuter trains in Wellington and Wairarapa and is working to upgrade rolling stock, Dr Small says.
It is also working to clean up stations, where commuters see graffiti as evidence of corporate indifference.
"We have a gang that deals with (it) and is largely getting on top, but tagging is a reflection on the community, not the company.
"Sometimes, tags are back a day later. It must be en one of the most frustrating jobs . . ."
Though Tranz Rail's share price has slipped from nearly $9 in 1997 to $2.72 -- a slide that has affected many staff as about a third are shareholders -- Dr Small says things are looking up.
Results for the nine months to March 31 reflect continued benefits from the improved economy and a record 14.5 million tonnes were carried. The previous record of 13.6m tonnes was achieved in 1977.
NZ Rail employed more than 24,000 people in the early 1980s, but staff numbers have fallen by 80 per cent to about 4000; productivity per freight staff member is up 488 per cent, the size of the freight wagon fleet is down 77 per cent and revenue per wagon is up 136 per cent.
That is a long way from the days when the railways were required to retain unprofitable services, its workshops trained many engineers and tradesmen, and most freight moved on rails, not on roads in big rigs.
Many of the changes Dr Small has overseen could not have happened without privatisation, but he acknowledges that some were being discussed more than 20 years ago, when former general manager Trevor Hayward raised the idea of new terminals at Clifford Bay and near Wellington Railway Station -- ideas Tranz Rail may decide to act on next year.
--------------------
CAPTION:
MARTIN HUNTER
Francis Small . . . He says he
is hurt by accusations that Tranz Rail is more concerned with avoiding liability
than with showing compassion
--------------------------------------------------------------------------------
Section: FEATURES
Sub-Section: GENERAL
Topics: BIOGRAPHIES-GENERAL ; BUSINESS
; RAIL TRANSPORT
Biography: SMALL Francis
© Wellington Newspapers Limited
2000, All rights reserved.
Tranz Rail changing direction THE DOMINION, 22 FEB 2001, Edition 2, Page 13.
By: HOWIE Craig
--------------------------------------------------------------------------------
Accidents, delays and poor profits are dogging Tranz Rail as it attempts to get back on track. Craig Howie asks what has gone wrong with New Zealand's beleaguered rail network.
--------------------
The organisation that employed about 25,000 across just about every corner of New Zealand 20 years ago will be left with fewer than 1000 staff and only the skeletal remains of its once vast operating empire
--------------------
THE BOLGER-LED National government was so worried about the prospect of the rail system being run down in private hands that it commissioned a secret report panning the risks before it sold New Zealand Rail in 1993.
Despite some of its fears being confirmed in that report, the state-owned enterprise was sold for $400 million to a consortium led by American rail company Wisconsin Central Transportation and merchant bank Fay Richwhite.
Now, almost eight years later, as the renamed and considerably slimmed down Tranz Rail embraces yet another shakeup, those worries have materialised as a new management team prepares to offload its long-haul passenger metropolitan commuter services, engineering workshops and refrigerated freight arms.
The organisation that employed about 25,000 across just about every corner of New Zealand 20 years ago will be left with fewer than 1000 staff and only the skeletal remains of its once vast operating empire.
All of this while Tranz Rail's public image has taken a battering from a string of workplace accidents, derailments, collisions and, most recently, long queues of customers waiting several hours as the Cook Strait ferries failed to maintain busy holiday timetables.
A letter to the editor of The Dominion typifies customer frustration. A regular morning commuter on the Levin to Wellington train estimates his service runs to time only 6 per cent of the time.
"The more serious delays average out at 30 minutes and to date the reasons include the inability to connect a carriage, an internal power failure, multiple signal failures and the train manager's body clock not functioning correctly."
Tranz Rail's public relations problems are, at least to some extent according to analysts, linked to the poor underlying financial health of some of its businesses.
The Dominion has been unable to obtain a copy of that early-1990s report on the risks to rail of privatisation. But a key conclusion is summarised in more recent research from the Institute for the Study of Competition and Regulation.
The viability of rail was of such concern to the then government, that the Treasury commissioned the report looking at the possible rundown of rail in private hands, the institute says.
An unviable rail system had two implications. First, the highest bid might come in well above "salvage" value of the business but entail winding down key parts of it. Second, winding down these parts would be "economically efficient" provided the rail's revenues and costs reflected its full social benefits and costs.
The institute concluded, in its 1999 research, that significant further productive gains were needed if all traditional rail services were to be commercially sustainable into the future.
By that time, the gloss had gone off Tranz Rail on the sharemarket, as investors, too, became concerned about its inadequate returns -- particularly on the more than $100 million of fresh capital spending it was making each year in attempting to maintain its fleet and its assets.
The private owners had been unable to generate sufficient returns from the business, despite their stated aim of running an efficient, modern rail business. Improved labour productivity and increased freight volumes did not translate into higher profits.
Analysts now estimate Tranz Rail's return on capital is about 8 per cent -- well short of the 12 to 14 per cent it should be earning.
Most recently, soaring fuel prices, which one analyst estimates will soar to $75 million this year from $34 million in 1999, have eroded Tranz Rail's profits.
Having listed at $6.20 in 1996, after the initial owners offered part of their stake in a public share offer, Tranz Rail hit a peak of $9 on the sharemarket in 1997. Its shares have since tumbled to about $3.80.
The weak share price has not been helped by Wisconsin (under new control itself) and Fay Richwhite moving to sell their remaining stakes of 24 per cent and 14 per cent respectively.
But the sharemarket performance, more than any other indicator, summarises Tranz Rail's financial story.
NEARLY a decade after those warnings in the report to the Treasury, a new management team at Tranz Rail last October confirmed a restructuring plan that stands to be even more far-reaching than the three or four others that have swept through its predecessor organisations since the early 1980s.
Chairman Robert Wheeler told shareholders that directors and management had been aware for two years that returns had fallen short of investor demands.
Since being sold in 1993, the company had invested about $900 million into locomotives, wagons, ships, tracks, workshops and other facilities.
"Our operating profits have been hard pressed to supply an adequate rate of return on that investment," Mr Wheeler said.
"Our strongest competitors do not work that way. They keep their capital investment to an essential minimum, which allows them greater flexibility to adapt to changing market needs."
The restructuring plan centres on sharply cutting capital investment -- from more than $100 million a year to about $50 million -- and selling parts of the business deemed to be non-core. The third arm of the plan will see Tranz Rail using outside contractors for much of its maintenance.
Long-distance passenger trains, Mr Wheeler said, were no longer the low-cost travel option of the past.
They had become an integral part of New Zealand's tourism network and would "sit better" with a specialist operator.
Analysts describe Tranz Rail's fundamental change in business direction as its only option if it wants to attract investment, though they say the next year or two could provide a rough ride as the benefits of the plan take time to materialise.
In particular, much of its success -- certainly for customers -- will depend on selling its passenger services to a committed operator.
The commuter trains in Wellington and Auckland, already subsidised by regional government, will need ongoing financial commitment, or even direct shareholdings, from the regional authorities in both cities.
Central government's attitude to backing legislation needed for regional authority investment will also be crucial.
"That's all about identifying the value of the public-good component of those services," Forsyth Barr research director Rob Mercer says.
"What is the public benefit in having those passengers travel by rail instead of road? The services will need a fair subsidy to reflect that."
The new management team was under the spotlight, but Mr Mercer gives it a good chance of succeeding. "I'm looking at a two-year timeframe."
Others agree with the company's strategy, even if the long-term future of some of its services is far from assured.
"There was a realisation that a huge amount of money had been sunk into the business, but they were running really hard just to stand still," Salomon Smith Barney transport analyst Blair Cooper says.
"Debt started to reach levels where it was attracting the interest of rating agencies."
Just last week, New York rating agency Moody's changed its outlook for Tranz Rail from stable to negative, saying it expected the company to remain under cost pressure as it was difficult to pass on cost increases through rate hikes.
Furthermore, uncertainties surround its restructuring efforts.
"While revenue has picked up slightly from last year as a result of rate and volume increases, the revenue growth is more than offset by cost increases (including fuel and restructuring expenses)."
Tranz Rail's rating will be lowered if its asset sales programme does not take place so group debt can be reduced.
The rating agencies will join
investors and rail customers in watching Tranz Rail's every move.
--------------------------------------------------------------------------------
Section: FEATURES
Sub-Section: GENERAL
Topics: BUSINESS ; RAIL TRANSPORT
© Wellington Newspapers Limited
2001, All rights reserved.
Freight rival pans rail downsizing THE EVENING POST, 11 OCT 2000, Edition 3, Page 11.
By: LOVE Phil
--------------------------------------------------------------------------------
Tranz Rail's radical chop-and-change to focus on freight and cut up to 3400 jobs is only a short-term answer to problems, a rival claims.
"It's so easy for people to think downsizing is the answer - invariably its only an answer in the short term," said Bruce Plested, managing director of Auckland-based trucking company Mainfreight.
"Then they downsize again and then there's nothing."
Mr Plested, whose company competes with Tranz Rail to haul freight, said he was concerned that the overhaul was "meddling with New Zealand's infrastructure".
Yesterday, Tranz Rail managing director Michael Beard announced sweeping changes to transform the corporate giant into primarily a freight rail operator. The two-year plan is to sell most of its passenger operations and outsource many maintenance operations.
The company is in talks with regional councils around the country, including in Wellington, as well as prospective new owners of the services. Tranz Rail is not selling its lines - it needs these to operate its freight businesses.
The company also plans to cut its staff by 3400, from 4000 to 600, in the next two years, though it says most will end up working for the new owners of the services.
Services such as engineering workshops, maintenance, signalling and telecommunications would all be contracted out, and possibly shunting and other terminal operations.
The Cook Strait ferry service is not up for grabs, being one of the more profitable parts of the business and key to freight operations.
Mainfreight's Mr Plested also fired a shot at two of Tranz Rail's shareholders, Sir Michael Fay and David Richwhite, saying, "merchant bankers living in Geneva are not good long-term planners".
Part of Tranz Rail's new strategy is to improve its service and look at its prices.
Mr Plested said Tranz Rail was a low-cost operator. It needed to take a leaf out of The Warehouse's book and become proficient at being a cheaper and good provider.
But two local shareholders support the move.
Lloyd Morrison, director of airports and ports investor Infratil, whose company owns just over 7 percent of Tranz Rail, said the changes were largely anticipated by the market and there were no real shocks. He said he was happy overall with the direction of the company, but no restructuring was easy. Now it was a case of delivering on objectives.
AXA chief investment manager Barry Lindsay, whose company is also a shareholder, said the overhaul was not unexpected.
"It (Tranz Rail) is following along the lines of Wisconsin Central. That's logical given the parentage and Michael Beard's experience.
"Tranz Rail has always been a capital-hungry business," Mr Lindsay said.
Though Tranz Rail was getting out of some parts of its business, such as passenger services, it did not mean these services would cease.
AXA had yet to form a view on just how well the restructuring would work in terms of improving shareholder returns.
Mr Beard said Tranz Rail was seeking a 20 percent increase in market share, along with a substantial increase in profits and the value of the stock by the end of 2002.
Mr Beard also issued a warning yesterday that the company's profit for the three months to September 30 would be hurt by rising fuel costs. The cost of fuel had nearly doubled from a year ago.
Mr Beard said there was some good news in the wind for the company. It had recently been working with four key customers on some new initiatives. Details would be released shortly.
--------------------
TRAINS-FORMATION
National rail operator Tranz Rail is to focus on carrying freight, not people. It will sell most of its passenger operations and get other companies to do many maintenance operations.
--------------------
* Selling or leasing Wellington commuter train service, Tranz Metro, in the next two years. French rail and bus operator Trans Dev and Scottish company Stagecoach, which runs buses in Wellington and Auckland, are frontrunners to either lease or purchase Tranz Metro, with Wellington Regional Council possibly on board in a joint venture.
* Selling or leasing long-distance passenger train services. Several companies, both foreign and New Zealand, have made approaches about buying Tranz Scenic. Unprofitable branch lines to be reviewed; likely closure of Napier-to-Gisborne line.
* Seeking bids for refrigerated freight business, Tranz Link Refrigerated, which the company says is better run as part of a specialist transport network.
* Contracting out maintenance services including engineering workshops, civil engineering, signalling, telecommunications, shunting and ferry terminal operations. Hutt workshops, engineering, plant and buildings likely to be sold to an overseas buyer, with interest from Australia and Asia.
* Keeping interisland ferry service, a key link in freight operations.
--------------------
At a glance
1982: The old Railways Department, having operated for more than a century in public ownership, becomes New Zealand Railways Corporation with a commercial focus. It has 21,000 staff.
1986: Becomes a State-owned enterprise.
1990: New Zealand Rail becomes a limited liability company. A series of job cuts in the late 80s reduces it to just 5000 staff.
1993: New Zealand Rail sold to United States company Wisconsin Central and New Zealand merchant bank Fay Richwhite, and renamed Tranz Rail.
1996: Tranz Rail lists on sharemarket.
2000: Massive restructuring announced which would cut staff from 4000 to 600.
--------------------
CAPTION:
Tranz Rail is majority owned by US transport company Wisconsin International, with 23 percent. Pacific Rail owns 14 percent, with New Zealand and overseas shareholders holding the balance.
`Our new direction pays homage to the spirit of New Zealand pioneers who built the railway that helped shape this nation of ours.'
Michael Beard, managing director,
Tranz Rail
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: RAIL TRANSPORT ADMINISTRATION
; GOODS TRAINS ; COMMUTER TRAINS
Sub-Topics: PASSENGER TRAINS ;
REDUNDANCY
© Wellington Newspapers Limited 2000, All rights reserved.
Tranz Rail details restructuring plans THE SOUTHLAND TIMES, 11 OCT 2000, Edition 1, Page 1.
By: BY MICHELLE SUTTON AND NZPA
--------------------------------------------------------------------------------
SOUTHERN freight and passenger services would not be threatened by Tranz Rails plans to exit long-distance passenger services and outsource maintenance operations, Tranz Rail said yesterday.
Only 600 of the workforce of 4000 workers will remain with Tranz Rail when it finishes restructuring in a bid to turn around its disappointing performance.
The Tranz Scenic long distance passenger services and refrigerated freight will be sold and infrastructure, engineering and maintenance, terminal operations and ship operations will be outsourced.
The Invercargill to Christchurch passenger service is one of eight Tranz Scenic routes that will be sold. Tranz Rail's Invercargill to Christchurch freight service will also be sold.
Workers' terms of employment and redundancy conditions will be kept as part of the sale.
Yesterday, the company said raising freight costs had not covered high fuel prices and the July quarter profit, to be announced on October 25, would not match the $10 million for the corresponding period last year.
As expected, chairman Robert Wheeler said Tranz Rail would trim many of the company's assets to concentrate on core services -- freight, distribution (including non-rail freighting) and the Cook Strait ferries.
Tranz Rail also wanted to quit commuter services and was considering seeking an operator to run the stock in conjunction with the regional councils in Wellington and Auckland, Mr Wheeler said.
Tranz Rail's commuter assets would not necessarily be sold, he said. The company hoped to improve its profitability by slashing the large amounts of capital expenditure needed to keep an integrated rail system running.
The company was bought seven years ago for $400 million and has spent $900 million in capital expenditure.
Managing director Michael Beard said Tranz Rail would hold on to profitable passenger services if the did were not sold but would close unprofitable ones.
The closure of the Napier-Gisborne line, and a branch line to Rotorua, was "moderately likely," within four to six months if no buyer was found, Mr Beard said.
Tranz Rail wanted the restructuring process to be completed within two years.
Tranz Rail held the first of several meetings with unions yesterday morning.
The Government said yesterday it wanted talks with Tranz Rail about plans to withdraw from some services.
Finance Minister Michael Cullen and Transport Minister Mark Gosche said Tranz Rail's plans would "change the landscape" and a meeting was needed so the Government could understand the implications of what was proposed.
Yesterday's announcement could
have a significant impact on the Government's plans to boost the regions,
which have suffered an economic and infrastructural decline over the past
decade.
--------------------------------------------------------------------------------
Section: BUSINESS
Sub-Section: NATIONAL
Topics: RAIL TRANSPORT ; RAIL TRANSPORT
ADMINISTRATION
© The Southland Times Company Limited 2000, All rights reserved.
Problem at Tranz Rail, says report THE PRESS, 8 SEP 2000, Edition 2, Page 9.
By: SCANLON Glen
--------------------------------------------------------------------------------
Critics of Tranz Rail's safety record have been vindicated in a ministerial inquiry which decries Tranz Rail's "culture" of blaming employees for accidents.
"At the outset, it needs to be made clear that there is a problem at Tranz Rail," the report says.
The report to the Ministers of Labour and Transport was released last night. The inquiry was initiated by Labour Minister Margaret Wilson after five Tranz Rail workers were killed in a year.
Ms Wilson said the report made it clear there was good reason to be concerned about Tranz Rail's record and the regulatory framework that governed it.
The report found that the workplace fatality record at Tranz Rail was about eight times the national average.
However, to Tranz Rail's credit its "over-all approach was constructive and forward-looking" and allowed the inquiry to focus on solutions. The inquiry made 10 recommendations including that the Health and Safety Act provisions be applied to Tranz Rail's non- maritime employees.
It also said Tranz Rail, the Rail and Maritime Transport Union (RMTU), the Land Transport Safety Authority, and Occupational Safety and Health, had to work together to develop protocols for the prevention and investigation of rail accidents.
It emphasised that Tranz Rail had to provide further support on an ongoing basis to the families of the victims of fatal accidents. "Tranz Rail must also in our view try to move away from the culture of blaming employees for accidents.
"While the risk inherent in some rail operations, particularly shunting, can never be eliminated, we think that the implementation of our recommendations would minimise the risk."
Ms Wilson said the current law allowed rail operators to establish a safety system based on "reasonable cost" and it was clear it needed to change.
"Workplaces need to develop a culture of safety based on mutual respect, trust, and understanding. Efforts have been made towards this end by Tranz Rail."
She said the report would become part of the safety and health legislation review already announced. The review should be completed by the year's end.
Ms Wilson had already held talks with Tranz Rail and the RMTU about the report, and the recommendations would be dealt with as quickly as possible.
RMTU acting general secretary Brian Cronin said it was pleased with the recommendations and confident that Tranz Rail was ready to change.
Tranz Rail corporate relations manager Fred Cockram said the inquiry had sifted the facts from the emotion and cleared the way for constructive change.
He said most of the recommendations related to the role of Government agencies and only two were directed at it.
Mr Cockram said the inquiry endorsed the company's views and there were several steps it, and the RMTU, could take to reduce the number of people at risk.
"I hope that the union and the
company can now move on to a more constructive relationship."
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: National
Topics: BOARDS AND COMMISSIONS
OF INQUIRY ; RAIL TRANSPORT ; INDUSTRIAL ACCIDENTS
Sub-Topics: RAIL ACCIDENTS ; INDUSTRIAL
SAFETY ; CABINET
© The Christchurch Press Company Limited 2000, All rights reserved.
Shape up, Tranz Rail told THE EVENING POST, 25 JAN 2001, Edition 3, Page 1.
By: REPORTERS Post
--------------------------------------------------------------------------------
Tranz Rail is coming under increasing fire over its inept ferry service, with Ministers and tourism experts warning it could harm New Zealand's image.
Tranz Rail has been plagued by delays for passengers and freight, breakdowns and mishaps during the past five weeks - exacerbated by the Aratere blowing an engine and the Arahanga being taken out of service just before Christmas.
Passengers and freight companies continued to be stranded on both sides of Cook Strait yesterday, with the Aratere running an hour late.
Tourism Minister Mark Burton warned today that significant delays to ferry sailings could damage New Zealand's tourism industry. He would seek a briefing from Office of Tourism and Sport officials about the delays, and then expected to meet Tranz Rail management.
"One of the key issues that I have been emphasising in the tourism industry . . . is that the heart of the building of a reputation and a quality product is quality service.
"That is the thing that in every aspect of the industry, all of the feedback and the research, tells us that customer service is a very high priority. And I certainly do have some concern that at the height of the holiday season we have seen large numbers of New Zealanders and overseas visitors have their travel plans significantly disrupted."
His view was backed by Victoria University professor of tourism management Doug Pearce, who said the unreliable ferry services could lead to a negative perception among international tourism operators. Breakdowns disrupted international travellers in particular, who often travelled to tight schedules.
National Party transport spokesman Roger Sowry said today that the Cook Strait needed another ferry operator.
Mr Sowry said competition was needed on the Strait but no operator would come in unless the Commerce Commission took a strong stance with Tranz Rail.
He and trucking companies said Tranz Rail had increased sailings and lowered rates to compete with rival Top Cat before the latter closed in November.
They said Tranz Rail drove Top Cat out of business and had since raised rates and cut sailings.
A truck operator said: "Something's got to be said about this oufit. They are profiteering, they don't really care less."
The Commerce Commission is investigating whether Tranz Rail's aggressive approach breached the Commerce Act after complaints from the Road Transport Forum, which represents freight carriers.
Mr Sowry said another operator wouldn't start on the Strait unless they knew the Commerce Commission would be tougher on Tranz Rail.
Tranz Rail spokeswoman Nicola McFaull confirmed passengers and freight were being delayed but said the company couldn't have forecast unprecedented freight demand this month - and this was accepted by Federated Farmers.
Despite taking the Arahanga out of service Tranz Rail had carried double the usual stock numbers this month, she said.
Ms McFaull said Tranz Rail hadn't increased freight rates for several years and it couldn't be held responsible for Top Cat's demise.
Today Tranz Rail was warning passengers booked on the Aratere to arrive in good time at its terminals in case the ship left early, after four irate passengers were left on the wharf on Monday when the ferry left 12 minutes early.
Interisland manager Thomas Davis said this could happen again because sailing early was a way to keep to schedule when the Aratere, with three engines, sailed against the tide. The company was considering bringing the Arahanga back into service to cover for the Aratere when it went out of service for repairs in March.
Ministry of Agriculture officials and SPCA inspectors were today checking the welfare of all livestock waiting to be loaded on to ferries.
Ministry staff said they'd been told of livestock waiting unacceptably long periods in summer heat around Christmas.
Enforcement adviser Alan Wilson said today that animals checked during the past three days at both terminals were found to be in good condition.
Tranz Rail predicted today that the situation would return to normal early next month when demand was expected to drop. `Something's got to be said about this oufit. They are profiteering, they don't really care less.'
South Island truckie on Tranz Rail
--------------------
CAPTION:
ARATERE_Due for engine replacement in March.
Supplied by New Zealand Press
Association
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: NATIONAL
Topics: FERRIES ; RAIL TRANSPORT
ADMINISTRATION
Sub-Topics: ISLANDS AND STRAITS
; WELLINGTON CITY ; KAIKOURA-MARLBOROUGH
© Wellington Newspapers Limited
2001, All rights reserved.
Locomotives `diabolical' (accident inquiry hearing) THE PRESS, 4 AUG 2000, Edition 2, Page 1.
By: MCCURDY Diana
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A Tranz Rail engineer told of the "diabolical" condition of many locomotives, and emotional family members and workmates lamented dead Tranz Rail workers at a ministerial inquiry in Christchurch into the company's safety record.
Tranz Rail servicing assistant Graham Ealam said under-staffing meant some locomotives were ill- maintained and unsafe.
"The engine drivers are careering around the countryside at speeds of up to 100kmh in what we would consider to be rubbishy cabs. They are absolutely diabolical."
Mr Ealam said some locomotives had been allowed to run temporarily on loose wheels because of a shortage of locomotives.
Although this stopped when management discovered the problem, it could have led to a derailment, Mr Ealam said. He also told how repairmen improvised with duct tape and Selley's No More Gaps to make rapid repairs.
"It's quite an embarrassment to our fitting staff to be carrying out these types of duties. It does nothing for the relationship between the mechanical branch and the drivers. It creates a lot of animosity," Mr Ealam said.
Yesterday was the fourth day of the inquiry, which was ordered by Labour Minister Margaret Wilson after a series of accidents in which five workers were killed in 12 months. The inquiry began in Wellington on Monday, shifted to Christchurch yesterday, and will finish in Auckland today.
Tranz Rail external relations manager Nicola McFaull said the company would give a written response to the allegations today.
She said Tranz Rail believed the focus of the inquiry should be on the company's shunting operations because that was where most accidents occurred. It did not wish to comment on the causes of individual accidents.
The company expressed its sorrow on Wednesday about workers' deaths and injuries.
Yesterday, Christchurch Tranz Rail freight worker Pat Ritchie said recent cost-cutting and restructuring had compromised safety within the company: "In the almost four years I have been there, I'm still amazed no- one has been taken out."
Workers were being asked to take on duties formerly performed by many more staff, which compromised their work, he said.
"There's a limit to flexibility. We're going to have to take yoga classes, I think. It's got that bad."
Thirty-year railway employee Raymond Terrey reiterated many of Mr Ritchie's comments, and noted a lack of staff and equipment.
"The actions of Tranz Rail in having lower staff numbers in order to operate a railway system with high profit returns, have been at the demise and expense of its staff, many of whom have paid the ultimate price with their lives," he said.
Wellington QC Bill Wilson, who is heading the inquiry, said it was important to hear from family members and workmates, so the inquiry could understand the impact of the accidents.
Fifteen workers have died in Tranz Rail accidents since 1993, and about 60 serious injuries have occurred. South Island men Neville Bell, Graham White, Bill Trouland, Paul Kyle, Neil Faithful, and Robert Burt were among those killed.
Yesterday, Mr Bell's sister, Fay Bell, and mother, Pat Bell, told the inquiry how they last saw Mr Burt at a Workers' Memorial Day where she was remembering Mr Bell's death in 1994. Fay Bell recalled: "Robert gave us a big hug".
Less than a fortnight later he was dead, killed in another Tranz Rail accident.
"Far too many people die and are seriously injured while working for Tranz Rail. There are more people being injured and dying now than in the past. Tranz Rail urgently needs to pay more attention to its employees," Fay Bell said.
Pat Bell said she still could not understand her son's death. "He was careful and he was very safety conscious. His death has had a great impact on our family."
Another former Tranz Rail employee, now a brain-injured beneficiary, said his accident had been caused by fatigue and over-work.
--------------------
CAPTION:
PHOTOS: DAVID ALEXANDER Pat Ritchie,
right, gives evidence while union secretary Wayne Butson takes notes. Bill
Wilson PHOTO: DAVID ALEXANDER Ivan Riordan is overcome with emotion as he
tells the Tranz Rail inquiry in Christchurch of the death of his workmate,
Neville Bell, at Waipara, in 1994. Mr Riordan and Murray Blair, left, were
first on the scene of the accident.
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: National
Topics: RAIL ACCIDENTS ; DEATH
; BOARDS AND COMMISSIONS OF INQUIRY
Sub-Topics: RAIL SAFETY ; INDUSTRIAL
ACCIDENTS ; RAIL TRANSPORT ; RAIL TRANSPORT ADMINISTRATION ; CHRISTCHURCH
CITY
Corporate: TRANZ RAIL
© The Christchurch Press
Company Limited 2000, All rights reserved.
Tranz Rail seller happy with progress THE DOMINION, 23 JAN 2001, Edition 2, Page 12.
By: FOX Andrea
--------------------------------------------------------------------------------
FAY RICHWHITE says the sale of its 14 per cent stake in Tranz Rail is progressing to its satisfaction, while fellow stake divestor Wisconsin Central continues to be seen by the market as a weak seller.
As the countdown to the sale of Tranz Rail's long-haul passenger service network Tranz Scenic began this week with at least one of the short-listed bidders due to start due diligence, Wisconsin's 24 per cent stake and Fay Richwhite's holding remained unsold after more than two months on the market.
Fay Richwhite spokeswoman Michelle Boag said yesterday that while no sale announcement was imminent, progress was satisfactory.
But analysts said the going would be slow for the two sellers, Tranz Rail's biggest shareholders, while the market saw Wisconsin as a weak seller because of recent ructions in its boardroom.
Wisconsin's former chairman and chief executive Edward Burkhardt, ousted from his executive roles in July 1999 after 12 years in the jobs, was late last year fighting to replace Wisconsin's management. His group, the Wisconsin Central Committee to Maximise Shareholder Value, holds about 7 per cent of Wisconsin Central's shares, and has the backing of its biggest shareholder, Southeastern Asset Management.
One analyst said Mr Burkhardt opposed Wisconsin Central's intention to restructure and sell parts of Tranz Rail, and though he had recently conceded failure in his bid to overthrow the company's leaders, the market was now shy about buying into Tranz Rail New Zealand's public railway company.
The analyst valued Wisconsin's Tranz Rail shares at $4 each.
Tranz Rail shares closed yesterday down 3c at $3.70.
Meanwhile, Australian company West Coast Railway yesterday said its experience had given it the confidence to enter the bidding for Tranz Scenic against much bigger rivals such as French rail and bus operator Transdev.
Geelong-based West Coast has made a shortlist of bidders for the eight long-distance services.
Transdev is also interested in buying Tranz Rail's Tranz Metro Auckland and Wellington commuter services.
Several New Zealand companies are understood to have expressed interest in buying Tranz Link, Tranz Rail's freight transport operation, which generates about 70 per cent of the company's total revenue.
Due diligence by most of short-listed Tranz Scenic bidders is due to start at the end of this month.
Final bids are due in early March.
West Coast chief executive Don Gibson said yesterday he did not know what companies he was up against in the bidding.
Tranz Scenic and West Coast, a private company formed eight years ago, were similar companies and West Coast saw the opportunity to expand the New Zealand service.
Tranz Rail, bought from the Government in 1993 for $400 million by a consortium including Fay Richwhite and Wisconsin Central, announced the sale programme and restructure in October to move to a less-capital intensive structure.
Tranz Rail said it had invested another $900 million in the company since 1993, and operating profits were not supporting an adequate rate of return on that investment.
--------------------
CAPTION:
Ms Boag
Mr Burkhardt
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: BUSINESS ; RAIL TRANSPORT
© Wellington Newspapers Limited 2001, All rights reserved.
Main Tranz Rail backers to quit? WAIKATO TIMES, 11 NOV 2000, Edition 2, Page 18.
--------------------------------------------------------------------------------
Tranz Rail says it had been advised by its two principal shareholders that they are exploring the possibility of selling their shares.
Wisconsin Central International Inc currently holds about 24 per cent of Tranz Rail shares and Pacific Rail, a Fay Richwhite trading company, owns about 14 per cent.
Both have engaged Deutsche Bank AG as financial advisers to explore potential sale of their holdings in Tranz Rail.
A consortium led by Wisconsin Central and Pacific Rail paid the government $328 million in 1993 for Tranz Rail and have since invested a further $750 million.
Both Tranz Rail and Wisconsin are undergoing shake-ups at the moment.
Former Tranz Rail chairman Ed Burkhardt is attempting to wrest back control of Wisconsin Central Transportation in light of its disastrous share price slide from $US41 three years ago, to $US10 in September. It was at $US14.25 yesterday.
Mr Burkhardt, who was ousted as Wisconsin Central's president and chief executive in July, has set up a shareholder committee which wants to maximise the company's value. He claims support from 70 per cent of Wisconsin's investors.
One of his aims is to divest the poor performing international assets, of which Tranz Rail is one.
Analysts said such a move would be negative in the short-term for Tranz Rail because of the potential difficulties in finding a buyer for the block.
Tranz Rail spokesman Fred Cockram said it was premature to speculate on whether the restructuring programme would come to a halt if a potential buyer began due diligence.
Tranz Rail last month announced it wanted to slim down to become a straight freight operator. It also reported a bottom line loss of $16.4 million mainly because of a $16.5 million charge for the planned major restructuring. -- NZPA
Supplied by New Zealand Press
Association
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: RAIL TRANSPORT ; STOCK
EXCHANGE
© Waikato & King Country Press Limited 2000, All rights reserved.
3400 jobs affected in rail shakeup THE DOMINION, 11 OCT 2000, Edition 2, Page 1.
By: WEIR James
--------------------------------------------------------------------------------
A HUGE shakeup at rail and transport company Tranz Rail will mean about 3400 staff will end up working for new masters, leaving just 600 or so behind in the existing company.
But Tranz Rail's recently appointed managing director, Michael Beard, said there would be "no large-scale redundancies".
The biggest shakeup at Tranz Rail for a decade may also see the company's Wellington head office move to Auckland, with commercial, pricing and sales staff "almost certain" to move north.
In the next two years, Tranz Rail will sell its commuter and long-distance passenger services and outsource its maintenance and engineering work so it can concentrate on rail freight and interisland ferry services.
Most existing Tranz Rail staff were expected to move to the new operators under present terms and conditions.
Tranz Rail has about 4000 staff, down from more than 20,000 in the late 1980s.
At the company's annual meeting in Wellington yesterday, Mr Beard also said it was "totally unacceptable" that five staff were killed in accidents last year. "I can't tell you the pain I felt walking into this company, to feel that we had blood on our hands."
Finance Minister Michael Cullen and other ministers will meet Tranz Rail later this week to discuss the implications of the planned changes.
* Continued p2 * From p1
"It will mean changes to the way commuter operations are run in Wellington and Auckland, the loss of some services in rural areas and the transferal on to roads of a considerable amount of non-containerised goods," Dr Cullen said.
Tranz Rail will sell its long-distance passenger train service Tranz Scenic, operating passenger lines including those between Wellington and Auckland, the Christchurch-to-Picton line and the tourist TranzAlpine line.
"This will not be a fire sale," Mr Beard said.
If the company did not get offers that made good sense then it would re-evaluate the sale.
Passenger rail services used to cater for cheap domestic travellers, but more recently part of the network such as the TranzAlpine line had been developed into a tourism business -- not part of Tranz Rail's core business.
Offers for the lines will be sought by Christmas.
Commuter rail services in Wellington and Auckland will probably be run by new companies in future, "outsourcing" the service in conjunction with the regional councils who help fund commuter lines.
Many maintenance services will also be contracted out, including engineering workshops, civil engineering, signalling and telecommunications, possibly including shunting and ferry terminal operations.
Tranz Rail is also seeking expressions of interest in its refrigerated-freight business.
The interisland ferry service -- described by Mr Beard as the "jewel in the crown" for Tranz Rail -- is understood to be a highly profitable part of the business and a critical link for North and South Island rail freight services.
But the company said that the
Napier-to-Gisborne branch rail line was likely to be closed.
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: NATIONAL
Topics: BUSINESS ; RAIL TRANSPORT
© Wellington Newspapers Limited 2000, All rights reserved.
Pricing angers truckies (interisland monopoly) THE PRESS, 1 AUG 2000, Edition 2, Page 4.
By: TAYLOR Kevin
--------------------------------------------------------------------------------
A row has broken out over a predatory pricing claim against the Cook Strait Tranz Rail ferries.
Tranz Rail strongly denies the claim made by Road Transport Forum chief executive Tony Friedlander, saying it made no apology for competing in a tough market.
Mr Friedlander said price controls were needed on Cook Strait ferry operators to stop Tranz Rail exploiting its market dominance with predatory pricing. The forum, representing 4000 truck operators, has asked Transport Minister Mark Gosche for a Commerce Commission investigation.
Mr Friedlander said Tranz Rail was forcing rival operator Fast Cat Ferries, which began operating Top Cat in May 1999, out of business by cutting freight prices on targeted sailings.
Tranz Rail has 80 per cent of the Cook Strait freight market. Its dominant position meant its profitability was hardly affected when it heavily reduced prices on some sailings, he said.
Top Cat last year started charging the "going rate" of $90 a lane metre for freight, but Tranz Rail had since halved its charges to $45 a lane metre on sailings leaving within an hour of Top Cat, he said.
"This seems to indicate the rate is a temporary measure aimed at crippling Top Cat's profitability and leading to a reinstatement of a Tranz Rail monopoly."
Tranz Rail's external relations manager, Nicola McFaull, said New Zealand's transport market was very competitive.
Tranz Rail did not have dominance over the Cook Strait freight market. It was one of four freight service operators between Wellington and Picton. Tranz Rail also faced increased competition from ships visiting New Zealand ports and transporting cargo domestically.
She said different rates were charged for different sailing times. Off-peak sailings or services with additional capacity were priced differently.
"This is standard business practice and the same techniques are used in the transport market the world over, including the airline and rail operators. Tranz Rail has been doing this for a number of years."
A spokeswoman for Mr Gosche said
the issue was for the Commerce Commission. The commission said it had not
yet decided whether to investigate. Fast Cat Ferries chief executive Keith
Pybus was reluctant to comment until he had seen the forum's full report on
the issue.
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: National
Column: REGIONAL NEWS
Topics: FERRIES ; PRICES ; COMMERCE
Sub-Topics: ISLANDS AND STRAITS
; WELLINGTON AREA ; KAIKOURA-MARLBOROUGH ; RAIL TRANSPORT
© The Christchurch Press Company Limited 2000, All rights reserved.
Fay, Richwhite silent on Tranz Rail sale THE DOMINION, 13 NOV 2000, Edition 2, Page 19.
By: STEEMAN Marta
--------------------------------------------------------------------------------
INVESTMENT bankers Sir Michael Fay and David Richwhite, now based in Geneva, are remaining tightlipped about a decision to quit Tranz Rail.
Wisconsin Central, a listed United States railroad operator, said both it and Pacific Rail, owned by Sir Michael and Mr Richwhite, had hired Deutsche Bank to explore selling their holdings in the New Zealand national rail business.
A spokeswoman for Sir Michael, Michelle Boag, said yesterday that Pacific Rail did not want to make any comment.
"From what he said to me, he would prefer not to get involved in any public speculation at this time," Ms Boag said.
"They regard it as an issue for themselves as shareholders.
"It was Wisconsin that filed the notice.
"Pacific Rail has not made any comment publicly and they want to stick to that position," she said.
"It was not an initiative of Pacific Rail because Pacific Rail is not a publicly listed company and on the Nasdaq whereas Wisconsin is, so Pacific Rail was included in the notice but it wasn't an initiative of Pacific Rail to announce publicly," Ms Boag said.
Wisconsin has 24 per cent and Pacific Rail 14 per cent of Tranz Rail.
David Richwhite, a director of Tranz Rail had also declined to give his views on comments made earlier last week by former Tranz Rail chairman Ed Burkhardt that there was value in keeping Tranz Rail as an integrated business and not going ahead with the huge restructuring and sell-off of several parts of the business.
The Wisconsin board's decision to divest the 24 per cent stake may achieve want Mr Burkhardt wants as the assets cannot be sold while due diligence by potential buyers of the controlling 38 per cent stake is taking place.
Mr Burkhardt, ousted as Wisconsin's president and chief executive, has set up a shareholder committee to pressure the Wisconsin board to exit its underperforming investments, including Tranz Rail.
But he sees Tranz Rail as a whole having more value than the split of the parts.
Two potential buyers for the controlling 38 per cent stake are a local consortium led by infrastructure investor Infratil, that has built a 7.2 per cent stake in the past few months, and reportedly French multinational transport operator Transdev which has expressed an interest in the stake and keeping the parts of the business together.
Tranz Rail closed steady at $3.80 on Friday.
--------------------
CAPTION:
Sir Michael Fay
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: BUSINESS ; RAIL TRANSPORT
© Wellington Newspapers Limited 2000, All rights reserved.
Tranz Rail rejects monopoly claims THE EVENING POST, 26 JAN 2001, Edition 3, Page 3.
By: O'CONNOR Juliet
--------------------------------------------------------------------------------
Tranz Rail has hit back at claims it holds a monopoly over services on Cook Strait, saying other operators are available.
Passengers and freight companies have criticised Tranz Rail for slow and delayed services during the past five weeks.
Today, ferries were running one to two hours late.
MPs have criticised Tranz Rail's stranglehold on passenger services across the Strait, saying another ferry operator is needed.
But company spokeswoman Nicola McFaull said yesterday Tranz Rail wasn't the sole Cook Strait operator and criticism that it held a monopoly was unfair. "We are not the only operator . . . people can use other services."
Alternatives include passengers flying, while freight companies can use Pacifica Shipping, between Wellington and Christchurch, or Strait Shipping's Suilven, between Wellington and Picton.
However, there is no alternative for people wanting to cross the Strait with their vehicles.
The Road Transport Forum, which represents truck companies, believes Tranz Rail drove Top Cat out of the market by reducing its rates on selected sailings. The Commerce Commission is investigating this after a complaint by the forum last year.
Mana MP Graham Kelly (Labour) said more competition was vital on Cook Strait and the travelling public's support for rival services over the years proved there was a willingness for an alternative to Tranz Rail.
Tranz Rail's ferry delays have been exacerbated by engine problems in the Aratere ferry. It also says its had unprecedented freight demand at the busy holiday time.
It has told customers to check
ferry times by phoning 0800 802 802 and has transferred some passengers to
faster and more convenient Lynx sailings.
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: NATIONAL
Topics: FERRIES ; RAIL TRANSPORT
ADMINISTRATION
Sub-Topics: WELLINGTON CITY ; ISLANDS
AND STRAITS ; KAIKOURA-MARLBOROUGH
© Wellington Newspapers Limited
2001, All rights reserved.
Residents vow to fight fast ships in the night THE EVENING POST, 12 DEC 2000, Edition 3, Page 3.
By: O'CONNOR Juliet
--------------------------------------------------------------------------------
Marlborough residents have vowed to fight plans by Tranz Rail to speed up its night-time crossings of Cook Strait.
Tranz Rail wants an exemption to run its Lynx ferry at full speed through the Marlborough Sounds at night, saying speed restrictions inconvenience its customers.
On Friday Marlborough District Council will impose an 18-knot (33km/h) speed restriction after an earlier ruling that higher speeds were unsafe.
Tranz Rail Interisland Line manager Thomas Davis said today it was running extra sailings on five nights this month to cope with demand and it wanted to go faster in the Sounds because the late schedule inconvenienced customers.
Save the Sounds spokesman Peter Beech said residents opposed Tranz Rail seeking any exemption. "There is no way, with their record of irresponsibility, that we are going to let them get away with that."
Tranz Rail started its new Lynx service on Sunday, washing up big waves in the Sounds. Several residents said the vessel was going much faster than 18 knots, but Tranz Rail denies this.
Mr Beech said Sunday's incident came after its wash swamped a boat and smashed a wharf during 40-knot trials on Friday. "It is nothing short of vandalism. They knew how bad the wash was, they knew that 40 knots is a critical speed and yet they still did it. They have got no respect for human life. They don't care."
Mr Davis said the ferry was observing the bylaw but trials showed the ship was leaving "pretty bad" wash at 42 knots. It would prefer running at full speed at night, but might have to seek a lower speed exemption, of 25 knots for example. The speed restriction had lengthened the crossing time, forcing Tranz Rail to drop a daily return sailing. However, it had added five evening sailings from December 20 to cope with demand after rival Top Cat closed.
Mr Davis said it wanted faster crossings because the last one, leaving Picton at 11pm, was an unsociable time for customers to travel. There was lower safety risk around the shores at night, he said. "People are not out in vessels or playing out on the sand."
Marlborough District Mayor Gerald Hope said Tranz Rail hadn't applied for an exemption. An exemption would need to be decided by the council's regulatory committee, he said.
The council says Tranz Rail would
need to prove that wave outputs from a fast ferry travelling higher than 18
knots posed no higher risk than the wake of conventional ferries.
--------------------------------------------------------------------------------
Section: NEWS
Sub-Section: NATIONAL
Topics: FERRIES ; MARINE SAFETY
Sub-Topics: ISLANDS AND STRAITS
; KAIKOURA-MARLBOROUGH ; WELLINGTON CITY
© Wellington Newspapers Limited
2000, All rights reserved.
Tranz Rail may raise rates after losses THE DOMINION, 2 FEB 2001, Edition 2, Page 13.
By: Van den BERGH Roeland
--------------------------------------------------------------------------------
TRANZ RAIL flagged further rate increases yesterday after reporting a $6.7 million loss for the six months to December 31 because of rising fuel costs and a restructuring provision.
The result compares with a net profit of $21 million for the same period in 1999.
Tranz Rail is in the first year of a two-year restructuring programme that will see the company refocused on freight and Cook Strait ferry services and selling its passenger rail services.
It provisioned $16.5 million for the restructuring in the first quarter.
Fuel and electricity costs rocketed 87 per cent and 62 per cent respectively during the period to a combined cost of $35.8 million from $22.1 million.
Chief financial officer Mark Bloomer said Tranz Rail was not expecting a reprieve in prices in the short term. He said $5 million of the $16.5 million provision had been used during the reporting period. The remaining $11.5 million was expected to be spent in the second half.
Most of the provisioning related to redundancies, with the remainder for moving some head office functions to Auckland.
Operating profit for the six months was $800,000, but would have been $17.3 million without the provision, compared with $33.1 million for the same period in 1999. For the December quarter, the result was a net profit of $9.8 million, down from $15.5 million for the corresponding 1999 quarter.
The half-year result was achieved on revenue of $305.7 million, up from $298.9 million. Most customers experienced an 8 per cent increase from October 1, after a 6 per cent increase in July, and 3 per cent in March.
Mr Bloomer said future increases could not be ruled out.
Rate increases had been slow to take effect or were inadequate to fully cover increased fuel costs.
A number of interested parties were conducting due diligence on the Tranz Scenic and refrigerated road freight businesses and an announcement on their sale was expected by April.
The result was issued after the market closed and Tranz Rail shares closed down 15 cents on $3.60 on the back of an announcement that key shareholder Wisconsin Central Transportation would be bought by Canadian National Rail.
Analysts said the announcement would cap the share price because Canadian Rail wanted Wisconsin to sell its Tranz Rail stake before the deal was completed, probably in October.
"It is likely that Wisconsin will have sold its shares in Tranz Rail prior to then," Mr Bloomer said.
Broken down, freight revenue was up $1.1 million to $231.1 million.
Freight tonnage and revenue tonne-kilometres decreased 2 per cent, but were offset by higher freight rates and increased revenue from commercial vehicles.
Agricultural and food products volume and revenue increased mainly as a result of increased exports of dairy products, together with an improvement in yield.
A weaker domestic economy cut revenue from manufactured products, which was down $2 million to $38.9 million.
Higher passenger fares and increased patronage saw passenger revenue improve by $5.6 million to $63.9 million.
"The revenue side is relatively
positive. The cost side has caused us some problems," Mr Bloomer said.
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: BUSINESS ; RAIL TRANSPORT
© Wellington Newspapers Limited
2001, All rights reserved.
Rail
at a crossroads THE DOMINION, 23 FEB 2001,
Edition 2, Page 8.
--------------------------------------------------------------------------------
LONG queues of Cook Strait ferry passengers stranded for hours in the hot holiday sun epitomised Tranz Rail's summer of discontent, as its unreliable services and less-than-robust financial health came under the spotlight. Because its network -- or what is left of it -- is so pivotal, Tranz Rail's problems quickly became New Zealand's problems. Tourism Minister Mark Burton joined the throngs of critics last month, impressing upon the company the serious potential damage its problems pose to New Zealand's tourism image and infrastructure.
Whether this leads to a discernible improvement in customer relations remains to be seen, particularly with Tranz Rail now focusing on yet another round of restructuring aimed at improving its below-par financial performance. By anyone's standards, the regular customer service lapses and the string of accidents and derailments are unacceptable in a country boasting tourism as its top foreign exchange earner.
Almost eight years after the government privatised rail, New Zealanders have every right to expect a better service and safety performance from an organisation trumpeting its transformation into a modern, efficient rail operator. It is difficult to know how closely Tranz Rail's financial and other performance woes are linked. Despite the company having invested about $900 million in locomotives, wagons, ferries, tracks and the like since 1993, public concerns remain about parts of its network being run down.
Treasury research commissioned before New Zealand Rail was sold in the early 1990s examined whether elements of the rail network could become unviable in private hands. In other words, the government's advisers were concerned that they would not make enough money. In itself, this was not a reason for taxpayers to retain ownership of the whole business. But it should have alerted policy makers to the need for a coherent transport strategy that put a monetary value on the public good provided by Tranz Rail's services and afforded regional or central government subsidies accordingly.
Stung by a sagging share price and shareholder gripes about inadequate returns, Tranz Rail's new management team is pursuing what is arguably the organisation's biggest shakeup yet. Directors are selling the long-distance passenger Tranz Scenic trains, the Tranz Metro operations in Wellington and Auckland, the engineering business and the refrigerated transport activities. The considerably pared-back company will be left with just its rail freight and Cook Strait ferry arms, to be run by a staff of fewer than 1000 -- a far cry from its once-vast empire of about 25,000 employees.
It is easy to forget the "take
it or leave it" service attitude of the bloated and bureaucratic Railways
Department of old. But it must be hoped that the new owners, when they can
be found, will provide the investment and business direction Tranz Rail's
offloaded services sorely need. With the cornerstone shareholders, America's
Wisconsin Central Transportation and merchant bank Fay Richwhite, poised to
sell out, Tranz Rail must finally deal to the many problems that have bedevilled
its performance for too long.
--------------------------------------------------------------------------------
Section: FEATURES
Sub-Section: EDITORIAL
Topics: BUSINESS ; RAIL TRANSPORT
© Wellington Newspapers Limited
2001, All rights reserved.
Railway boss got $1.79m package THE DOMINION, 4 OCT 2000, Edition 2, Page 18.
By: WEIR James
--------------------------------------------------------------------------------
TRANZ RAIL'S former chief executive, Francis Small, got a whopping $1.79 million salary and retirement package in the past year, according to the company's annual report.
It shows that $1.79 million was paid to Dr Small in the year to June, up from $606,000 in the previous year, suggesting a retirement payout of about $1 million.
After 36 years with the group Dr Small stepped down as chief executive in May this year but remains a director of the company, as vice-chairman of the board.
Given his time with the company and the former government-owned Railways, the payout was likely to include a component from a government superannuation scheme. Dr Small had been head of Tranz Rail since 1990.
Senior executive pay at Tranz Rail also varies, with bonuses depending on company performance.
His replacement as chief executive from May 13, Michael Beard, received $110,000 for six weeks up till the end of the June financial year, suggesting an annual salary of about $953,000. However, a Tranz Rail spokesman said Mr Beard had worked for the company for a couple of periods before the formal handover, so the figure was not a strict guide to Mr Beard's annual salary.
Mr Beard was also given 1.99 million Tranz Rail options for services provided to the company, as of May 8.
Mr Beard spent almost $550,000 buying Tranz Rail shares between his appointment in May and the end of June.
The report shows the sell-down by Pacific Rail from about 19 per cent of Tranz Rail to about 14 per cent at balance date.
This was reflected in the notes to the accounts showing Pacific Rail's representative on the Tranz Rail board, David Richwhite, sold more than 6.1 million Tranz Rail shares for more than $22 million.
Fellow Pacific Rail director Leigh
Davis sold 6.2 million shares, also for more than $22 million.
--------------------------------------------------------------------------------
Section: BUSINESS
Topics: BUSINESS ; RAIL TRANSPORT
; WAGES
© Wellington Newspapers Limited
2000, All rights reserved.
Unloved Tranz Rail doggedly restructures The Independent - 8 February 2001 : Page 26
Jenny Ruth
The market trashed Tranz Rail's
shares hard last week, partly due to fear that Wisconsin Central International
may dispose of its 24% stake through a public offer, exiting New Zealand in
a similar fashion to Waste Management's major shareholder.
US-based Waste Management's sale
of its 60.5% stake in the New Zealand operation swamped the market, precipitating
a fall in the share price from December 1999's $4.80 high to a $3.10 low before
the shares began a slow rally.
They were trading at $4.66 late last week.
Since 10 November, Wisconsin Central's and Fay Richwhite's 14% stakes have been officially on offer in a market convinced that international trade buyers aren't interested.
When the stakes were put up for sale, the names of a range of possible buyers were bandied about including French rail and bus operator Transdev. Also tipped as potential buyers were those which missed out when Wisconsin/Fay Richwhite beat them to the punch when the government sold its railway in 1992.
Now the rumour mill has gone silent.
"It's not an easy ask to find somebody to buy it,'' says Credit Suisse First Boston analyst Andrew Mortimer, summing up the prevailing market view.
That didn't unduly upset the punters. Paul Turnbull, an analyst at JP Morgan, says the view had been that if Wisconsin Central couldn't find a trade buyer willing to pay its price it would simply have held on to it.
"While they would still be committed to selling it down the track, they wouldn't do it aggressively,'' Turnbull says.
Then came last week's announcement that Canadian National Railway plans to buy Wisconsin Central for $US1.2 billion.
Canadian National, which also owns the Illinois Central railroad, is about 10 times the size of Wisconsin Central. But it has made it clear it doesn't want Wisconsin Central's international holdings. Wisconsin Central owns stakes in British and Australian railroads as well as Tranz Rail.
In the slow US regulatory environment that the deal isn't expected to be completed until October, so Wisconsin Central has a little time up its sleeve.
US regulators may scuttle the deal.
Last year, the Surface Transportation Board scuttled a plan by Canadian National and Burlington Northern Santa Fe to create North America's biggest railroad by combining their rail networks.
That said, our market reckons the Canadian takeover shifts Wisconsin's stance from a willing - but not desperate - seller to a forced seller.
Accordingly, Tranz Rail's shares fell from $3.75 before the news broke to as low as $3.55 last week.
"The situation is quite complex.
"The major shareholder is selling down its Tranz Rail stake as Tranz Rail's undergoes a restructuring.
"Tranz Rail aims to sell many of its assets. Anyone interested in buying Wisconsin's stake in Tranz Rail is going to have a hard time putting a price on it," observed one analyst.
Not everyone is taking such a pessimistic view.
Rob Mercer, research manager at Forsyth Barr, says that while he has no particular knowledge of potential buyers, he's sure they exist.
"It's a good business and has good elements to it. There's substantial upside if they get it [the restructuring] right,'' Mercer says.
Another analyst says that the Wisconsin Central stake being up for sale hasn't slowed down Tranz Rail's restructuring is a positive sign.
Tranz Rail plans to quit everything but the rail freight, distribution and ferry businesses and to out-source many services currently provided in-house.
When it released its disappointing second quarter results last week, the company outlined progress to date and said it expects to be able to announce the first sales, that of its Tranz Scenic long-distance passenger business and its refrigerated road freight operation, by April.
Both businesses are undergoing due diligence by potential buyers.
The company is also working on rationalising its freight operations.
In the last quarter it reconfigured its ferry fleet. It retired its Condor Vitesse fast ferry, which couldn't carry commercial vehicles, and the Arahanga, which couldn't carry passengers, and replaced them with a new fast ferry, Incet 057, which can carry both passengers and commercial vehicles.
Other parts of the restructuring have become bogged down in politics. The $112 million sale of the Auckland rail corridor to the Auckland Regional Council is stalled awaiting the endorsement and financial participation of the central government.
While Tranz Rail has begun negotiating a similar deal with the Wellington Regional Council, it admits the sale will also need central government's backing.
Mercer says in the end the government will have to back the Auckland sale. "I still believe there isn't a better alternative. At some stage, Auckland has to make that decision and improve its transportation.
"There aren't a lot of alternatives to get people off the streets,'' he says.
If the deal succeeds, it will add about 60 cents a share to Tranz Rail's valuation.
Mercer doubts Wisconsin Central will try to off-load its stake through a public offer.
"That there's an opportunity to take a strategic stake in the company and end up controlling the operation is the key factor. If you don't believe the assets are attractive at all to any global player, that's not a view I hold,'' he says.
Most analysts agree a trade buyer is more likely, however difficult that buyer might be to find, and that a trade sale would yield a higher price than a public offer.
"This is a stock New Zealand institutions don't particularly like and the New Zealand public don't like it much either. Unless it was very cheap it wouldn't get away. Tranz Rail isn't a loved company. It hasn't been a good performer,'' says one analyst.
The situation was completely different with the Waste Management sale. That is a company with a strong profitable track record and well-respected management. It also wasn't in the midst of being restructured.
Not that Tranz Rail's current management isn't respected. Managing director Michael Beard, formerly chief executive of Australia-New Zealand Direct Line, is well-regarded but has been in the job less than a year.
The company reported a net profit of $9.8 million for the three months ended December, 36.8% lower than in the same three months a year earlier.
Stripping out the tax credit from the latest quarter and tax charge in the year-earlier period, the drop at the operating level was an even larger 50%.
Still, the company gave shareholders
ample warning that until the restructuring has been completed, its operating
performance won't be satisfactory.
Copyright¸The Independent
(1087 words)
FORMER
TRANZ RAIL BOSS FIRES BROADSIDE AT FAY RICHWHITE
The National Business Review -
27 Oct 2000
BY NICHOLAS BRYANT
Tranz Rail's decline is "Fay Richwhite
writ large, the investment banker way of doing business, spin everything off
or else," says fighting former chairman Ed Burkhardt.
Mr Burkhardt got stuck into the
performance of merchant banker Fay Richwhite as he revealed his plans to overthrow
the board of Wisconsin Central, Tranz Rail's major shareholder.
He said he was sickened to see how Tranz Rail had gone downhill and called current management's plans to turn it around some of the strangest thought processes for running a railway he had ever seen.
"Tranz Rail is a fine railway that has not been well managed and the remedies we're seeing won't work - they're well wide of the mark," Mr Burkhardt said. As a result, Wisconsin Central Transportation Corporation's 23.75% stake in Tranz Rail could be sold within a year.
The move depends on Mr Burkhardt successfully orchestrating a major shareholder rebellion and sacking Wisconsin Central's board of directors.
And his chances look good.
Mr Burkhardt, Wisconsin Central's founder who was sacked as president and chairman 15 months ago, is understood to have big institutional investors, which hold 70% of the company's stock, on his side.
Sales of foreign holdings would be "first item on the agenda" if the takeover bid was successful, Mr Burkhardt said.
At the top of his list of Tranz Rail's current ills is the way management is wringing its hands in despair over higher fuel costs.
Had the company been well run it would have had fuel-price pass-through provisions written into contracts so freight customers bore the brunt of price hikes, he said.
Railways should fare better than other freight haulers in an era of high fuel costs because they use less fuel to move a tonne of freight from source to destination than trucks.
"If Tranz Rail is absorbing the price rises itself because they've written contracts that don't provide for it, I don't see it as a fuel price problem - it's a management problem," Mr Burkhardt said.
Fay Richwhite director David Richwhite has a seat on the board of all three Wisconsin-held companies, while his cohort at Jump Capital, Leigh Davis, is also a Tranz Rail board member.
Wisconsin Central's net income has slipped 17% in the past year, while its share value has almost halved from $US18.88 to $US10.65 a share.
©Fourth Estate Holdings Ltd(418
words)
Tranz Rail quits the train business The Independent - 11 October 2000 : Page 1
Jenny Ruth
Tranz Rail says it plans to sell,
close or otherwise dispose of all its operations except its core rail freight,
its door-to-door distribution services and its Cook Strait ferries - a move
predicted by The Independent in its 12 July issue.
Everything else, including Tranz
Rail's long-distance passenger trains, its refrigerated freight business and
its commuter services will go.
Controlled by Wisconsin Central and Fay Richwhite, the company also plans to out-source many of its services, including track maintenance, rolling stock and locomotive engineering maintenance and terminal operations.
The operations to be out-sourced currently employ about 3,400 staff.
The company says it doesn't expect significant redundancies and expects those employees will be taken on by whoever contracts to supply those services.
Tranz Rail will be left with about 600 staff.
The company also warned its first-quarter profit will be hit by fuel prices which were more than double the prices prevailing in the same quarter last year.
It says it's doing what it can to recover fuel costs through higher freight rates and energy efficiency measures, but the bottom line will still be affected.
It will also be hit by one-off costs associated with the restructuring plans.
The company didn't say how much the bottom line will be affected, or even if it will report a loss. It made a profit of $10 million in the same quarter last year.
The long-distance passenger trains and the refrigerated freight business will be put up for sale shortly.
Managing director Michael Beard says what happens with the commuter services is a matter for negotiation with the relevant regional councils, but that Tranz Rail can't continue to operate them in their present form.
The company is already negotiating with the Auckland Regional Council.
Beard says the company currently provides commuter services in Wellington on a 12 month contract.
Significant capital spending is needed to up-grade the Johnsonville line and other parts of the network. But Tranz Rail will need a much longer contract before it commits itself to spending such money, he says.
The company also plans to either close unprofitable lines or to reassign its leases. "We are actively reviewing a number of lines that give dubious returns, including the Napier to Gisborne line and Rotorua branch line," Beard says in a speech prepared for yesterday's annual shareholders' meeting.
He acknowledges there's a lot of concern about line closures.
"There are also reasons, other than commercial, to keep marginal lines operating," such as environmental and safety concerns.
"It is entirely possible the government may consider it in the national or community interest to allocate funds to certain lines to ensure their viability. Tranz Rail would be open to such overtures," Beard says.
At a briefing for journalists ahead of the annual meeting, chief financial officer Mark Bloomer said the reason for selling the long-distance passenger trains isn't because they aren't profitable but because they aren't part of the newly-defined core business.
Chairman Robert Wheeler said the long-distance trains would be better operated by someone in the tourism industry.
Asked why Tranz Rail is keeping its ferries when it wants to exit all other passenger services, Beard said: "We would be very careful about breaking the link between the two islands." Still, it's possible "to think about" separating heavy freight from the transport of cars and light vehicles, he said.
Wheeler's speech to the meeting made no bones of the reason for the changes.
It was not because the market doesn't understand Tranz Rail that the shares have fallen from a high of about $9.
"The market understands the company only too well and the current share price reflects the reality that our financial results have been mediocre," Wheeler says.
The shares closed at $3.58 late yesterday before details of the restructuring were released to the market.
In the year ended June, the company's operating profit rose 3.4% to $70.8 million after adjustments for feasibility and redundancy costs.
"Our current way of operating does not give an adequate return to meet long-term capital requirements. We have poor asset utilisation. Even our trucks do not work as hard as those of our competitors," Wheeler said.
The company's high fixed costs don't give it sufficient flexibility and it doesn't have the ability to increase or, in some cases maintain, its freight rates to recover costs, he said.
The company has tried to do too much at the expense of excellence in its strengths. It still struggles to deal with the complexity of the current organisation despite extensive re-engineering in the last seven years and its delivery of service falls short of commercial needs, Wheeler said.
"The Tranz Rail of the future
will be a transport services management company. It will be smaller, more
focused, safer, less capital intensive, driven by service excellence and more
profitable." Finance minister Michael Cullen is meeting Tranz Rail's board
on Thursday.
Copyright¸The Independent
(826 words)
TRANZ RAIL MOVES TO LIFT ITS VALUE The National Business Review - 25 Aug 2000
BY RAY LILLEY
Using other people's capital through
lease-backs and contracting out services are emerging as keys to the redirection
of Tranz Rail as new-broom chief executive Michael Beard aims to lift shareholder
value.
Company insiders say it's a business
structure Mr Beard has used in the past to ensure a major reduction in the
amount of capital - and risk - on company books. The approach should see the
leasing of the rail ferry and truck fleets, the sale and contracting back
of core support activities such as the railway workshops and a slimline corporate
management structure.
Mr Beard signalled his reshaping this week by reducing the number of managers reporting directly to him as chief executive. Two top managers will resign and two more will take up independent contract work.
For Tranz Rail this will be a major cultural change to its traditional rail business, which internationally is accepted as capital expenditure-hungry. Mr Beard may even reinforce the change by moving the corporate office to Auckland.
Company spokesman Fred Cockram said a shift was "being considered" among a wide range of options but nothing had been decided.
While there have been no indications of what will happen to unprofitable parts of the core rail business, such as the Northland and Wairarapa lines, Tranz Rail has confirmed it is working closely on this with community, customer and interest groups.
It will take three to five years to turn the rail-cum-transport company from its big capital project approach of the past to a focused shareholder-value company. Analysts have predicted it will be at least five years before the company is fully profitable.
Mr Beard will be offshore for
about a month, selling the family home in the US and at board meetings for
Tranz Rail. He is due to unveil the initial stages of his change plans by
late next month.
©Fourth Estate Holdings Ltd(331
words)
CEO's
landmark retirement The National Business Review - 12 May 2000
BY RAY LILLEY
Corporate survivor Francis Small
bows out after a landmark career, writes RAY LILLEY
The original rail man reaches the
end of the executive line today, a 40-year journey from public servant to
private sector operator unmatched in New Zealand.
Dr Francis Small survived in senior management roles in Tranz Rail as it moved through its reconstruction from a public service labour camp to corporatisation in 1982, to state-owned enterprise in 1990, privatised company in 1993, and its public float.
His retirement as managing director is a landmark. He is perhaps the sole survivor still in top office from the public sector re-engineering upheavals triggered in the early 1980s. He is one of few who entered a company at ground level aged 17 and rose to chief executive.
Although Dr Small will not say it, he is probably more responsible than any other single individual for "saving rail" as a major transport mode in this country.
Now a thriving, competitive integrated transport group with 4200 staff, the old Railways Department had 23,000 staff in the late 1970s when it began its 20-plus year odyssey of change.
How did he survive?
"In my case I guess I went through three or four different incarnations, three or four different aspects of the business ... In a steady-state situation you'd atrophy, and there have been some examples around of that happening." He doesn't expand.
"But the 40-year syndrome has gone. That went in the late 1980s and I suppose if we hadn't gone through these changes in blocks I would have gone too. So it was bloody interesting."
It meant proving to the new board each time that he had the drive and shared the board's vision for taking the next steps with the business: "I would do it all again."
As Dr Small leaves office, transport and other utility stocks are returning to favour in markets such as the US.
"Bill Gates just bought 7% of Wisconsin Central," Dr Small said.
He smiled as he savoured the thought of the technology whiz buying something as down and dirty as rail stock. Wisconsin Central is a 23% shareholder in Tranz Rail.
For a civil servant steeped in the "rail culture" - his father was a lifelong rail man before him - Dr Small displayed his personal response to change in rail when he nominated the day Tranz Rail was floated on the New York Stock Exchange as the high point of its reinvention.
He stood in the Goldman Sachs trading room in Manhattan when the stock came on to the floor, for him the most defining development for modern rail.
"It was a pretty exciting moment - a bit like launching a rocket."
He wanted to talk about the market, and about change being facilitated by the "culture of rail" which had allowed change from a rail operator to a total freight provider with a smorgasbord of services.
The "dam-burst" changes of the late 1980s and early 1990s taught bitter lessons to Tranz Rail, which realised permanent, evolutionary change was the only way to prevent another pent-up demand for restructuring.
The 1994 Cook Strait ferry row did not see war actually break out between company and union but "we got to five minutes to midnight at a couple of stages."
Now, annual ferry negotiations are not played out at school holiday time through the media. Holidaying passengers and tourists are not held hostage.
Tranz Rail staff remain highly unionised, with 80% members of unions and party to collective agreements.
Opening the books to union scrutiny is already established practice, with independent third-party accountants coming in on behalf of union groups. Dr Small said many of the changes proposed by Labour's Employment Relations Bill are already common practice at Tranz Rail.
"We're not throwing up our hands in abject horror but we'll be making some suggestions for changes in what [the government] is proposing."
Tranz Rail would insist on talking directly to its staff, just as staff took a direct interest in what the business is doing - a central part of railways culture for decades.That tradition even saw Little Red Books of information produced for staff nationwide when major- change projects were planned and implemented.
Castigated last year by analysts for its high capital expenditure on maintenance and upgrade projects, Tranz Rail has adopted a $50 million a year limit on that spending for a couple of years to help lift its profitability.
Railway systems worldwide have voracious capital needs and have to find inventive, creative ways to lower their capital expenditure needs and remain competitive.
That approach could see Tranz Rail invest in new fast catamaran ferries to replace its conventional passenger and freight ferries on the Cook Strait run. The Incat-style vessels would enable five round trips a day to the new Clifford Bay terminal - instead of the current two round trips.
"It will be an interesting debate ... whether we replace Arahanga with an Arahanga look-alike, or whether fast ferry technology ... can perform the same [freight] tasks as Arahanga."
Dr Small would like the company to be further down the e-commerce track, but said successor Michael Beard had special skills in the area, and would extend business-to-business initiatives with vigour.
Market analysts had climbed a steep learning curve in the past few years, as transport groups have listed here. His frustration was with analysts looking quarter by quarter at a long-run cyclical business so, when the cycle was in down-turn, "there's not much we can do about it" if people did not milk cows or cut down trees.
But he believed a better understanding was emerging among market watchers.
As a stockholder and executive he remains disappointed with company performance.
After three good quarterly results that did not happen by accident, and with all the analysts reporting favourable buy recommendations, he said he was bemused by the low price of the stock.
"It's not that Tranz Rail has been singled out. Transportation stocks have been out of favour," after being the dotcom stocks of the early 1990s. "Wisconsin Central was at $US42 then but is now at $US14. They've taken rather a bigger hit than we have."
Changes and opportunities are
seen in the whole dotcom revolution, with products like meat moving to fresh
supply - changing processing, transportation and ware- housing systems along
the supply chain.
©Fourth Estate Holdings Ltd(1109 words)