The Government's near $20 million investment in Hillside Workshops will create rail jobs and the potential for a heavy engineering hub for the South Island, KiwiRail Group Chief Executive Greg Miller says.

Regional Economic Development Minister Shane Jones announced the $19.97 million investment through the Provincial Growth Fund at an event at Dunedin's Hillside Workshops today.

"This is a significant investment from the Government that will not only revitalise Hillside, but also set the stage for a wider development that will bring Dunedin's engineering sector together to deliver more economic benefits for the region," Mr Miller says.

KiwiRail will use the funding to upgrade the two main rail workshops at the site, including electrical and fire protection systems; create new facilities so that locomotives and wagons can be taken apart for heavy maintenance and upgrade; overhaul the aging heavy-lift crane and traverser;
improve the site's rail yard and roading; and replace the existing office block.

"Improvements on the site will allow KiwiRail to maintain a lot more locomotives and wagons and undertake a range of new work, such as heavy maintenance and upgrades," Mr Miller says.

"It will make Hillside a crucial part of KiwiRail's growing South Island freight and tourism operations, and create new skilled jobs.

"In the next three years we expect to create around 40 new jobs at Hillside, including hiring skilled mechanical, electrical and potentially light fabrication staff. From the 23 staff at the workshops right now we expect to have around 100 staff onsite within a decade.

"Revitalising Hillside also creates the opportunity to take on more apprentices and attract more talented young people to a career in rail."

Mr Miller says over the longer term, if further funding becomes available, KiwiRail will explore demolishing old buildings on the remainder of the site. This will free up a further 8000 square metres of the site for redevelopment.

"Industrial land is limited in Dunedin and there is potential to partner with developers to create a heavy engineering hub alongside the rail facilities at Hillside. It makes sense to bring in other engineering firms, to share skills and create an innovative environment.

"This is an opportunity to focus on the future and create a centre of engineering excellence for the South Island."

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