Friday, January 25, 2013

KiwiRail's awful shareholders

This means the organisations which have owned KiwiRail over the last 20 years, currently the present Government.

A few days ago we posted a BNSF Railway press release about the capital investment it is making in its infrastructure and equipment for 2013 - a budget of $US 4.1 billion, which is up 12.5% on last year. This is so it can further improve service to its customers: speed, reliability and facilities, to not only keep existing customers happy, but to win new ones, which like the other Class 1 railroads in the USA, it is steadily achieving.

KiwiRail badly needs to spend money on its dilapidated infrastructure to achieve this too - but the Government isn't interested in providing any capital for it to do so.  The Government expects KiwiRail to pull itself up by its own bootstraps.  No matter that since 1993 Messrs Fay & Richwhite and then Toll Australia engaged in big time capital stripping and "deferred maintenance "so that when the Clarke government bought the system off Toll in 2007 it was extremely run down.

It is a Catch 22 situation - to win customers and thus make good operating profits, KiwiRail needs an extensive capital investment program like the big North American railroad operators, which are much admired by investment analysts there (see earlier posts).  But its awful shareholders, the present NZ Government, don't want to know about it.

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