KiwiRail defends decision to close line

KiwiRail is defending its decision to close the Gisborne to Napier line as "robust" following an independent review that found the line could still be viable.

The review, released this morning found flaws in KiwiRail's decision and suggested the tonnage needed to keep the route viable could be achieved with new commitments from regional businesses now coming forward.

The review was paid for by donations from the public and written by economists at Business Economic and Research (BERL), then reviewed by a specialist international rail engineering consultancy.

It said KiwiRail's analysis that it would take 1.5 million to 2.2 million tonnes of freight on the line per year to make the operation commercially viable was flawed.

A closer look at the KiwiRail analysis indicates the tonnage needed for the line to be cashflow neutral could be similar to the level of tonnage which the local community now indicated could become available, about 180,000 tonnes to 200,000 tonnes per year, the report said.

Wood and wood products initially on the Mohaka to Napier route could attract 750,000 tonnes per year and eventually lead to the rail line becoming economically viable and potentially profitable "in a few years".

But KiwiRail chief executive Jim Quinn this morning stood by its own assessment.

"KiwiRail is satisfied that the figures in our report are robust and our view remains the same - if we thought we could run a commercial operation on that line we would be doing so.

"However you assess it, the gap between what was currently operating on the line, and the volume required to cover the fixed costs of reinstating and then keeping the line in a fit for purpose state is significant."

He said the rail line was in extremely poor condition, and high capital and maintenance costs would be required for well beyond 10 years to ensure it was fit for purpose.

Mr Quinn dismissed the BERL report as "essentially a brief desk-top assessment of a highly complex business case".

"We have spent over two years assessing the costs and future viability of this line on a commercial basis, as well as extensively and directly consulting with local business and community leaders.

"We know the business, we know the region, we know the infrastructure and we are confident of our assessment."

Mr Quinn said BERL's comparison based on revenue per tonne was flawed, because revenue was directly linked to the distance the freight needs to travel.

He said a large proportion of freight travelled only about half the length of the distance between Napier and Gisborne.

Mr Quinn did not debate the volumes of goods that would be moved out of the region over time - but questioned whether rail was the right solution for producers in many different locations in a competitive market.

"The possibility of forestry has always been the promise, however we have not been able to gain any commercial agreement that would deliver on that promise, and nor is the wood on stream in the right areas soon enough.

"Our assessment remains unchanged - we do not consider volume growth in the ranges required to be realistically achievable and, therefore, the line is not commercially viable."

Gisborne district councillor Manu Caddie, who led the fundraising campaign for the BERL report, said its release raised questions about the figures used by KiwiRail to recommend closing the line.

"The main thing is that the numbers are a heck of a lot closer to break even than previously claimed and, with a tiny fraction of the massive amount of wood coming on stream put on rail, the line will quickly be profitable."

- APNZ and Hawke's Bay Today