Budget funds a rail renaissance, but KiwiRail needs human capital

New life will be breathed into New Zealand's creaking railroad system thanks to the Budget - but KiwiRail faces a challenge money can't buy as easily as new heavy metal.

The statutory corporation will lose 800 of its 3500 staff to retirement in the next 10 years making recruitment one of the biggest tasks ahead, says chief executive Greg Miller.

That's not to imply he's just been granted $1.4 billion and is still complaining.

Miller is pumped about the Budget allocation.

"I was delighted. It's an outstanding amount of investment to make and we need it, and we're grateful. We have a lot of work to do ..."

He was just responding to a Herald question about the biggest challenges ahead in utilising this two years' worth of funding in what is a 10-year national rail strategy by the Government.

"The challenge is going to be the expedient delivery I'm looking for from my team.
"We have to be prudent and responsible with the capital and we're excited about that.

"And there's quite a bit of recruitment to go on - getting new team members to deliver and infrastructure and apprenticeships and cadetships etc.

"We have an aged workforce - 800 of our 3500 people are retiring in the next decade."

But Miller is looking at the recruitment task - a serious problem across the New Zealand freight and logistics sector - as "an exciting challenge".

The Budget allocated $741 million for KiwiRail through Vote Transport over the next two years and a further $300m is available for regional and rail projects through the Provincial Growth Fund.

This is how the $741m breaks down:

$331m over two years to address legacy issues on the rail network and help move it to a sustainable, "steady state" condition. This will include:

• Increased investment in tracks, bridges, tunnels and signals around the country such as continuing work required on the Kaimai Tunnel between the Waikato and Bay of Plenty; Upgrades to the train control system and general track renewals.
• Investment in handling equipment such as hoists and generators, mainly at Westfield/Southdown Auckland.
• Replacing parts on rolling stock and the plant and equipment required to do this.
• A new freight reservation, booking and tracking system for customers.

$375m for replacing rolling stock at the end of its life and to upgrade maintenance facilities no longer fit for purpose. This includes:

• Final payment on 15 new locomotives for the North Island (arrived in NZ October).
• A start on replacing KiwiRail's oldest locomotives - 48 in the South Island, 52 shunt engines and six small electric shunts.
• Replacing 900 container wagons, to be used in the busiest corridors allowing the worst of the fleet to be retired with some repurposed for logs.
• Major upgrades at the key Lower Hutt and Christchurch maintenance facilities and upgrades at other depots around the country .

$35m for KiwiRail to progress design and purchase of two rail-enabled ferries to replacing the three ageing Interislander ferries Aratere, Kaitaki and Kaiarahi.

Miller said business cases have been presented for the available $300m PGF funding though project priorities have yet to be worked out.

The North Auckland line to Northland will get attention.

"It's had nothing done to it for 130 years. It's deteriorated to the point of being a high risk derailment [line]. We can't sustain that. When you close a line the way back is really expensive."

The Beehive also has a close eye on the North Auckland line.

Two Government-commissioned study reports released by infrastructure and regional economic development minister and associate transport minister Shane Jones identified rail as key to economic freight flows, getting trucks off the road and relieving traffic congestion in the Northland-Auckland-Waikato-Bay of Plenty triangle.

One of the reports, the Northland Rail Business Case, said the North Auckland line is so decrepit it would be unusable within five years if not rehabilitated.

Miller said it's now more than three years.

The report said it would cost around $800m to renew and upgrade the line and build a new rail line to deep water port Northport at Marsden Point.

Miller said he didn't feel any political pressure to spend heavily on the Northland line.

"I don't feel any at all. We've had fabulous support from the PGF. When you look at what rail has obtained out of the $3 billion [in the PGF] we are close to $500 million.

"It's not pressure [I feel], it's gratitude."

He said there were no caveats yet on the Budget capital allocated.

But prioritisation of the $300m from the PGF would be important "because we need to spend way more than that in the regions".

Business cases made for PGF funds included tourism rail upgrades including the Trans Alpine coastal express, $40m for a cargo and log hub in Bunnythorpe in the Manawatu-Whanganui region, the rail line between Taumarunui and New Plymouth and logging sector needs.

Miller said KiwiRail had been struggling while New Zealand's freight volumes climbed.

"Machinery dies and you get to the stage where you cannot keep maintaining it, throwing good money after bad.

"As an example, we have had one loco (locomotive) since 1961 and it's on its fifth rebuild. It has cost the taxpayer $30.3 million and it's finished. A new one is $5-6 million.

"We haven't used past capital well because there just hasn't been enough of it."

The Government's national rail strategy or vision would be finished in September, Miller said.

The Budget allocation got KiwiRail "in the queue" to order through tenders the new locomotives and ferries from overseas.

They could take up to four years to be delivered.

New Zealand hadn't had the capability to build locomotives since the steam train era, Miller said. Wagons were sourced overseas because they could be mass produced with a technical and cost benefit.

KiwiRail was looking to replace 2000 of its 4000-odd flat-top wagons over the next four years.

About 400 were replaced last year.

KiwiRail assets:

• 4000 kilometres of track
• 1656 bridges
• 18,000 ha of land managed
• 198 mainline locomotives
• 4585 freight wagons
• Two owned and one leased ferry