“We have serious questions about whether KiwiRail, operating under its current business model, will be able to operate without ongoing dependence on government subsidies and support”, Goldsmith wrote in the letter.
KiwiRail has a target to achieve commercial self-sustainability for its above-rail assets which include its rail freight and Interislander ferry businesses.
This means generating sufficient operating surplus to self-fund the capital expenditure required to maintain and renew these above-rail assets, Goldsmith said.
The ongoing annual operating surplus KiwiRail estimated it would require to achieve this was redacted in the letter.
“This had earlier been expected to be achieved by FY25 (the 2025 financial year) and this no longer appears likely based on KiwiRail’s commercial performance to date”, Goldsmith said.
Interislander ferry Aratere ran aground near Picton on June 21 due to a steering failure.
Since this letter was written, Finance Minister Nicola Willis has revealed exactly what she thought of the advice.
Willis said the cost of it was “excessive and not justifiable”. She didn’t think an organisation with highly paid executives, like KiwiRail, should have to spend a sum as big as it did on external consultants for advice on how to run its core business.
“Frankly, if I were on the board, I would have been asking why couldn’t my executive come up with this themselves.”
Responding to the concerns raised about KiwiRail’s financial outlook, chief executive Peter Reidy said despite the tough economic climate, KiwiRail’s self-sustainable target remained the objective of the board and management.
“We are working to grow revenue, improve our operational efficiency and deliver better for our customers.
“The KiwiRail management team has been working with consultant firm McKinsey to assess the full potential of the business as well as to develop a robust plan to deliver increased value.”
McKinsey’s support has involved bringing in global railway expertise, Reidy said.
“To support and challenge KiwiRail on our growth, productivity and technology plan to achieve the required targets.”
KiwiRail chief executive Peter Reidy says they are committed to lifting the health and safety performance of the company to ensure their team arrives home safely every day. Photo / Mark Mitchell
“Recent incidents including the January 2023 Kaitaki incident have made us concerned about KiwiRail’s approach to health and safety and its ongoing asset management practices. We expect lessons learnt from this are applied across all company activities”, Goldsmith wrote.
Goldsmith said KiwiRail was failing to achieve its target of halving its Total Recordable Injury Frequency Rate (TRIFR) over three years. This figure records how often injuries happen at work.
Ministers expected to see “demonstrably improved health and safety outcomes”.
Reidy said KiwiRail would continue to focus on the lagging safety indicator.
In the 2022 financial year, there was a 23.2% reduction in the TRIFR from 31.2 to 23.9 injuries per million people-hours worked. The following financial year it was 25.8.
Reidy said the latest available figures show a 10% decrease over the 12 months to the end of May.
“KiwiRail is committed to lifting the health and safety performance of the company to ensure our team arrives home safely every day. We have engaged extensively with all staff and union members to lead and drive comprehensive leadership-led safety culture improvement.”
High-potential critical risk near-miss events – those that could lead to a fatality or serious harm - have reduced by 43% over the 12 months to the end of May, Reidy said.
“This is an important leading indicator for safety culture and risk severity.”
Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.
