Rail takeover deal finalised

8.45AM

Negotiations between the Government and Toll over the country's rail network went right down to the June 30 deadline, but the deal has been done.

Finance Minister Michael Cullen says the deal to buy the network from Toll for a dollar was finally completed last night.

The agreement follows months of often fractious negotiations with the Australian company, which bought Tranz Rail last year.

Dr Cullen says the government is committed to spending $200 million over four years upgrading the track.

Toll will invest $100 million in rolling stock.

The company will also manage the track until September, when the Government's new Trackco agency will take over.

Both sides had last night shut down on comment beyond saying that progress was being made.

There were no signing ceremonies or photo opportunities scheduled for the u-turn in economic history.

The Government sold the track with the rail company in 1993 and is buying back a rundown network in 2004.

The rail company is now controlled by Australian company Toll Holdings and Tranz Rail has become Toll NZ.

Finance Minister Michael Cullen lambasted Toll this month for dragging its feet on the deal and said he was not prepared to see Toll gain a tax advantage if the deal was concluded after June 30. He threatened to legislate.

"I am not happy with the way negotiations have proceeded," he said then. "I don't think it has been a good start to the relationship."

The Australians wanted the access regime agreed before letting the track go.

Toll was not believed to be holding out for control of the signalling system, which will pass to the new track owning company. Toll NZ will continue to run the network until the new company has safety certification and staff in place to take over.

The Government is to spend $200 million over five years on the rail network but major users estimate $300 million to $400 million of maintenance has been skipped in the past 10 years.

Cullen has said there is a reasonable chance that more than $200 million will be spent.

Analysts estimate there is a $10 million advantage to Toll if the deal goes through in the new financial year but they did not see that as the main reason for the delay.

The deal was not included in a list of new measures "delivering fairness and security" in a press release from Prime Minister Helen Clark to promote policies that come into effect today.

The track deal

* In July last year the Government agreed to buy the rail network from Toll Holdings for $1.

* The deal included 4128km of main line track, 1787 bridges and 729 level crossings.

* The Government is to invest $200 million in upgrading the track over five years

* The Government also agreed to buy associated land and other assets for $50 million.

* A new company, initially named TrackCo, was to run the network from July 1.

* Yesterday was the deadline for the deal to conclude.

- NEWSTALK ZB / HERALD