State owned rail company KiwiRail has written down the value of its operation from $7.8 billion to $1.1 to $1.3 billion and will separate its rail and ferry operations out from its land holdings.
KiwiRail chaiman John Spencer said the rail operator had last year signaled its intention to alter its balance sheet to "reflect a standard commercial valuation approach''.
"Consistent with our indicative outline last year, the commercial arm of KiwiRail will carry assets valued at approximately $1.1 to $1.3 billion, reflecting the revenue they generate, rather than the current value of approximately $7.8 billion'', he said in a statement.
"This is a much more realistic valuation of the company's assets which will greatly assist KiwiRail in meeting its commercial objectives and provide more discipline in driving improved performance. We are amending our accounting methods to align to those objectives.''
Mr Spencer said a new State Owned Enterprise (SOE) would be created which will own and operate the rail and Interislander businesses under the existing KiwiRail brand.
Crown land held for rail purposes would continue to be owned by New Zealand Railways Corporation and made available for use by KiwiRail.
Finance Minister Bill English and State Owned Enterprises Minister Tony Ryalll said NZ Railways Corporation will continue to hold the 18,000 ha of rail network land, "from which no financial return will be expected''.
The freight, passenger and ferry business along with rolling stock, rail infrastructure and plant and equipment, would be transferred to the new SOE on January 1 next year.
KiwiRail's land and network assets would be written down from about $13.4 billion to about $6.7 billion.
Of that write down, about $4.9 billion would be covered by reversing an existing asset revaluation and the remaining $1.8 billion would be written off.
That $1.8 billion write off will be added to the Government's operating deficit for the current financial year, the ministers said, with the final position to be confirmed over the next few months before the annual accounts were published.
The previous Labour Government bought the rail operation, including rolling stock the ferries and infrastructure from Australia's Toll Holdings for $690 million in 2008.
The Crown already owned the land including the tracks.