Budget 2014: Major review ordered of KiwiRail

Transport Minister Gerry Brownlee. Photo / Sarah Ivey

The bill for fixing up struggling KiwiRail has topped the $1 billion mark, with more than half of that coming from the partial sale of state-owned power companies.

The Government has now initiated "a major review" of the rail operator's business after it sought even more funding, Budget documents reveal.

Yesterday's Budget included the commitment of a further $198 million for KiwiRail's "Turnaround Plan" to return the company to commercial viability. The plan was originally forecast to cost the Government $750 million but yesterday's commitment takes it $1.04 billion.

In 2012, the Government said the $250 million it committed to the plan that year would come from asset sales. It committed a further $94 million from asset sales proceeds last year. This year's $198 million takes total "Future Investment Fund" or asset sales cash committed to the turnaround to $524 million.

Including the $1.04 billion committed to the turnaround plan, Governments have now poured a total of $2.4 billion into KiwiRail since it was bought back from Australia's Toll Holdings by Labour in 2008.

The new review of KiwiRail's business and its request for even more cash was disclosed in the Treasury's list of "Specific Fiscal Risks" yesterday.

Transport Minister Gerry Brownlee said the money committed yesterday would be spent mainly on infrastructure, while $25 million would go towards repairs on the Cook Strait ferry Aratere.

The KiwiRail money is part of the $1 billion in asset sales cash allocated to capital investments in yesterday's Budget. Health will receive $200 million of that, including $67 million for the new Grey Base Hospital on the West Coast, and $172.5 million goes to the upgrade and repair of schools. Irrigation projects will receive $40 million.

The Hobsonville Land Company housing development in northwest Auckland will receive $30.6 million and $75 million goes to a "Christchurch housing contingency".

Finance Minister Bill English said that on top of $533.3 million in Future Investment Fund commitments in Budget 2012 and $1.4 billion in 2013, yesterday's allocations left almost $1.7 billion of asset sales cash to spend in the next two Budgets.

The Government's KiwiRail turnaround plan

• 2010: $250m
• 2011: $250m
• 2012: $250m from Future Investment Fund
• 2013: $94m from Future Investment Fund
• 2014 $198m from Future Investment Fund
• Total: $1.04 billion