7 Mar 2019

KiwiRail struggles to meet upgrade funding goals

6:07 am on 7 March 2019

KiwiRail's plans to upgrade its network are running into funding obstacles.

The first passenger train on the newly reopened Coastal Pacific Rail Line arrives in Christchurch from Picton.

A passenger train on passenger train on Coastal Pacific Rail Line arrives in Christchurch from Picton. Photo: RNZ / Simon Rogers

Newly released documents show its attempts to get money from the Provincial Growth Fund have not all been successful, with officials warning the fund may not be able to support the level of funding the rail company wants.

These include plans to run a daily service between Auckland and Wellington and a request to fund "core capital requirements" in the regions.

In last year's budget KiwiRail sought $300 million to fund two years projects to upgrade its ageing network and rolling stock.

The government approved $185m, saying the remaining amount would be provided from the Provincial Growth Fund.

In subsequent discussions with the Ministry for Business, Innovation and Employment, officials warned KiwiRail "the fund may not be able to support this level of funding".

KiwiRail subsequently received $50m, leaving it $65m short of the $115m it had hoped to get.

However, it would not discuss the shortfall, saying the money it asked for was over two years and any future funding was budget-sensitive.

KiwiRail said using the fund to pay for working capital met the fund's criteria because an efficient rail network is essential for regional economic development and productivity.

"Part of KiwiRail's network which do not have commercial volumes sufficient to cover capital costs have been in a state of managed decline for some time," the company said in a statement.

"The PGF investment will allow capital works and maintenance costs for lines south of Christchurch, Hawke's Bay, Taranaki, the West Coast and eastern Bay of Plenty, with additional work across other parts of regional New Zealand."

Regional Economic Development Minister Shane Jones, who oversees the fund, said an important proportion of the fund was dedicated to KiwiRail but the state-owned enterprise was not going to be able to fund all of its aspirations through it.

Instead KiwiRail was going to have to work with Treasury in order to secure long-term capital.

Mr Jones said there was only so much the fund could spend on KiwiRail in the provinces, and he had made that clear to KiwiRail.

"We've got a limited number of dollars for provincial rail growth and I've said to KiwiRail staff and in particular the new chair of KiwiRail, Mr Greg Miller, that we're going to have to ration in terms of access to the Provincial Growth Fund," he said.

New Zealand First MP Shane Jones answering media questions

Regional Economic Development Minister Shane Jones. Photo: VNP / Phil Smith

Getting money from the fund was a competitive process - something Mr Jones said he was constantly reminded of.

"It's fair to say that the officials on a regular basis are warning the first citizen of the provinces that there are a host of other infrastructure projects, not the least of which is the $130m allocated to upgrade the roads around Tairāwhiti, Northland and part of the Bay of Plenty," he said.

"KiwiRail, whilst important, is not the exclusive recipient," he said.

However, he stressed that KiwiRail was not out of favour with the government.

"I wouldn't say that KiwiRail is raiding the fund but, put it this way, they've been starved of capital for so long and they know that my leader [Winston Peters] and I ... are very much pro-KiwiRail people. As far as we're concerned, KiwiRail are in favour with this government."


In July last year KiwiRail sought $185m from the Provincial Growth Fund to upgrade services on its tourist routes including the Northern Explorer (Auckland to Wellington), Coastal Pacific (Picton to Christchurch) and TranzAlpine (Christchurch to Greymouth).

Northern Explorer crossing the Hapuawhenua Viaduct.

Northern Explorer crossing the Hapuawhenua Viaduct. Photo: Supplied / KiwiRail

The state-owned enterprise argued the extra services would double the spend by rail passengers from $100m currently to $220m by 2027 across the Waikato, Ruapehu, Manawatū-Whanganui, Marlborough, Kaikōura regions and the West Coast. It would also double the number of tourism jobs rail supports, from 863 to 1906 over the same period.

Although the government announced $80m to upgrade services on the Coastal Pacific and TranzAlpine, there was no such announcement about the Northern Explorer.

In a statement KiwiRail said its original proposal was for a package of tourism investments of up to $185m, including a bi-directional daily Northern Explorer service - up from three days a week it currently operates.

The view from KiwiRail's Coastal Pacific train, just south of Kaikōura.

The view from KiwiRail's Coastal Pacific train, just south of Kaikōura. Photo: Great Journeys of New Zealand / Facebook

"Following consultation with officials, a second lower-cost package focusing on key investment regions was submitted, which provided for additional capacity, premium services, platform upgrades and international marketing for the TranzAlpine and Coastal Pacific Great Journeys of New Zealand," KiwiRail said in a statement.

Mr Jones said the government was looking for more information before it would sign off on plans to extend the Northern Explorer service.

"Investing in the Northern Explorer requires investment in a different type of trains and locomotives than the South Island trains and would involve a significant additional investment. The key rail investment in the North Island in 2018 is a logistics hub near Palmerston North," he said.

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