‘Fire sale’ of Dunedin Railways denied

Dunedin Railways carriages parked at the Dunedin Railway Station siding yesterday. PHOTO: GREGOR...
Dunedin Railways carriages parked at the Dunedin Railway Station siding yesterday. PHOTO: GREGOR RICHARDSON
The Dunedin City Council is looking for alternative operating models that keep Dunedin Railways in the city — not a fire sale, the chairman of Dunedin City Holdings Ltd says.

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.

Comments

When DCC assets like the stadium make a loss it is always excused by the "trickle down" theory. This is the idea that the income brought to the city by people coming for the "asset" more than makes up for the loss the asset makes. Seems the same theory is not to be applied to Dunedin Railways. The DCC and its old boys/girls club of not-accountable-to-the-public "professional directors" seem to have no vision for Dunedin Railways. They have viewed it as a millstone for some time now and COVID-19 was just the excuse they needed to eliminate it. I simply have no confidence that they genuinely want to save this asset. What is needed is a businessperson or a co-operative of some sort, with vision and a passion for making this asset work, to buy the operation.

I agree that selling the business would be the best course of action. However, I fear that the council has avoided this as an option because they need the company's assets to offset Dunedin City Holdings and the council's borrowing. The council and its company can only borrow money against its assets - but if those assets are over-valued (the actual value when sold) the knock-on effect could be disastrous. By mothballing the company they can keep the capital value on their books, making their balance sheet look healthier than it really is, while in the long-term slowly reduce their value through year upon year depreciation.
I must stress, however, that this is only a theory and I am more than happy for an accountant to disprove this theory.

Sadly the one to ten million DCC could palm the railways assets for would do almost nothing to offset the BILLION dollars these greens fools are intending to owe.

If the DCC was serious about retaining the business in Dunedin in some form the sales doc would say that. No, the assets are up for sale, no interest from DCC in keeping the railway in Dunedin.

And of course the absent mayor is still absent. He's probably hoping council can turn the gorge railway into another bike track, should only cost anther $50 mill or so.

The trouble is very few of us trust the DCC to do the right thing. In the great scheme of things $10m over 10 years doesn't seem too bad, especially considering the wastefulness of the current council. Next thing they will want to turn it into another cycleway.

 

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