Greater Wellington Regional Council has for the first time short listed three potential bidders to operate and maintain its rail services for a term which could span 15 years and potentially be worth hundreds of millions of dollars.

The short-list for the Metropolitan service spanning Hutt Valley, Johnsonville, Kapiti and Wairarapa includes a joint venture between the local unit of Paris-based Transdev and South Korea's Hyundai Rotem, UK-based Serco, and a venture between incumbent operator KiwiRail and Keolis Downer, the partnership between Paris-based Keolis and ASX-listed Downer.

KiwiRail has held the contract since 2006 and the Wellington regional council is testing the market for the services for the first time since taking ownership and control of the rolling stock and most of the stations over the past eight years. The new contract will have a greater emphasis on performance-based partnering, after the government last year introduced a new public transport operating model, known as PTOM, for bus, ferry and rail, in an attempt to get better value for money by linking payments to growth in patronage and reducing reliance on subsidies.

"The new contracts will have a much greater emphasis on providing high quality, affordable services that encourage more people to take the train, bus or harbour ferry," said regional council chief executive Greg Campbell.


The council will issue tender documents to the short-listed companies early next year. It expects to select a preferred tenderer mid-year and sign a contract by the end of 2015. The new rail contract will take effect from July 1, 2016.

The council declined to comment on the potential value of the contract or on how many expressions of interest it received.

In the year ended June 30, the council paid $44.5 million for train operations and $10.2 million for train maintenance, according to its annual rail report. Half of the rail service revenue was funded through fares, with the average fare increasing by 16 cents to $3.72. Some 28 per cent of revenue was funded by the NZ Transport Agency and the remainder by ratepayers.

The train service carried 11.6 million passengers over the 2014 financial year, up from 11.4 million in 2013, although the report says changes to the way it calculated passenger numbers in 2014 reduced the number of passengers carried by 41,000. The council is targeting future passenger growth of 2 per cent.

Punctuality of the service improved to 94.3 per cent from 93.9 per cent while reliability was steady at 99.2 per cent. The measures were higher when adjusted for the effect of the Seddon earthquakes in July and August, the report said.

Wellington rail is undergoing a transition to electrification and is expected to complete its transition to Hyundai Rotem's Matangi electric trains by late 2016.