Steady Progress In Challenging Times

KiwiRail has recorded an operating surplus of $133.9m[1] for the year ending 30 June 2022.

“This is a creditable result given the difficult conditions in FY22”, says Board Chair David McLean.

“Achieving that surplus, which is committed to future core capital reinvestment, is a step along the way to KiwiRail’s above rail business becoming self-sustaining,” says Mr McLean.

The FY22 result is the first full-year result to be reported under KiwiRail’s new funding model.

Under this model, the ‘Below Rail’ or the network component of the railway is now fully funded through the National Land Transport Fund (NLTF), supported by the Crown and by track-user charges from the market. This means the reported Group operating surplus reflects the performance of KiwiRail’s commercial ‘Above Rail’ business.

Mr McLean noted that because of the change in the way KiwiRail is funded, the surplus could not be easily compared to those of previous years.

Total freight revenue was $449.7m, up $22m on FY21. This increase reflected a strong performance in IMEX (import-export), where revenue was up $18.3m, as well as the bulk and domestic sectors.

However, those gains in the freight sector were offset by a difficult year for Interislander, which was affected by major mechanical issues.

This included a serious gearbox failure on Kaiarahi which took it out of service from the end of August 2021. An additional ship, Valentine, was leased to fill the gap created.

Chief Executive Peter Reidy says in FY22 there was a 23.2 per cent reduction in the Total Recordable Injuries Frequency Rate – which records how often injuries are happening at work – from 31.2 to 23.96 injuries per million people-hours worked.

“However, this is still too high. We can and must do better, and as Chief Executive I will be leading the change we need to make to achieve that.

“I am determined to push our commitment to safety, and to show that we care for our people by promoting visible leadership built on the belief that all injuries are preventable.”

Mr Reidy says the $133.9m surplus was achieved despite a very difficult operating and trading environment including the ongoing impact of Covid.

“We are seeing a growing customer appetite to use rail and an increased focus on driving a commercial outcome for our Above Rail business.”

“The problems Interislander faced with its ships underlines the importance of the programme now underway to deliver two new purpose-built hybrid electric ships, along with new terminal facilities in Picton and Wellington”.

“Passenger numbers for both Interislander and Scenic rail services were also affected by COVID, with the Scenic services spending much of the year in hibernation.

“KiwiRail has continued to deliver on its capital reinvestment programme and is steadily moving towards achieving its revitalisation programme for New Zealand and our customers while building resilience in the Below Rail network.

“Capital expenditure for the year was $1.1 billion. This represents the largest level of capital investment in a single year in KiwiRail’s history.

“The Government is investing heavily in rail, recognising its benefits to the country in providing an efficient, low-carbon form of freight and passenger transport, and the progress we are making in delivering on that investment is steady,” Mr Reidy says.

“Investment is being made in upgrading the rail network, infrastructure and operating systems, and investing in rolling stock capacity, the facilities used to service our wagons and locomotives, and in new ships and terminal capacity for Interislander services.

“On the network, significant progress was made on the Auckland and Wellington metro upgrades. Spending on the Auckland metro network was $338.7m and on the Wellington metro network $93.3m.

“Over the Christmas period, when commuter trains were halted to allow work to proceed, there were more than 1000 people working trackside in Auckland in the single biggest mobilisation of resources for a temporary rail closure KiwiRail has carried out. Concurrently 300 people were deployed on the Wellington network.

“Another $49.9m was invested in the Northland rail network as part of a programme that will see heavier axle trains running faster north of Auckland.

“We are continuing to develop the business case for a new rail line to Northport.

“The spending on replacement of aged rolling stock of $186.3m included the signing of a contract with Swiss firm Stadler in October last year for 57 state-of-the art locomotives for the South Island. The locomotives, which are being built in Spain, will begin arriving in early 2024.

“The new locomotives are a significant step forward in transforming KiwiRail into a 21st century transport services business to deliver increased capacity to support rail freight and passenger services with our customers.

“The upgrade to our rolling stock maintenance and refurbishment mechanical facilities, including major work at the Hutt Workshops and a new facility at Waltham in Christchurch, are progressing well.

“Construction at Hillside Workshops in Dunedin is underway and will allow us to start assembling wagons locally again from late 2023.”

Mr McLean paid tribute to the leadership of David Gordon, who was KiwiRail’s Acting Chief Executive until 1 August 2022.

“Mr Gordon played a key role in achieving this solid result, and keeping the organisation focussed and moving forward during turbulent times.

“I’d also like to thank all 4500 in the KiwiRail team. Although the last year was challenging, they should all feel proud of the work they are doing to build a stronger KiwiRail. It plays a vital role in New Zealand’s transport infrastructure by providing lower-emission, stronger connections.”

[1] Operating surplus represents earnings before depreciation & amortisation, interest, impairment, capital grants and fair value changes.

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