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Note 16: Property, Plant and Equipment (continued)

Land and Buildings

  Actual
Land and Buildings
Breakdown of land and buildings
(total valuation over $500m)
30 June 2017
Land
$m
Buildings
$m
Total
$m
Housing stock 17,845 8,910 26,755
School property 5,683 12,413 18,096
State highway corridor land 10,892 9 10,901
Conservation estate 5,718 64 5,782
Hospitals 1,091 4,716 5,807
Rail network corridor land 3,520    -  3,520
Prisons and Department of Corrections 166 1,960 2,126
Defence Force land and buildings 983 1,728 2,711
Landcorp farmland and buildings 1,091 148 1,239
Ministry of Justice land and buildings 204 782 986
Police stations 151 475 626
Other 2,296 3,450 5,746
Total land and buildings 49,640 34,655 84,295
30 June 2016 Actual
Land
$m
Buildings
$m
Total
$m
Housing stock 15,632 8,568 24,200
School property 4,770 9,876 14,646
State highway corridor land 9,757 9 9,766
Conservation estate 5,691 90 5,781
Hospitals 995 4,468 5,463
Rail network corridor land 3,354    -  3,354
Prisons and Department of Corrections 140 2,399 2,539
Defence Force land and buildings 938 1,456 2,394
Landcorp farmland and buildings 1,092 131 1,223
Ministry of Justice land and buildings 487 731 1,218
Police stations 152 491 643
Other 1,951 3,271 5,222
Total land and buildings 44,959 31,490 76,449

Carrying value of other asset classes subject to revaluation

State Highways

  Actual
30 June
2017
$m
30 June
2016
$m
State highways 23,829 22,347

There are some uncertainties about the values assigned to different components (eg, formation, bridges) of the state highway network. These uncertainties include whether the New Zealand Transport Agency's (NZTA) databases have accurate quantities and lives and whether there is complete capture for some cost components. Some uncertainties are inherent, but those arising from both the quantity and costs of components are planned to be reduced by improvements in the accuracy of the underlying databases.

Additional ‘brownfield' costs associated with road construction in urban areas (eg, traffic management) are assessed as being the most significant part of the potential undervaluation, with the remaining due to incomplete records. An allowance to recognise these costs has been included for the current and some previous years. However, historic ‘brownfield' costs cannot be reliably measured and are currently excluded from the valuation.

Any adjustments in value affect the Statement of Financial Position only. There is no impact on the operating balance.

Electricity generation assets

  Actual
30 June
2017
$m
30 June
2016
$m
Meridian Energy 7,849 7,657
Mercury NZ 5,241 5,268
Genesis Energy 2,938 2,955
Inter segment eliminations (162) (161)
Total electricity generation assets 15,866 15,719

Specified cultural and heritage assets

  Actual
30 June
2017
$m
30 June
2016
$m
National Library 1,053 1,010
Te Papa 948 924
National Archives 614 625
Conservation 446 442
Other 36 34
Total specified cultural and heritage assets 3,097 3,035

Rail network

Recoverable
amount
$m
ODRC
 
$m
30 June
2016
Carrying
value
$m
  Recoverable
amount
$m
ODRC
$m
30 June
2017
Carrying
value
$m
101 4,304 101 Network required for freight 96 4,486 96
8 769 769 Network not required for freight (including metro) 9 724 724
109 5,073 870 Total rail infrastructure 105 5,210 820
    49 Buildings     50
    40 Capital work in progress     69
959 Rail network 939

The rail network infrastructure used for freight services (including dual use assets required for freight operations) is measured at fair value, reflecting the amount that could be expected to be received from a third party in an orderly transaction.  The portion of dual use assets not required for freight operations and metro only assets are reported in these financial statements at an optimised depreciated replacement cost basis, as the community benefits enabled by this investment do not provide a return at the whole-of-Government level.

The rail network comprises around 4,000 kilometres of track (excluding yards and sidings) and is used primarily for freight transport. In addition to freight, the network is used by KiwiRail for long distance passenger transport and access is provided to two regional authorities, Greater Wellington Regional Council and Auckland Transport for metro passenger services. Some tracks are dual purpose (ie, used for both freight and metro), however there are a number of tracks which serve metro transport only (eg, the Johnsonville line). The rail infrastructure earns revenue from freight and long distance passenger charges. In addition, network access charges are collected from the two regional authorities in relation to the metro services.

Prior to the restructuring of KiwiRail as a profit-oriented entity, the total rail network infrastructure was measured on an optimised depreciated replacement cost basis reflecting the previous focus on it as a non-cash generating asset. If the value of the rail network was still measured using that approach, then a notional depreciation amount of $210 million (2016: $159 million) could be calculated, representing an estimate of the amount of “wear-and-tear” or consumption of the network asset over the year. This estimated “wear-and-tear” compares to the total maintenance and renewal expenditure of $258 million (2016: $184 million) on the rail network during the year.

Since the restructuring, both the Crown and KiwiRail have been challenged in marrying relatively short-term funding commitments with making prudent investment decisions for long-life assets such as rail infrastructure. The Government has therefore initiated a review to consider KiwiRail's operating structure, capital requirements and funding mechanisms within the context of rail's purpose within New Zealand's broader transport mix. The review is considering how KiwiRail's operations and its investment decisions can best be structured so as to incentivise an optimal combination of rail, road and other transport modes, incentivise commercial decision making by KiwiRail, and prudently minimise the extent to which KiwiRail requires ongoing Crown financial support. Decisions from this review are likely to affect the mix of assets and operations, the extent of the rail network, and which of the entities within the Crown might own those assets and/or perform those operations. These decisions could affect how much of the rail network is valued at ODRC (if fully valued at ODRC the rail infrastructure would be valued at $5,210 million (2016: $5,073 million) and how much is valued at recoverable amount (if fully valued at recoverable amount the rail infrastructure would be valued at $105 million (2016: $109 million).

Public Private Partnerships

A public private partnership (also known as a service concession arrangement) is an arrangement between the Government and a private sector partner. The Crown's obligation to pay for these assets is included in other borrowings.

  Actual
30 June
2017
$m
30 June
2016
$m
Transmission Gully 448 287
Education Assets 384 210
Auckland South Corrections Facility 325 318
Auckland Prison 295 148
Puhoi to Warkworth State Highway 184    - 
Total public private partnerships 1,636 963
Carrying value of assets by source    
Provided by private sector partner 1,350 842
Existing government assets 286 121
Total public private partnerships 1,636 963

Movements in carrying value for Public Private Partnerships

Gross carrying amount Actual
30 June
2017
$m
30 June
2016
$m
Opening balance 1 July 977 583
Assets provided by private sector partner(s) 505 292
Existing Government assets 124 102
Net revaluations 35    - 
Other 2    - 
Total Gross Carrying Amount 1,643 977
Accumulated Depreciation and Impairment    
Opening balance 1 July 14 1
Eliminated on revaluation (22)    - 
Depreciation expense 15 13
Total accumulated depreciation 7 14
Carrying value as at 30 June 1,636 963

The assets in a public private partnership (PPP) are recognised as assets of the Government.  As the assets are progressively constructed, the Government recognises work-in-progress at cost.  At the same time a financial liability of the same value is also recognised.  When the assets are fully constructed, the total asset cost and the matching financial liability reflect the value of the future compensation to be provided to the private-sector partner for the assets.

Details on individual PPP's can be found in the annual reports of individual agencies (Ministry of Education, New Zealand Transport Agency and the Department of Corrections).

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