Show and tell time at Tranz Rail meet

By PAM GRAHAM

Tranz Rail admitted yesterday that for 15 years it had not known what freight it was carrying.

Management were not surprised when a logging contractor from Northland stood up at the annual meeting in Auckland and said: "I owe you $1000 and I never got invoiced."

Chief executive Michael Beard said other customers had told him "the best thing about Tranz Rail is they don't charge us for our freight".

A fix was now being found for an information system that tracked wagons only, allowing some "freight into the system without a proper invoice".

Beard rejected one estimate that uninvoiced freight may have cost the company $600 million over 15 years.

"I don't think it's anything like that number but it is a reasonably significant number and one we would want to go after," he said.

Shareholders' Association chairman Bruce Sheppard was not among the 140 shareholders, some of whom had to stand in the small room. Beard said Tranz Rail met Sheppard privately last week.

Shareholder Oliver Saint criticised the move to elect directors before a reasonable question time and shareholder Gerald Petrie spoke at length about rail economics.

He argued that an unwillingness to carry marginal freight in quiet months was weakening the company's revenue base.

Beard said business was rejected when it required capital investment that would not provide a return and he invited Petrie for further discussions.

And that was the tone of the meeting. Critics were quelled by a mountain of information on latest trading, the proposed sale of the Tranz Metro passenger service in Wellington, the latest on the inland port plan in Palmerston North, the Clifford Bay terminal in Marlborough and progress on a new pay scheme for employees.

Tranz Rail is the second-worst-performing stock on the NZSE40 this year, behind Baycorp Advantage, and it is asking shareholders to provide $66 million to pay back banks and back a letter of credit to leaseholders of the Aratere ferry.

Chairman Wayne Walden admitted that the company had been through a period of crisis, and director John Loughlin used the word "precarious" to describe recent events. Beard said most of the issues facing the company after its credit rating downgrade to junk had been resolved in the past few weeks.

"Subject to credit approvals, the Aratere lease has been resolved, the rights issue will resolve our capital structure issues and we expect new banking facilities to be approved by November 20," Walden said.

Chief financial officer Wayne Collins said approval of the leaseholders and banks was due simultaneously.

"Tranz Rail is more obviously a New Zealand company than at any time since its inception," Beard said. More than two-thirds of its shareholders are New Zealanders.

They were told that the business is being turned around and it will earn $53.1 million profit before interest and tax this year.

"Although we are only in the first month of the second quarter, we are seeing good forestry and bulk rail volumes, while Distribution Services Group, our trucking operation, is also moving into peak retail volumes," Beard said.

On the sale of Tranz Metro, Beard said the Wellington Regional Council and Tranz Rail could not agree on the process for the sale.

Tranz Rail wanted a non-binding indicative bid before allowing due diligence.

On building a ferry terminal at Clifford Bay, in Marlborough, which would shorten Cook Strait ferry journeys by half an hour, Walden said the board had asked managers to revisit the issue and report back.

On the stalled Palmerston North inland port plan with Ports of Auckland, Walden said the proposal "didn't deliver to Tranz Rail at the end of the day".

"I believe there are at least two proposals that we have taken back to them and my understanding certainly, as at this morning, is that we are re-engaging in terms of the inland port concept."

Beard was open when he was asked by a shareholder why he had sold 35,000 shares.

"I hold about 270,000 shares," he said, adding that the purpose of the sale was to pay tax. "I still continue to hold around about 235,000 shares." The sale should not be seen as any lack of confidence in the company.