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That might include a change of ownership, but Dunedin Mayor Aaron Hawkins said any proposal that involved a transfer of assets would be subject to full public consultation.
The council has called for expressions of interest on how Dunedin Railways Ltd (DRL) assets might be viably used.
Mr Hawkins said the council intended to protect the company for the future.
Dunedin Railways ran tourist and charter train services, using the Taieri Gorge railway line and the national rail network.
The council put the company into hibernation last month.
Before the Covid-19 global pandemic, the company was forecasting ongoing losses of about $500,000 a year.
A review last year found about $10 million would be needed in the next 10 years to keep the Taieri Gorge line safe and functioning.
The Dunedin Railways board was working on a business turnaround plan when economic fallout from the Covid-19 crisis affected the tourism industry.
Dunedin Railways closed as a non-essential business on March 23 and was facing insolvency, even with support such as the wage subsidy, when the council decided in April to put it in hibernation.
The expressions of interest document says submissions are invited from "individuals or parties who have identified viable business propositions to be considered by the company to utilise or proposals to acquire some or all of DRL’s assets".
Dunedin Railways is a council-owned company, one of a group of companies under the umbrella of holdings company Dunedin City Holdings.
Dunedin City Holdings chairman Keith Cooper said the process left room for an acquisition, but that did not mean the company or its assets would simply be sold to the highest bidder.
Options could include an alternative operating model for Dunedin Railways or a business partnership.
The benefit to the city would be a key consideration, he said.
“To be clear, this is not a fire sale. The company or its assets are not ‘on the market’ and we are not seeking to offload its assets.
“We appreciate the importance of Dunedin Railways to the community. We are looking for the best possible outcome for DRL and the city of Dunedin.”
Key assets include the Taieri Gorge line, rolling stock and property in Middlemarch.
Submissions close on Thursday next week.