KiwiRail struggles to meet upgrade funding goals

KiwiRail’s plans to upgrade its network are running into funding obstacles.

The first passenger train on the newly reopened Coastal Pacific Rail Line arrives in Christchurch from Picton.

A passenger train on passenger train on Coastal Pacific Rail Line arrives in Christchurch from Picton. Photo: RNZ / Simon Rogers

Newly released documents show its attempts to get money from the Provincial Growth Fund have not all been successful, with officials warning the fund may not be able to support the level of funding the rail company wants.

These include plans to run a daily service between Auckland and Wellington and a request to fund “core capital requirements” in the regions.

In last year’s budget KiwiRail sought $300 million to fund two years projects to upgrade its ageing network and rolling stock.

The government approved $185m, saying the remaining amount would be provided from the Provincial Growth Fund.

In subsequent discussions with the Ministry for Business, Innovation and Employment, officials warned KiwiRail “the fund may not be able to support this level of funding”.

KiwiRail subsequently received $50m, leaving it $65m short of the $115m it had hoped to get.

However, it would not discuss the shortfall, saying the money it asked for was over two years and any future funding was budget-sensitive.

KiwiRail said using the fund to pay for working capital met the fund’s criteria because an efficient rail network is essential for regional economic development and productivity.

“Part of KiwiRail’s network which do not have commercial volumes sufficient to cover capital costs have been in a state of managed decline for some time,” the company said in a statement.

“The PGF investment will allow capital works and maintenance costs for lines south of Christchurch, Hawke’s Bay, Taranaki, the West Coast and eastern Bay of Plenty, with additional work across other parts of regional New Zealand.”

Regional Economic Development Minister Shane Jones, who oversees the fund, said an important proportion of the fund was dedicated to KiwiRail but the state-owned enterprise was not going to be able to fund all of its aspirations through it.

Instead KiwiRail was going to have to work with Treasury in order to secure long-term capital.

Mr Jones said there was only so much the fund could spend on KiwiRail in the provinces, and he had made that clear to KiwiRail.

“We’ve got a limited number of dollars for provincial rail growth and I’ve said to KiwiRail staff and in particular the new chair of KiwiRail, Mr Greg Miller, that we’re going to have to ration in terms of access to the Provincial Growth Fund,” he said.

New Zealand First MP Shane Jones answering media questions

Regional Economic Development Minister Shane Jones. Photo: VNP / Phil Smith

Getting money from the fund was a competitive process – something Mr Jones said he was constantly reminded of.

“It’s fair to say that the officials on a regular basis are warning the first citizen of the provinces that there are a host of other infrastructure projects, not the least of which is the $130m allocated to upgrade the roads around Tairāwhiti, Northland and part of the Bay of Plenty,” he said.

“KiwiRail, whilst important, is not the exclusive recipient,” he said.

However, he stressed that KiwiRail was not out of favour with the government.

“I wouldn’t say that KiwiRail is raiding the fund but, put it this way, they’ve been starved of capital for so long and they know that my leader [Winston Peters] and I … are very much pro-KiwiRail people. As far as we’re concerned, KiwiRail are in favour with this government.”

Tourism

In July last year KiwiRail sought $185m from the Provincial Growth Fund to upgrade services on its tourist routes including the Northern Explorer (Auckland to Wellington), Coastal Pacific (Picton to Christchurch) and TranzAlpine (Christchurch to Greymouth).

Northern Explorer crossing the Hapuwhenua Viaduct

Northern Explorer crossing the Hapuwhenua Viaduct Photo: Kiwirail

The state-owned enterprise argued the extra services would double the spend by rail passengers from $100m currently to $220m by 2027 across the Waikato, Ruapehu, Manawatū-Whanganui, Marlborough, Kaikōura regions and the West Coast. It would also double the number of tourism jobs rail supports, from 863 to 1906 over the same period.

Although the government announced $80m to upgrade services on the Coastal Pacific and TranzAlpine, there was no such announcement about the Northern Explorer.

In a statement KiwiRail said its original proposal was for a package of tourism investments of up to $185m, including a bi-directional daily Northern Explorer service – up from three days a week it currently operates.

The view from KiwiRail's Coastal Pacific train, just south of Kaikōura.

The view from KiwiRail’s Coastal Pacific train, just south of Kaikōura. Photo: Great Journeys of New Zealand / Facebook

“Following consultation with officials, a second lower-cost package focusing on key investment regions was submitted, which provided for additional capacity, premium services, platform upgrades and international marketing for the TranzAlpine and Coastal Pacific Great Journeys of New Zealand,” KiwiRail said in a statement.

Mr Jones said the government was looking for more information before it would sign off on plans to extend the Northern Explorer service.

“Investing in the Northern Explorer requires investment in a different type of trains and locomotives than the South Island trains and would involve a significant additional investment. The key rail investment in the North Island in 2018 is a logistics hub near Palmerston North,” he said.

Maersk: Massive Innovative Solutions Must Happen in Next 5-10 Years

At the end of last year, the world’s largest shipping company Maersk revealed plans on becoming a carbon neutral company by 2050.

The efforts are in line with the shipping industry’s push to halve its carbon footprint by 2050 compared to 2008.

“We do not by net-zero refer to off-setting CO2 emissions from fossil fuels. By committing to this target, we believe we will drive the transformation of the shipping industry towards use of carbon-neutral fuels,” the company said in its sustainability report for 2018.

Maersk believes that efficiency can only keep shipping emissions stable, not reduce or eliminate them.

“Nevertheless, until decarbonisation is achieved, decoupling business growth from emissions is a necessity, and we have set an efficiency target of 60% relative reduction in CO2 by 2030 from a 2008 baseline. With these targets, we are breaking the mould for climate targets and ambitions in the shipping industry.”

Maersk had set a target of 60% relative reductions by 2020, using a 2007 baseline. By the end of 2018, the company reached 47% reduction since 2007.

These have been achieved through massive investments in optimizing fleet efficiency, with technical retrofittings including capacity boost, new bulbous bows, propellers and engine modifications, as well as by improving planning and optimizing of networks.

However, as explained, this is not enough to reach 60% in two years’ time.

Hence, the company pointed out that massive innovative solutions and fuel transformation must take place in the next 5-10 years.

“Over the last four years alone, we have invested USD 1 billion and engaged 50+ engineers each year in developing and deploying energy efficiency solutions. We expect this investment level to be sustained in pursuit of our new targets. Efficiency gains do not, however, solve the climate change problem. That can only be achieved through decarbonization,” the company said.


Transformation of the 100-Year Old Business Model

Transforming the shipping industry which has run on relatively cheap, heavy fuel for 100 years is not an easy task. In addition to new ship designs and engine types, there is a need for new types of fuel as well as building entire new supply chains for these new solutions, Maersk insists.

“All of this breakthrough innovation will have to take place in the 2020s and is more than any single company can do,” the company adds.

As a result, the shipping major urges all parties involved to collaborate on incentives and development of innovative solutions to usher in  the age of zero-carbon vessels.

“We want to begin a dialogue with cargo owners, regulators, researchers, investors and technology developers, and together set the foundation for a sustainable industry,” Maersk said, pointing out that research and development will be the cornerstone in decarbonizing the shipping industry.

The Pursuit of Solutions Must Begin Now

Zero-emission, commercially-viable vessels must be on the water by 2030, Maersk believes, especially due to the 20-25-year lifetime of a vessel.

“This should be followed by an initial slow ramping up, allowing maturing of technology and supply chain in order to be able to turn around our entire fleet for net-zero carbon emissions in 2050. This leaves us and the industry only eleven years to find the right solutions for a positive business case for decarbonization.

“For the next few years, it is very important not to rule out any solutions. There are several promising technologies at various stages of development. All solutions will come with benefits and challenges to be overcome and only by actively partnering, collaborating and undertaking research and development will we know which ones will win out. There are several technologies and fuels being developed these years within the areas such as advanced biofuels and hydrogen-based fuels.”

Maersk said that it has already engaged in research and test programs in some of these technologies, for example sustainable biofuels.

“Over the coming years, we will expand the range of solutions we are investigating. This will prepare us for selecting a few candidates we will pursue for the first carbon-neutral vessels.

” Our 2030 efficiency target is strong enough to ensure that we continue to decouple CO2 emission levels from growth in trade and volumes shipped. With this target, we will not exacerbate our contribution to climate change while we grow our business, serve global trade and support job creation.”

Container shipping companies cleared in U.S. Investigation

in International Shipping News 27/02/2019

The world’s two biggest container shipping companies on Tuesday said they have been cleared in an investigation of the sector by the U.S. Department of Justice (DoJ).

Denmark’s Maersk and Switzerland’s Mediterranean Shipping Company (MSC) were among several companies ordered to testify in an antitrust investigation that began in 2017 over practices by an industry that is the backbone of world trade.

Other lines included Germany’s Hapag Lloyd.

Container companies, which transport everything from TVs to bananas, have tried reduce costs through alliances to pool sailing schedules and port calls. Critics say this can lead to reduced services and increased prices for customers.

Privately-owned MSC, which is the world’s No.2 line, said it had been informed by the DoJ that the department had closed its investigation into MSC and the global container shipping industry without bringing charges or imposing penalties.

“This is an important decision where the global container shipping industry has, once again, been fully investigated and exonerated,” the company said in its statement on Tuesday.

A.P. Moller Maersk confirmed that the DoJ had closed its investigation and had released Maersk from any obligations under the Grand Jury subpoenas issued in March 2017.

Camilla Jain Holtse, A.P. Moller Maersk’s head of competition law and policy, said the company had provided full cooperation throughout the investigation.

A spokesman for Hapag Lloyd declined to comment.

The investigation could have resulted in large fines at a time when the container sector is struggling with slowing global economic growth.

Last week Maersk warned that trade headwinds would slow container demand growth this year, sending its shares down 10 percent. The stock was down 2.3 percent at 1343 GMT on Tuesday and Hapag Lloyd was down 2.8 percent.

The U.S. investigation followed separate cases in other jurisdictions in recent years.

In 2016 European Union antitrust regulators accepted an offer from Maersk and 13 competitors to change their pricing practices to stave off possible fines.

Govt forced KiwiRail to backtrack on locomotives decision, documents show

Newly released documents show the government forced KiwiRail to backtrack on its decision to ditch the electric locomotives on the North Island’s main trunk line.

According to the Treasury, it’s the first time a state-owned enterprise has been directed by a minister to make a decision that didn’t stack up commercially.

The State-Owned Enterprises Act said an entity’s principle objective was to be a successful business.

In 2016, KiwiRail’s board decided to replace its 15 electric locomotives with diesel, arguing it would make the company more efficient and better able to take freight, and with less freight going by road, there’d be a positive environmental impact.

On 30 October last year the government put a stop to the plan instead promising a $35 million cash injection to refurbish the electric locomotives.

In a letter to Transport Minister Phil Twyford two weeks before the decision was announced, acting chief executive Todd Moyle made it clear KiwiRail didn’t have the money to refurbish the locomotives.

“KiwiRail has no funding for these additional costs and is unable to recoup the investment and there is no uplift in revenue associated with this decision,” he wrote.

Labour Party MP Phil Twyford.

Transport Minister Phil Twyford Photo: RNZ / Mei Heron

But a Cabinet minute written the day before the government’s announcement, showed Cabinet agreed to use its powers under the State Owned Enterprises Act to direct the company to provide a non-commercial service.

Mr Twyford said being a successful SOE was more than just about profit and loss for a particular year, and this government wanted to grow rail.

He said previous governments had left KiwiRail on financial life support with no future vision.

“That’s not how our government sees it, we’re committed to bringing rail into the heart of the transport system, instead of treating it as the poor cousin and drip-feeding it a little bit of money year after year and barely keeping it alive,” he said.

KiwiRail uses electric locomotives on the main trunk line between Hamilton and Palmerston North.

When it said it was going to switch to diesel, the Rail and Maritime Transport Union accused it of “environmental terrorism”.

The union’s general secretary Wayne Butson said the decision to go down the diesel track was the best case of reverse engineering he’d ever seen.

“What you started with as your opening premise was the decision that they wanted to have and then they just worked backwards, and they screwed the scrum, massaged the logic and the numbers”, he said.

He said at that time KiwiRail’s board were wedded to a philosophy of simplify and standardise.

“There was this mantra which said ‘we only wanted one type of wagon, we only want one type of loco and that will give us immeasurable gains over time. It will reduce the inventory that we need, in terms of spares that we need for things’. In my view it didn’t have any logic,” he said.

Mr Butson said that decision failed to consider the needs of a modern railway, which must have some level of variation in the types of locomotives and wagons it uses.

Engineer Roger Blakeley said the decision to scrap the electrics was at odds with the Labour government’s target of getting to net zero carbon emissions by 2050 and leader Jacinda Ardern’s claimthat climate change was her generation’s “nuclear free moment”.

“With the diesel locomotives, if KiwiRail went ahead with them, it would burn an extra 8 million litres of diesel fuel per year and add around 12,000 tonnes of carbon dioxide to the atmosphere each year. That’s what would have been the implications of a switch back to diesels,” he said.

The Palmerston North to Hamilton route was electrified in the 1980s and the plan then was to carry on and electrify the whole main trunk line from Wellington to Auckland.

It’s estimated completing the project now would cost around a billion dollars.

Mr Twyford said it’s not part of the government’s immediate work programme.

Infrastructure Minister Shane Jones launches the New Zealand Infrastructure Commission

The Government has launched a new independent Crown entity tasked with addressing New Zealand’s “unprecedented infrastructure deficit”.

The New Zealand Infrastructure Commission – Te Waihanga – would look at ways of fixing and further funding areas where infrastructure investment is needed.

Transport projects and urban infrastructure issues would likely be the focus of the new commission.

Infrastructure Minister Shane Jones said New Zealand has an “unprecedented infrastructure deficit” and the commission was tasked with addressing that.

He said New Zealand’s transport and urban infrastructure was struggling to keep up with population growth.

“This infrastructure deficit is manifesting in housing unaffordability, congestion, poor-quality drinking water and lost productivity.”

“That’s simply not good enough,” he said.

The Treasury has estimated the total infrastructure spend over the next five years would be $42 billion – more than double that of the past five years.

Jones said this showed why the establishment of the Infrastructure Commission was needed.

Overall strategy and planning would be the focus of the new body.

In a Cabinet paper, Jones said the Infrastructure Commission would also act as a “shop front” for private companies looking to invest in New Zealand.

He pointed the finger at the previous Government, accusing National of focusing on short-term projects and under-investing in infrastructure projects.

Local Government New Zealand president Dave Cull said unprecedented population growth and the need to adapt for climate change, as well as a low-emissions economy, means that New Zealand was “behind the eight ball in terms of infrastructure investment”.

“Having a central agency to act as a shop front that the private sector can interact with, and having an ability to buy goods and services in bulk will be a massive benefit to regional development projects,” he said.

The Cabinet has approved just over $4 million to establish the commission and legislation establishing the body would go before Parliament in April.

The creation of the Infrastructure Commission has been well flagged – in August last year Jones announced work had begun on establishing the body.

He said Treasury had been unable to properly quantify the value of the infrastructure deficit New Zealand was facing which he said “was not good enough”.

The new body would work to quantify the level of the deficit, as well as figuring out how to fix it.

The Government received 130 submissions on what the body should look like.

“We have heard that message, and we have delivered.”

Ministers will retain final decisions on infrastructure investments, but the Commission will have an independent board and the autonomy it needs to provide robust, impartial advice.

“It will help hold this Government, and future governments, to account and we welcome that,” Jones said.

Hydrogen opportunity for NZ transport hubs

Hydrogen could play a key role reducing emissions from heavy trucks using the country’s major transport hubs, Refining NZ chief executive Mike Fuge says.

Hydrogen is challenging to store and transport, he says. Establishing a national distribution network would be difficult, just as it would be for heavy electric trucks.

But he says there is an opportunity to use hydrogen at transport hubs around the country, like at Northport – the refinery’s neighbour at Marsden Point – which has fleets of very heavy trucks travelling to and from it daily.

“There’s an opportunity, with the right sort of assistance, to turn those trucks to hydrogen,” he told BusinessDesk.

The Marsden Point oil refinery is the country’s biggest maker of pure hydrogen and has just completed a major upgrade of that capacity. It has 40 years’ experience making and using hydrogen and wants to use that as the country works to reduce emissions from the transport fleet.

Refining NZ has spent several months working on a new long-term strategy which it plans to lay out mid-year.

Fuge told investors today that the company is committed to a profitable refining business remaining at its core.

But he said the company is also looking at how it can leverage its existing assets and technical skills to play a part in the country’s energy transition.

“We see ourselves having a very active role to play.”

Many New Zealand firms are trying to assess the potential of hydrogen as a low-emission fuel for transport or industry.

Ports of Auckland has hired global energy consultancy Arup for a hydrogen pilot to test its suitability as a fuel for its straddle carriers and tugs. Hiringa Energy is working with TIL Logistics to test its potential in trucking and warehousing, while Pouakai NZ last year sought a loan of up to $20 million from the Provincial Growth Fund to test the feasibility of a combined power, hydrogen and fertiliser plant in Taranaki.

Earlier this month, Concept Consulting said hydrogen could be a good fit for return-to-base trucking operations, or for never-leave-base applications like forklifts and port cranes.

But it doubted hydrogen would be economic for industrial processing due to the volume of power needed to split it from water – in the case of electrolysis – or the high cost of capturing and storing the carbon emitted when it is made conventionally from hydrocarbons such as natural gas.

The high cost of public infrastructure also made hydrogen problematic as a fuel for long-distance trucking, Concept said.

Fuge said converting the refinery’s hydrogen-making to a clean process over time could provide a material reduction in emissions and the firm would be interested in working with the government to help make that happen.

Fuge says New Zealand’s fuel standards are already high, so offer relatively little scope for further emissions reduction.

Electric vehicles will replace more of the petrol fleet and that is less of an issue for the refinery, given its production is biased towards diesel and jet fuel, he said.

Biofuel currently needs a carbon price of about $400 a tonne to be viable, he said, but long-term the firm could bring its expertise into that sphere, particularly wood-based processes making fuel from cellulose.

KiwiRail’s Todd Moyle: Next ferries will carry trains across Cook Strait

KiwiRail is buying two new, large, rail-enabled ferries to replace the current three-ship Interislander fleet. This is an investment in a future that is not only ours but also New Zealand’s.

Our ferries play a crucial role linking the north and south of the country but the Aratere, Kaiarahi and Kaitaki are all reaching the end of their useful lives.

Every year 800,000 passengers cross the strait on nearly 4000 sailings. The ferries also transport the equivalent of a queue of freight trucks 1200km long and a train with 500km of wagons carrying goods for supermarkets and commodities such as grain, gas, wood products and aluminium.

And as we saw when the Kaikoura earthquake struck just over two years ago, our ships are a lifeline for our vulnerable capital city and for the top of the South Island.

Our ferries are a vital set of sinews that connect the economic muscles of New Zealand.

There is huge interest in the future of our ferries and the decision on their replacements. That is understandable. Crossing the strait on the Interislander is part of many Kiwis’ childhood memories, and many are aware of the role they play in building stronger connections for New Zealand.

The ships are well-maintained and delivering great results – 99 per cent of our scheduled services operate as planned and 93 per cent arrive on or ahead of schedule. But they are ageing, and will reach the end of their useful lives around the middle of the next decade.

The decision on what to replace them with spans generations. Each ship is expected to cost upwards of $200 million, though this may change depending on the final specifications, and the ships are likely to remain in service until at least 2050.

The two big questions we had to answer were how many ships we should have, and whether or not they should be capable of carrying trains.

There are clear economic benefits in a two-ship fleet. Large ships – we expect the new ferries will be around 30 per cent larger than what we have now – have the capacity to cater for demand at peak periods, such as the holiday season. Two large ships will deliver what is required through the year at a lower cost than a three-ship fleet.

Crucially, having three ships instead of two would simply add to operating and capital expenditure without generating any additional revenue.

The reduction in fleet size will not affect capacity, with up to six return sailings possible each day.

Having two identical ships is also more efficient, allowing standardisation of all aspects of the operation, including terminal infrastructure, crew familiarisation and training, and a reduced spare parts inventory.

It also makes sense for KiwiRail to opt for rail-capable ferries as part of our commitment to grow rail freight in New Zealand. They will provide a seamless journey between the islands without the need to unload rail wagons on to road trailers for the trip across the strait, and then reload them on the other side.

Getting freight off the road and on to rail is not only good for KiwiRail, but also good for the country – carrying freight by rail results in 66 per cent fewer carbon emissions compared with heavy road freight, and also means fewer heavy trucks on the roads. That means safer roads, and lower spending on road maintenance.

Our next step is to begin the detailed work setting out what we require in the new ships and terminals then seeking expressions of interest from shipyards to provide the final costing for our detailed business case approval. All going well, the first of the new ferries will arrive around the end of 2023.

We’re confident the decision we’ve made is the right one for KiwiRail, and the right one for New Zealand.

• Todd Moyle is acting chief executive of KiwiRail.

KiwiRail shakes off ‘Kaikoura effect’ with big jump in freight

KiwiRail's Coastal Pacific service resumed in December 2018.
KiwiRail’s Coastal Pacific service resumed in December 2018.

KiwiRail is back on track with a lift in freight and profits after the main north line between Picton and Christchurch was repaired following the 2016 Kaikoura earthquakes.

Freight volumes will increase further this year with the reopening of the Napier to Wairoa line for forestry wagons, and more work on a line to Marsden Point in Northland.

New luxury tourism trains are on the way thanks to a $80 million boost from the Government’s provincial growth fund, KiwiRail acting chief executive Todd Moyle said.

KiwiRail’s new commuter service will be running between Hamilton and Auckland next year, and it’s making progress buying two new rail ferries for Cook Strait to begin service in 2024. 

Moyle said the company was shaking off the effects of the Kaikoura earthquakes. 

The operating surplus of $16.3m for the six months ending December 2018 was 7 per cent ahead of the previous corresponding half-year period.

Interislander ferry Aratere.
RICKY WILSON/STUFF Interislander ferry Aratere.

“It will take some time to get back to where we were before the main north line was closed but we’re seeing increased demand.

The Coastal Pacific scenic train resumed service a few weeks ago with strong bookings throughout the summer.

The Interislander service reach record satisfaction levels at 94 per cent and an award at a Direct Ferries ceremony in London.

KiwiRail’s improved financial result benefited from the “wall of wood” and other freight sectors, with overall revenue up 12 per cent to $328m on the previous corresponding period.

Regional Economic Development Minister Shane Jones at an event marking the reopening of the Napier-Wairoa railway.
LYNDA FORREST Regional Economic Development Minister Shane Jones at an event marking the reopening of the Napier-Wairoa railway.

Domestic freight jumped 30 per cent, forestry 15 per cent, bulk freight 8 per cent, and tourism up 8 per cent on the Great Journeys of New Zealand rail and ferry services.

KiwiRail had overcome enormous challenges over the past two years, restructured operations, network services and rolling stock teams for greater efficiency, Moyle said.

“That has seen improvements in network reliability, a plan to rejuvenate our aged locomotive and wagon fleets.”

Moyle said KiwiRail’s improvements were also good for the environment.

“The more freight we get onto rail, the fewer trucks we have on New Zealand roads which increases safety for everyone, reduces carbon emissions and means less road maintenance for taxpayers.”

KiwiRail was dealing with a legacy of under-investment from successive governments and the infrastructure still required a lot of work, Moyle said.

“The Government has seen we are in catch-up mode and is willing to invest for the good of New Zealand.”

The company faced increased costs from regulation, compliance and investments commitments.

Maintenance affects South Port

New Zealand Aluminium Smelter is restarting the fourth potline, which has been closed for six years, following a rise in metal prices, which could mean more product handling for South Port. Photo: Gerard O'Brien

New Zealand Aluminium Smelter is restarting the fourth potline, which has been closed for six years, following a rise in metal prices, which could mean more product handling for South Port. Photo: Gerard O’BrienSouth Port at Bluff is predicting a 10% downturn in revenue for its full year ahead as it grapples with repairs and maintenance, likely to cost it $750,000 to just over $1million off its profit line.

For its half-year to December, the port posted a revenue boost to almost $21million, but that was undermined by repairs and maintenance costs to date, including the five-yearly dry-docking of the port’s tug Hauroko, which cost $838,000.

However, additional cargo across the wharves is expected from the recently opened Mataura Valley Milk plant in Gore and potentially from New Zealand Aluminium Smelter, which has reinstated a fourth production potline and accounts for about a third of cargo across the wharves.

South Port shares were unchanged yesterday at $6.50, and are up more than 8% on a year ago.

Revenue for the six months to December grew 7.4% to $20.9million, while after-tax profit declined about 7% from last year’s $4.9million, to $4.55million.

South Port chairman Rex Chapman said increased maintenance expenditure on the port’s infrastructure and floating plant would continue to have an impact on profitability for the rest of the year, but he was confident the annual 26c-per-share dividend of the past three years could be met again.

‘‘Over the coming months it is expected that there will be a number of fluctuations in each bulk cargo category; however, by year end the total volume is forecast to be in line with budgeted expectations,’’ he said in a statement.

South Port declared a fully imputed interim dividend of 7.5c per share, the same as last year.

Container volumes are tracking 10% ahead of last year and hit a record 19,800 and total cargo activity rose 1%, or 18,000 tonnes, from 1.75million tonnes last year to $1.77million tonnes.

Chief executive Nigel Gear said revenue was up by 7.4% due to a favourable cargo mix, strong performance in the warehousing division and increased marine activity.

‘‘Bulk cargoes continue to be the backbone of the business.

‘‘Volumes were comparable to the same period last year with the exception of fertiliser, down 34,000 tonnes and stock food, up 22,000 tonnes.’’

For its full-year trading, South Port issued guidance yesterday that its full-year earnings should fall in the range of $8.6million to $8.9million, down on last year’s record $9.66million profit.

While log volumes were similar to last season, Mr Gear said there had been a slowdown of exports to India and recent volumes were impacted by poor ground conditions in some Southland areas which hindered harvesting.

Those two factors were expected to result in a 10% reduction in log exports, he said.

Operational highlights for the six months included completion of Mataura Valley Milk’s infant formula plant in Gore and its initial export through Bluff on the Mediterranean Shipping Company line in November last year.

The fourth potline at New Zealand Aluminium Smelter (NZAS) was officially opened on December 6, 2018.

Once fully operational, the potline would consume an additional 60,000 tonnes of alumina and increase aluminium production by 30,000 tonnes per annum.

‘‘Over the coming year, South Port will be working with NZAS to determine whether there are additional services the port can provide to handle and/or pack any of this finished cargo into containers for export through Bluff,’’ Mr Gear said.

There was also new export of containerised medium density fibre board, which was packed at the port’s three-year-old Intermodal Freight Centre.

During the period, there was increased handling, packing and storage of meat, fish and dairy products in both the cold store and dairy warehouses, he said.

Of the dairy sector, Mr Gear said although New Zealand milk supply had increased this season, a production decline in Europe and Australia had ‘‘impacted positively’’ on Fonterra’s global dairy auction prices recently.

NEW NZ DRY DOCK A BASIS FOR NEW INDUSTRY – KIWIRAIL

A dry dock to handle the country’s biggest vessels is affordable and can form the basis of a new marine servicing industry, KiwiRail chair Greg Miller says.

Establishing a new facility will reduce the increasing cost and risk shippers face getting regular surveys completed at ports in Australia or Singapore, he said.

The new ferries the firm plans to introduce from 2023 – 230 metres long and 30 metres wide – “actually sets the stage” for the project, he said. KiwiRail is keen to be a catalyst and initial discussions with other shippers have been positive.

The key, he said, is to integrate the new dock with other existing facilities. The resulting hub could then provide a full range of marine services.

“It’s nowhere near as big and scary as we think – if we get it right,” Miller told BusinessDesk.

“I’ve got a really good idea of the costs and they don’t scare us.” He wouldn’t provide an estimate.

Dry docks operate at Lyttelton and at Devonport in Auckland. But both are old and neither are large enough to cater for the increasing size of the country’s ferries, coastal carriers and some ocean-going fishing vessels.

Port Marlborough has spent several years campaigning to establish a floating dry dock at Shakespeare Bay and previously estimated the cost at up to $80 million.

Last year, the New Zealand Shipping Federation urged action on the project, saying it was open to any location that is affordable, can provide 24-hour, seven-day operation, has access to other wharves and is deep enough for use by international vessels.

It told the government’s working party on a supply chain strategy for the upper North Island that the only feasible sites are Whangarei and Shakespeare Bay.

Miller wouldn’t be drawn on the location of the facility, development of which may still be five to 10 years out.

Yesterday, he told Parliament’s Transport and Infrastructure Committee that the limited dry dock capacity is causing a loss of productivity.

Increasing coastal shipping around Australia is making it harder for New Zealand vessels to access facilities there. Getting to and from Singapore adds to time and cost and also adds considerable risk to scheduling.

Miller said New Zealand fishing companies are also designing vessels to fit the local facilities, reducing their ocean-going capacity and their efficiency.

The Devonport dock can handle vessels up to 170 metres in length. Miller said there are probably 14 local vessels that could use a larger facility now and he could see that figure getting to 20 “pretty easily”.

Beyond that there is additional scope to gain business from international shipping lines that currently can’t get vessels serviced here.

“We could build an industry,” he said. “We are going to really pursue a location and an opportunity for that.”

(BusinessDesk)