The New Zealand Transport Agency is investigating its heavy vehicle certifiers after suspending two of them over safety concerns.
Suspension of Dick Joyce based in Lower Hutt follows the suspension last year of Peter Wastney after truck tow bars were found to be deficient.
The agency is also investigating one other heavy vehicle certifier, in response to a recent complaint.
The split tow bar connection of a truck and trailer unit.
This Auckland-based certifier has not been suspended, pending the outcome of the investigation, which NZTA said was unrelated to the investigation of Joyce.
Joyce has the right to appeal his suspension to the District Court. He has carried out certification work for the Transport Agency for several years including to peer review work on a 2012 research paper on freight transport efficiency.
Some trucks have been unable to tow trailers until the drawbars are re-certified.
“Joyce was suspended following safety concerns identified during the Transport Agency’s regular auditing process,” a spokesman said.
“In the area of specialist heavy vehicle certification, we rely on the support of a network of qualified professionals to carry out the services which they are appointed to provide to a high standard.
“It is extremely disappointing when a person appointed to carry out these specialised services fails to perform their duties to the high standards required.
“We will be strengthening our capability in this area as an urgent priority. We are currently recruiting for three additional auditors and two additional heavy vehicle engineers, and we will also be working to build engineering capability in the sector.
“Once the decision to suspend Joyce was taken, the Transport Agency immediately commenced a process to examine other certifications carried out by him to determine whether there were any further safety issues in addition to those identified through the audits that gave rise to the suspension.
“Any additional safety issues identified will be addressed, and also taken into account by the Transport Agency in considering whether to take action to revoke Joyce’s authority permanently.”
The Transport Agency was also auditing other certifiers, as part of its safety auditing regime, “and we will continue to take enforcement action wherever it is warranted in order to ensure public safety”, the spokesman said.
Meanwhile, Road Transport Forum chief executive Ken Shirley said while he believed there was too much unnecessary regulation in general, the area of certification appeared to have been under resourced.
Fortunately there had been few truck and trailer uncouplings, he said.
“One of the problems is there’s a chronic shortage of skilled engineers nationally. Certifiers need highly specialised skills.”
Shirley said the work of re-certifying 1500 Wastney-certified truck tow bars was about half way through and they should be completed by Christmas.
“I wouldn’t criticise the agency for its response, they came to the party and picked up the tab for re-certifying, although there is the potential for loss of business and customers. It was probably a timely wake up call,” Shirley said.
Europe is building new alliances to counter an increasingly isolationist America as President Donald Trump recasts the U.S.’s economic relationship with the world.
The European Union opened free-trade negotiations with Australia this week, representing one of more than a dozen deliberations currently being conducted by the bloc. This comes on the heels of the U.S. slapping tariffs on imports from some of its most solid allies — including the EU, Canada, Mexico and Japan — in the name of national security.
But Trump’s aggressive foreign-policy stance, which has included leaving the Trans-Pacific Partnership and the Iran nuclear deal, has offended some of the U.S.’s closest partners, with EU President Donald Tusk vowing to stand up to the White House’s “capricious assertiveness.” This has raised the prospect of a shift in alliances among world powers as they seek to preserve the global trade system.
All the trade deals being concluded are sending a message that “the EU and its partners are coming together,” European Trade Commissioner Cecilia Malmstrom said in a speech in Canberra on June 18, adding they were shaping globalization and standing up for open trade. “And we need many allies to help us in pursuing these goals.”
Trump doubled down on his efforts to recast Washington’s trade relationships this week, threatening tariffs on another $200 billion in Chinese imports after already identifying $50 billion in products to hit with levies. The U.S. measures have created unlikely allies among nations, with both China and the EU calling for adherence to the multilateral trade system.
This comes after Trump threw a Group of Seven meeting into chaos, rejecting a joint statement upon hearing Prime Minister Justin Trudeau say Canada would be forced to respond to the U.S. decision setting tariffs on Canadian steel and aluminum. Leaders have criticized Trump, with French President Emmanuel Macron’s office saying “international cooperation cannot be dictated by fits of anger and insults,” and Norway’s prime minister saying “the U.S. isn’t the same driving force as it used to be.”
“The Atlantic has gotten wider under President Trump,” German Foreign Minister Heiko Maas said in a June 13 speech in Berlin. “Trump’s isolationist policy has opened a huge worldwide vacuum. Therefore our common response today to ‘America First’ must be ‘Europe United’.”
The EU is already Australia’s second-largest trading partner after China, and an accord including New Zealand could boost the bloc’s gross domestic product by 4.9 billion euros ($5.7 billion) by 2030, according to European Commission estimates. Sectors likely to be included in discussions will be machinery, cars, electronic equipment, chemicals and metals.
The talks with Australia come a year after the EU inked accords with Mexico and Japan and the provisional passage of a trade agreement with Canada, which took seven years to complete.
“I look forward to adding Australia to our ever-expanding circle of like-minded trade partners,” Malmstrom said in a statement. “In challenging times, it is heartening to see that Australia shares our commitment to a positive trade agenda, and to the idea that good trade agreements are a win for both sides.”
Despite the historical relationship the U.S. has with Europe, and the American role in developing the trans-Atlantic partnership, EU leaders are concerned that Trump’s actions may undermine the global system.
“What worries me most, however, is the fact that the rules-based international order is being challenged,” Tusk said during the G-7 summit in Charlevoix, Canada. “Quite surprisingly, not by the usual suspects, but by its main architect and guarantor: the U.S.”
Wellington’s CentrePort suffered extensive damage in the November 2016 earthquake.
New Zealand’s ports are under pressure to agree on a basis for presenting financial results, with the Auditor-General saying the current variations could mask the underlying performance of different businesses.
In a letter to the chief executives New Zealand’s major ports, deputy auditor-general Greg Schollum said the agency had identified “considerable variation” in the various port companies’ reported returns, in part created by different methods of valuing assets.
“These different approaches mask the underlying performance of many entities in the sector and make them difficult to compare,” Schollum wrote.
“We are concerned that this affects the ability of shareholders, Parliament and the public to assess the performance of the individual port companies and the sector as a whole.”
In the year to June 30, 2017, return on equity across the ports averaged just under 9 per cent, but ranged from less than 3 per cent to more than 25 per cent, with Schollum putting part of the variation down to different accounting methods.
Nine of the 12 port companies measured some asset classes at fair value, but across the nine the measures were not consistent. “These differences have a significant effect on the return on equity reported.”
A lack of transparency meant it was harder for shareholders to assess the merits of capital investment, which totalled $290 million across the sector in 2016/17.
“Because of the different valuation approaches, it is difficult to form a view about whether this capital expenditure was a good use of shareholders’ funds.”
Schollum urged the port companies to review the way assets were valued.
“We consider that it is more appropriate to use fair value and to assess the fair value based on the expected cash flows to be generated. This will provide the most useful financial information to stakeholders, should help inform investment decisions, and will make company and sector performance more transparent.”
The New Zealand Transport Agency has begun thinking about how it may need to prepare for the arrival of autonomous vehicles such as this Volkswagen driverless concept car.
The transport revolutions of the past – railways, petrol cars and air travel – have shaped our cities and driven some of the most sudden and dramatic changes in society.
So it’s probably no wonder that transport is one of the first things we consider when we think about future technology.
In a few short years, people have gone from debating about whether electric cars will take off at all, to arguing about whether and when they will be self-driving.
Meanwhile, the leading edge of transport research and development has skipped ahead a mile.
Last month, Uber began laying the groundwork for a fleet of autonomous electronic helicopters or drones that would ferry commuters between the rooftops of skyscrapers, so they could bypass congested city streets.
The company aims to have a commercial service operating in Dallas and Dubai by 2023.
One vehicle that could perhaps do the job is being trialled in – who would have guessed it – New Zealand.
United States company Kitty Hawk, funded by Google co-founder Larry Page, has been testing a self-driving “flying car” called Cora, which can take off and land vertically, in Canterbury since October.
Spokeswoman Anna Kominik said it had settled on New Zealand for the trials after a global search for a jurisdiction that was “safe, had aviation experience and was a good place to do business”.
Kitty Hawk is headed by former Google X scientist Sebastian Thrun, who led the development of Google’s self-driving car and its Google Glass augmented-reality spectacles.
Its website explains Cora “rises like a helicopter and flies like a plane, eliminating the need for a runway and creating the possibility of taking off from places like rooftops”.
Kitty Hawk assumes Cora will be used for an Uber-like “ride-sharing” flying-electric-car service, rather than being a modern take on the exclusive corporate helicopter.
The Cora won’t be available for sale to individuals, it says, and is instead “about giving everyone a fast and easy way to get around that doesn’t come at the expense of the planet”.
However, Kitty Hawk is also trialling a one-person vertical take-off “personal aircraft” called the Flyer that is designed to fly up to 10 kilometres on a single electric charge.
The Flyer is designed to travel for up to 20 minutes at 20 miles per hour, though it’s currently limited to flying over water at an altitude of only 10 feet.
Coming back down to earth – but not with a bump – Telsa founder Elon Musk envisages a network of “hyperloops” that would smoothly whisk people between cities at up to 1200kmh, which is just under the speed of sound.
The incredibly high speeds touted by hyperloop researchers are conceivable because people would travel in pressurised “pods” that would glide on magnets, pushed by magnetic pulses through tubes that were kept at a near-vacuum to reduce air resistance.
One of the huge (some think insurmountable) engineering challenges is creating and maintaining something close to a vacuum in tubes that could stretch hundreds of miles.
Without the near vacuum, hyperloops just become a bit like a Maglev train in a tube.
Virgin founder Sir Richard Branson has signed a “preliminary agreement” to build a hyperloop that would transport people 160 kilometres between the Indian cities of Pune and Mumbai in 25 minutes, implying a less whizzy average speed of about 350kmh.
Its tubes would be depressurised to about 100Pa (pascals), equivalent to the very thin air pressure that exists 60km above the ground.
Branson, who has come off the bench to personally chair his Virgin Hyperloop 1 venture, told the BBC he believed it could transport people in Britain “far quicker, in far greater numbers, with far greater convenience than any other train network in the UK”.
If ever built in New Zealand, a hyperloop could cut the land-travel time between Auckland and Wellington to under an hour, and the commute time between Hamilton and Auckland to less than 10 minutes.
KiwiRail general manager of planning David Gordon says KiwiRail “has not formally looked at hyperloop technology for New Zealand and has not formed any view on it”.
Compared with drone taxis and hyperloops, self-driving cars might sound positively pedestrian.
But Christchurch consultant Roger Dennis is one of a growing number of professional future-watchers who argue they are an advance we can definitely count on.
Dennis forecasts self-driving trucks and cars will first prove their safety in the confines of mines, university campuses, ports and hospitals before being gradually allowed onto public roads by regulators.
Tragedies such as the death in March of a pedestrian in Arizona, who was hit by an Uber vehicle travelling in autonomous mode, will prove only an unfortunate “blip”, he believes.
“Driverless trucks have been used in mines for a number of years and, when they remove the human driver, accidents go down and productivity goes up. Human-driven cars kill more people every year than autonomous cars ever will.”
Self-driving cars may not be given licence to roam all of New Zealand’s eclectic mix of public roads in one swoop. Regulators may instead open up the road network in phases, he says.
“A logical approach would be to say, ‘We think these roads are suitable for autonomous vehicles and there’s another set of roads where it won’t work’. Then, as artificial intelligence improves, you will see more and more roads become certified.”
The New Zealand Transport Agency is starting to prepare for the arrival of autonomous vehicles (AVs), says one of its managers, Martin McMullan.
Virgin is one of the companies pioneering hyperloop systems, which could let people travel on land at up to 1200 kilometres an hour.
Trans-Tasman body Austroads, on which the agency has a board seat, produced a report last year on changes that might be required to the road network.
It stressed the benefits of making intersection designs and machine-readable signs “consistent”, so they could be reliably interpreted by software.
“Feedback suggests that many AVs will be designed to operate on our road networks as they currently are”, but existing infrastructure was “problematic” for some manufacturers, the report concluded.
“Roadworks are a key aspect noted to be of particular concern to AV manufacturers and system suppliers. It is necessary to ensure that roadworks become well planned events.”
Colin Gavaghan, director of the New Zealand Law Foundation Centre for Law and Policy in Emerging Technologies at Otago University, says it’s only “human” for AV accidents to weigh heavily on our minds.
“I’d wager that one pedestrian death from a driverless car would stand out in people’s minds more than all of the 300-odd road deaths in New Zealand last year combined.”
People imagine they are safer when they are in control of a vehicle, and “no amount of actuarial data can budge that belief”, he says.
“That said, I’m not sure that we should be settling for ‘a bit better than the status quo’ if it’s reasonable to expect driverless cars to be much safer.
“I have a vision of a future where car deaths are as rare as air traffic deaths today, and we should be demanding that level of safety.”
Research firm Bloomberg argues the world is unlikely to run out of lithium before the electric vehicle (EV) revolution is complete, even if it remains an essential ingredient in batteries.
Although not super-abundant, lithium is not a “rare earth” metal, with discovered global recoverable reserves estimated at somewhere between 10 million and 40m tonnes and rising – potentially enough to power more than 10 billion electric cars, according to Bloomberg.
Neither would New Zealand be likely to run out of electricity, according to Electricity Authority chief executive Carl Hansen.
“Electrifying all light vehicles would increase electricity demand by approximately 15 per cent, but this will likely occur over several decades,” Hansen says.
“We’re confident that the industry can cope with building generation in a timely way to meet the demand increases.”
Electricity prices might not even need to go up. “Over this time period there’s a high chance that electricity prices will decline in real terms due to the declining costs of technology such as small-scale solar generation.”
The same is true for transmission costs, he says. “It is possible the average cost of delivering electricity to consumers could decline due to higher use of existing network assets, especially during off-peak hours.
“Electric vehicles offer a fantastic opportunity for New Zealand to reduce its transport-related carbon emissions.”
Tony Seba believes petrol cars will go the way of the “horse and cart” far faster than most planners expect.
There is less agreement on when EVs and AVs may take over.
Right now, the switch to conventional self-driven electric vehicles has only just begun.
At the end of May, there were 5984 EVs registered in New Zealand, not including plug-in hybrids, according to the Transport Ministry.
That’s up from just 735 two years before and 2444 a year ago, but still a drop in the ocean among the total fleet of 3.6 million light vehicles.
Stanford University economist Tony Seba turned heads at an Apec conference in Wellington in November when he forecast no petrol vehicles would be built after 2025.
He believes that, by 2030, most journeys in the US will be taken “Uber-style” in fleets of self-driving cars that will pick people up and drop them off.
In the US “200m cars are going to be stranded – useless”, said Seba, who is known for his bold forecasts.
At the conservative end of the spectrum, the Transport Ministry forecasts EVs will still only make up 40 per cent of the fleet by 2040, even though it believes the typical lifetime cost of owning an EV will fall below that of a petrol car equivalent by about 2025.
The ministry is not making any forecasts about self-driving cars. But McMullan says if AVs follow the pattern of other vehicle technologies they will take between 10 and 30 years to dominate vehicle sales, and then at least a further 20 years to squeeze out the existing fleet.
Dennis – noticing a Tesla electric car pass by his window as he speaks – says the “safe money” is on it being eight to 15 years before AVs become noticeable on the roads.
“The two big barriers will be that the last 20 per cent of the technology challenge will be difficult, and regulation and public policy.”
The obvious roadblock for drone transport and electrically powered flight in general comes in inventing the battery technology that could provide the necessary power-to-weight ratios.
British vacuum cleaning inventor James Dyson announced Dyson’s move into the electric-vehicle business last year and is among those betting big on new solid-state batteries that would have a solid electrolyte instead of the conventional liquid one.
Last month, carmakers Toyota, Nissan and Honda and battery manufacturers Panasonic and GS Yuasa received a US$14m grant from the Japanese government to team up on solid-state battery research.
These could at least double power-to-weight ratios at the same time as slashing recharge times by a factor of six, according to some researchers.
Dennis says there is “always interesting stuff in the labs”, but cautions battery technology has not been a fast-moving field, at least up to now.
A “10-year timeframe” would be realistic for any breakthroughs, he believes.
“I think everybody finds it really difficult to think long term, and the classic example of this is the rebuilding of Christchurch, New Zealand’s largest infrastructure project costing more than $40b.
“There are at least four new car parking buildings in the CBD, yet if you look at Oslo in Norway, their CBD is going to be car-free by 2020. These are multi-storey buildings whose usage will probably start to tail off in 10 to 15 years – maybe sooner.”
Port of Tauranga is a high-quality company lauded as the most productive and efficient port in Australasia but its shares are too expensive, according to Morningstar which recommends investors sell the stock.
The port company’s shares recently traded at $5.13, a significant premium to Morningstar’s $3.80 fair value estimate. The research house has a one-star rating on the stock, which indicates the market is pricing in an excessively optimistic outlook and encourages investors to strongly consider exiting the stock. Other analysts agree, with four having a ‘sell’ rating on the stock and one a ‘strong sell’, with a median price target of $3.80, according to Reuters data.
“Port of Tauranga is a high-quality company,” Morningstar analyst Adrian Atkins said in a June 12 research note. “While the firm is in a favourable position with a virtuous outlook, the prevailing share price has baked in too much growth.”
The port is the country’s largest for cargo volume and second largest for container throughput, and Morningstar notes it runs at a cost advantage to other ports in the country due to its lower-cost non-union workforce and large-scale operations. It’s set to benefit in the future as larger international ships call at fewer ports, expected to prompt a rationalisation in New Zealand to two hub ports servicing the North Island and the South Island and increased use of rail and coastal shipping.
“The competitive advantages in New Zealand’s largest port are undoubtedly compelling,” Atkins said. “As port operations rationalise, and as the only port in New Zealand capable of accommodating larger cargo ships, we expect Port of Tauranga will continue to win share from competitors. Fortunately, it has ample land to accommodate expansion.”
Still, despite the rosy outlook for the company, Morningstar notes Port of Tauranga is trading on a “mediocre” fiscal 2018 dividend yield of 3.5 percent including special dividends, and the research house forecasts a fiscal 2019 dividend yield of 3.7 percent, falling to 3 percent in fiscal 2020 as special dividends finish.
With the shares trading on a forward price to earnings ratio of more than 37 times “significant growth is already priced in” and “overly optimistic”, Atkins said in his note titled ‘Port of Tauranga is a High-Quality Company …But Wait for a Better Price’.
This is an extremely exciting time for the shipping industry which is expected to undergo a major transformation over the next decade.
A number of variables are likely to play their role in the shaping of the industry’s future way of doing business ranging from the third industrial revolution to electric cars and the switch to renewable energy and digitalization.
However, being such a resilient sector shipping tends to find opportunities in disruption.
Speaking at today’s Power Panel, organized by BIMCO within the Posidonia 2018 trade show, industry representatives from various branches shared their views on the most exciting things in the industry at the moment.
Basil Karatzas, CEO of Karatzas Marine Advisors, said that the most exciting thing on the market was the freight perspective.
“It makes the market return to the fundamentals and give it more thought. What is more, it keeps away speculative investments,” he said, adding that most of newbuildings orders placed so far were for the purpose of renewing fleet or ensured cargo for vessels.
Among the five things to watch out for in the medium to long-term are digitalization and the use of advanced analytics which have already started to transform the shipping industry, according to Henriette Brent-Petersen from DVB Bank.
“We are on the verge of the beginning of a revolution of our industry. It is not only that the business model changes, but all levels of the supply chain,” she explained.
One of the examples to support this argument is the rise of the smart-yards, Brent-Petersen said, which are forecast to automate their manufacturing process and start producing ships copying the Volkswagen model of building cars. This will ultimately put a permanent pressure on the newbuilding prices, she went on to say.
“The most exciting thing at the moment in shipping is Posidonia,” Simon Ward from Ursa Shipbroking said, stressing that shipping boils down to relationships.
“This interaction of people from various areas of the industry is where the new ideas come from and where relationships are forged. Conferences like this one are the places where exchange of technology and innovation takes place: through people. If we lose that we will lose the nature of shipping itself.”
For Valentina Vignoli, from Peninsula Petroleum, a bunker supplier, the most exciting thing at the moment is the 2020 sulphur cap.
“It is the first step for the industry to move into an era of greener fuels. In the medium term we might even see new types of fuels being developed to comply with the new regulations, which is exciting and challenging at the same time,” she said.
Finally, James Leake, analyst at N.S. Lemos, believes a very close eye should be put on the developments in India, and specifically its teenage population as the source of emerging households.
“Given the shape of Indian population pyramid it is the place to watch out for in the five to ten years. I’m not going to claim that it would set the market on fire, but if we are looking for optimism that is the only place growth can come from speaking from a structural perspective; population-wise.”
In conclusion, as stressed by Karatzas, it has become ever more difficult to predict the future and these are very uncertain times for the industry.
Nevertheless, there are at least five things to closely monitor as the industry steams ahead into the uncharted waters.
Women’s International Shipping and Trading Association (WISTA) is proud to announce the re-launch of WISTA Japan.
“We are delighted to welcome Japan back to our WISTA family. Japan plays an important role in the maritime industry, being the second ship owing nation in the world and we are positive that WISTA Japan will contribute greatly to the aims and mission of WISTA International,” said Despina Panayiotou Theodosiou, president of WISTA International.
“I am very gland to re-launch WISTA Japan and to be registered as the official member of WISTA International. In the shipping industry in Japan, it is both socially and politically meaningful to create a women’s association. We are looking forward to growing with WISTA International,” said Shoko Kamimori, president of WISTA Japan.
Launch Party for WISTA Japan
WISTA Japan was re-founded by: Shoko Kamimori, Fukada Salvage & Marine Works Co., Ltd., President WISTA Japan; Yoriko Ishida, National Institute of Technology, Oshima College; Akiko Matsumoto, Tokyo Century Corporation; Reiko Yoshida, Atsumi & Sakai; Atsuko Kissho, Atsumi & Sakai; Aya Osawa, The Japan Ship Owners Protection & Indemnity Association; Maki Yoshida, Star Marine Public Relations Corporation; Masayo Wakamori, Lloyd’s Register of Shipping; Yuka Narita, Atsumi & Sakai; Yukako Mori, Atsumi & Sakai; Yukari Aoto, Sonpo Japan Nipponkoa Insurance Inc..
WISTA International is comprised of 40 National WISTA (NWA) around the world and nearly 3,000 members. To launch a national WISTA association, the association must file appropriate paperwork in the home country, have at least 10 members in management positions and pay annual fees to WISTA International. WISTA International and its NWAs facilitate the exchange of contacts, information and experiences among its members, promote and facilitate the education of its members and provide liaison with other related institutions and organizations worldwide.
From July 2018, Swire Shipping will upgrade its multipurpose liner services between North Asia and the Pacific.
Under this enhancement, Swire Shipping will be adding direct calls at the Chinese ports of Nansha and Ningbo and aligning its North Asia services to provide a 10-day service frequency between North Asia and Papua New Guinea (PNG).
Swire Shipping’s multipurpose vessel in Papua New Guinea (PNG)
Other markets served by Swire Shipping’s North Asia services such as Townsville, Noumea, the Solomon Islands, Vanuatu and New Zealand will also benefit from access to more ports in China. 4 Donald Fraser, Swire Shipping’s General Manager for Liner Trades said, “Swire Shipping is committed to developing and upgrading our services and are delighted to provide our customers with this latest set of improvements. In particular, there will be a sailing every 10 days from China to PNG, complementing our 10-day Southeast Asia-PNG and AustraliaPNG services. We’re very excited to be offering our customers this comprehensive import and export network coverage.”
Source: Swire Shipping
With its fleet of ageing ferries, age-expired locomotives and the need for replacement wagons, KiwiRail is building its case for a large taxpayer investment. David Williams reports.
It was in 2008, an election year, that Helen Clark’s Labour-led government bought back the country’s rail assets under the KiwiRail banner.
Finance Minister Michael Cullen said at the time that during negotiations with the previous owner, Toll, it become clear that buying the rail operating business, including the inter-island ferries, was the best way to increase investment in the industry. Running a commercially viable business would prove extremely difficult without government support, he said, adding: “In the months ahead, I will explore options for significant investments in new, modern rolling stock.”
Instead, Labour lost that election and the global financial crisis kicked in, leading to years of public sector belt-tightening under Prime Minister John Key. Yet, despite all the rhetoric about roads – especially those of national importance – the National government pumped billions into rail. According to The Listener, the previous government spent about $2.1 billion on network maintenance and upgrades, and $1.4 billion for commuter rail upgrades in Auckland and Wellington.
But it’s never been enough. While its freight and tourism businesses manage to make a small operating profit, the company traditionally needs more than $200 million a year to maintain its network. That network includes 3500 kilometres of track, 1322 bridges and 98 tunnels, as well as maintaining its “above-rail” assets.
KiwiRail’s latest half-year report said more than half of the company’s active locomotives in the South Island were bought before 1975. That reflects, KiwiRail chairman Trevor Janes wrote, “decades of underinvestment which has contributed to recent challenges” – including the 2016 Kaikoura earthquakes.
“A rail company cannot live from pay cheque to pay cheque, you need a longer-term focus.” – David Gordon
It’s in this context that KiwiRail started a review. In last year’s Budget, the National-led Government pledged $450 million over two years, on the proviso there was a probe into its operating structure and longer-term capital requirements. “The Government wants to put the rail network on a longer-term sustainable footing,” then Transport Minister Simon Bridges said, in the hope National could suddenly achieve what it had failed to do for years.
The focus of that review changed when Labour, New Zealand First and the Greens formed a Government. (Pre-election, Labour promised to build light rail from Auckland’s CBD to the airport and a passenger service between Auckland, Hamilton and Tauranga.)
KiwiRail’s group general manager of investment, planning and risk David Gordon tells Newsroom there’s now a greater focus on “What do you want rail to do?”, as opposed to simply how much will it cost. “A rail company cannot live from pay cheque to pay cheque, you need a longer-term focus. I think everyone understands that. The question is, what is the mechanism by which that’s done and then, obviously, what is the amount.”
One mechanism, announced in April, was a surprise petrol tax hike, something Newsroom Pro’s Bernard Hickey called the Government’s “politically riskiest move since its formation”.
In its policy statement on land transport, which sets transport priorities, the new Government sent a message by adding rail to the list of transport classes that can bid for money from a pot called the national land transport fund. (Auckland is set to get a $2.8 billion increase from the fund, to help pay for a $28 billion transport wishlist over the next decade.)
However, the policy statement said scope for rail funding is “very tight”, and limited to improving struggling urban rail services and contributing to new and existing “interregional” commuter services.
‘Rust never sleeps’
KiwiRail’s review is scheduled to run through the rest of this year. But Gordon says for the biggest-ticket items, which will cost the largest dollops of money, it wants to bring these to the Government’s attention earlier. Those include its locomotives and ferries, which are at “end of life”, and money spent in its freight business “just to remain relevant”. KiwiRail would also like to standardise its equipment and link its IT systems more closely to that of its customers.
The problem is, and always has been, how much money KiwiRail needs just to maintain its network. Two weekends ago, a big chunk of the Auckland network and almost all of Wellington’s network was closed for replacement works. In greater Wellington, five bridges are in various stages of replacement involving 70,000 railway sleepers.
“It goes on all the time,” Gordon says. “Rust never sleeps.”
KiwiRail has also become very good at sweating its big ticket items like locomotives and ferries. But you can only sweat them so much.
Off the back of a record summer season, KiwiRail’s general manager of strategic projects Walter Rushbrook says its existing ferries are at capacity at peak periods. It is considering whether it should buy or lease bigger ships to cope. That’s triggered wider conversations about transport links with the likes including port companies, regional councils and NZ Transport Agency, especially about the future of existing ferry terminals in Wellington and Picton. As Rushbrook says: “Bigger ships mean you need bigger wharves.”
KiwiRail’s Interislander ferries – Kaitaki and Aratere, which it owns, and the leased Kaiarahi – are not expected to have cataclysmic failures as they age, he says. But they might become more unreliable. “The team works really hard to keep it going but it’s like an old car – it’s going to need increased amounts of love as it gets into its twilight years.”
Meanwhile, Gordon says about half of KiwiRail’s 100 locomotives are “age-expired”. New locos cost about $5 million. “You could do the maths there.” Wagons also need replacing – he didn’t hint at how many – standard flat-top wagons cost about $150,000-a-pop.
“So, yes, it’s in the hundreds of millions, absolutely.”
Surely that number could reach $1 billion, over time? Gordon says that as a stand-alone commercial proposition, rail in New Zealand has never been in a position to fund its underlying capital, of about $200-odd-million a year.
“On an ongoing basis, rail will require capital. You do the years long enough it’ll get to be a very big number.”
Asked when big chunks of Crown investment might be needed in KiwiRail’s ageing infrastructure, Gordon and Rushbrook both arrive on a rough timeframe of five years.
Turnaround comes to a screeching halt
Labour would do well to focus on the non-financial benefits of rail – such as carbon emission savings and easing congestion – if National’s record is anything to go by.
In 2010, it enacted a $750 million “turnaround plan” in the hope of making KiwiRail self-sustaining by 2021. The plan was shelved in 2013. A Treasury review found KiwiRail had made substantial progress but the plan had been based on overly optimistic revenue assumptions, inadequate progress in some areas and unexpected factors, like the global recession.
Hundreds of millions of Crown dollars continued to flow into the rail company. A commercial review started in 2014 found that New Zealand’s freight business would never be big enough for KiwiRail to be self-sustaining. By 2016, six years after the turnaround plan started, freight volumes had increased 14 percent, and KiwiRail’s share of import and export volumes had leaped 69 percent. Another 48 locomotives and 1300 wagons were bought.
So much was achieved. And then the Kaikoura quakes hit in November 2016.
In latest KiwiRail accounts, for the half-year, the company notes its insurance only covers loss and damage up to $350 million. The previous Government promised to meet any shortfall, including, in that last six-month period, a $40 million injection, while the company’s accounts took a charge of $134.1 million on its assets “for the capital cost of reinstatement incurred”.
Gordon says if Crown money is invested properly it can deliver on Government policy objectives. He points to Government investment in Auckland’s commuter rail network. In 2003, when Britomart station opened, patronage was about two-and-a-half million trips a year. Last August, the rail network celebrated recording 20 million trips in a single year.
Gordon: “I can’t see any reason to suspect that, post the City Rail Link and other things, that could be up in the 50s.”
Peters versus English
A question which seems more relevant in the last 24 hours is, what are the Government’s objectives? Yesterday Labour’s Justice Minister Andrew Little announced he was backing off repealing the controversial Three Strikes law because New Zealand First wouldn’t support it.
In terms of KiwiRail’s future, it’s worth repeating an exchange in Parliament in February 2015.
Bill English, the Finance Minister at the time, found himself defending his Government’s investment in KiwiRail – more than $1 billion over four or five years – under questioning from Finance and Expenditure Committee member Winston Peters.
Plugging capital investment gaps of between $150 million to $350 million a year was a concern, English agreed.
Peters asked English if he’d had any discussions about privatising the ferry service or putting in foreign ships or crews. No, English replied, adding: “This is a business where it’s a real challenge to get it to a sustainable basis, and we are now, I think, on about our third round of having a harder, deeper look at what drives KiwiRail costs and revenue.”
Peters, unsatisfied, pressed further, asking if any Treasury boffins had ever asked about the financial “disaster” happening at KiwiRail, the “almost daily stoppages” and whether it needed to go through the business with a fine-tooth comb. “Surely somebody said: ‘Look, alarm bells should be ringing here. What are we going to do about it?’”
Newsroom asked Peters, the Minister of State Owned Enterprises and soon to be acting prime minister, for his current view of KiwiRail’s operations and the likelihood of further Crown investment. His office didn’t respond.