Toll gives rail cost warning

Frustrated rail operator Toll says a lack of progress in its negotiations with the Government is delaying big spending decisions and could slow the shift of freight from road to rail.

Melbourne-based Toll managing director Paul Little said talks with Crown track management agency Ontrack were bogged down on track access charges, with the rail industry being asked to pay "overnight" for a 15 to 20-year track maintenance "deficit".

"Not only is the Government putting in danger here the speed with which goods may be transferred from road to rail, it also needs to recognise that Toll needs a stable environment to spend the tens of millions of dollars it needs to spend in New Zealand. At the moment we are not seeing that and that is an area of concern."

In a deal in June last year, the Government reclaimed the national track network from private ownership for $1 and agreed to spend $200 million improving it. Toll committed to spending $100 million on trains. The spending by both would be over five years.

Little said Toll would have to spend "a lot" more than $100 million, but investment decisions were on hold while it had "no security around the bottom line".

The fee for access to the network for the first year was set at the time of the deal. The negotiations under way now are for future fees.

Toll and Ontrack will meet again today.

An Ontrack spokesman said it intended to follow the processes set down in the New Zealand Rail Access Agreement.

Little said any attempt to "push higher than acceptable" charges on to Toll would flow through the industry very quickly.

"It is a pass-through cost, so if the access charges get doubled, hypothetically, that component, and our charge through to our major customers, gets doubled.

"The Government needs to be mindful it may well slow up the transition of freight from road to rail if rail becomes less competitive in terms of its cost base. It becomes more difficult for groups like Toll and Mainfreight and others that are major rail users to persuade customers to use rail.

"The Government's whole philosophy, I think, is to attract freight from road to rail. There is not a big cost difference today between road and rail - it is a very finely tuned equation. If we get lumped with very high access charges ... it will impact on how efficient we can be in enticing customers."

Ontrack said its international tender for an infrastructure maintenance contract would be finalised around November.

Rail operators

Ontrack

Established in September 2004 as an SOE
Manages track access, the track upgrade, land and leases associated with the rail corridor
Toll has one seat on the board

Toll

Australian rail, road and sea operator
Owns 84 per cent of former Tranz Rail
A rail and road operator in NZ