KiwiRail deal key to line lease

The Napier-Wairoa section of the line was found to be in a reasonable to good condition. Photo / File

A new report by the group pushing to reopen the Napier-Gisborne rail line says re-establishing the track as far as Wairoa is feasible but whether it is financially viable will depend on a deal yet to be thrashed out between KiwiRail and Hawke's Bay Regional Council.

The council has set aside $5.46 million to potentially fund the re-establishment of the line but says the latest report from the Napier-Gisborne Rail Establishment Group (NGR), leaves several questions unanswered.

NGR's 22-page business proposal, setting out the case for re-opening the Napier-Wairoa section of the line, will be considered by the council's corporate and strategic committee at a meeting tomorrow.

The council asked for the business proposal after receiving an ultimatum from KiwiRail to commit to leasing the mothballed line by March 1.

The business proposal concludes that the Napier-Wairoa section of the line is in a reasonable to good condition and there is a sufficient resource of logs to be harvested in the area to sustain a log-based rail service to Napier Port for at least 30 years.

It says developing a "log hub" or inland port for logs at Wairoa, in conjunction with Napier Port, will produce benefits and costs savings for both the forestry sector and Napier Port.

However, the report said there were a number of KiwiRail matters that needed to be resolved before an agreement could be reached. There had been very little time to negotiate these matters with KiwiRail, it said.

Securing private sector funding to supplement the council investment was another stumbling block NGR has encountered.

"NGR have advised that their discussions with potential private sector investors have been frustrated by the lack of certainty in relation to the KiwiRail-related costs," the council's chief executive, Liz Lambert, says in a report to councillors on the business proposal.

"Unless these issues can be finalised at commercially sustainable levels then securing private investors will remain difficult."

Ms Lambert's report also addresses the need raised by NGR for negotiations with KiwiRail.

"If the council cannot finalise an acceptable lease agreement that enables an operator to be viable financially and operationally, then the matter must be abandoned," she says.

The council has stipulated it would require a 6 per cent return on its investment in the line and Ms Lambert says in her report the NGR business proposal "is not a final business case upon which HBRC can base a decision on leasing the line".

Regional Council chairman Fenton Wilson said yesterday the council had a commitment to seeing freight return to the line and it appeared a logging operation between Wairoa and Napier was viable.

Mr Wilson said he was awaiting with interest a presentation to the council NGR was due to give at tomorrow's meeting, and the subsequent debate among councillors.

The Government last year refused a request to fund repairs to the Napier-Gisborne line, saying it did not believe re-opening the rail link made economic sense.