Overview (continued)
Rail Issues
Acquisition of Toll NZ Ltd
On 1 July 2008, negotiations were completed and an agreement was signed for the purchase of 100% of the shares in Toll NZ Ltd. Prior to the acquisition, assets and operations not integral to the rail operation were separated out of Toll NZ Ltd. On acquisition by the Government, the company was renamed KiwiRail Holdings Limited (KiwiRail). The cost of acquisition of the company was $690 million (page 94), settled in cash on 1 July 2008.
On 1 October 2008, the Crown sold the shares in KiwiRail to the New Zealand Railway Corporation (NZRC). The transfer price was $388 million, based on the fair value of the assets and liabilities held by KiwiRail as at 1 October 2008. The valuation was performed by PricewaterhouseCoopers and completed in May 2009.
Based on the fair value exercise as at 1 October 2008, it has been calculated that the fair value of the assets acquired and liabilities assumed through this purchase on acquisition (1 July) was $370 million. The difference of $320 million between the fair value ($370 million) and the cost of acquisition ($690 million) appears in the Other Expenses Incurred by the Crown - Loss on Acquisition of Toll NZ Ltd (page 93).
| $m | |
|---|---|
| Total purchase price of shares in Toll NZ Ltd (page 94) | 690 |
| Less loss on acquisition of Toll NZ Ltd at 1 July 2008 (page 93) | (320) |
| Add Crown Rail Operator equity injection (page 94) | 6 |
| Add gain on transfer to NZRC included in Other Current Revenue (page 96) | 12 |
| NZRC increase in capital to fund purchase of Crown Rail Operator (page 94) | 388 |
Other rail expenditure
During the year, the Crown restructured the funding arrangement with NZRC (trading as ONTRACK). The changes in Other Expenses Incurred by the Crown (page 93) from 2007/08 include:
- an increase of $68 million for the purchase of non-commercial rail services
- an increase of $26 million to increase transport growth on the rail network through the upgrade, renewal and maintenance of its fleet, terminals, systems and infrastructure
- an increase of $6 million for the construction of a rail siding and associated works at the Wiri Inland Port
- an increase of $5 million to reimburse NZRC for the transaction costs of purchasing Toll NZ Ltd
- an increase of $83 million for the renewal and upgrades of the Auckland rail network “below track” infrastructure. This is a multi-year appropriation and the unspent balance is carried forward
- an increase of $57 million for the electrification, upgrades and maintenance of the Auckland and Wellington metropolitan rail networks. This is a multi-year appropriation and the unspent balance is carried forward
- a reduction of $21 million on upgrading the national rail network, and
- a reduction of $7 million on the operating and maintenance costs of ONTRACK not recoverable through the National Rail Access Agreement.
The restructured loan funding arrangement for capital expenditure in relation to Rail (page 94), resulted in total loan funding of $185 million in 2008/09, being an increase of $81 million from 2007/08. These loans were for the purchase of new locomotives, providing short-term capital, servicing contract buy-out obligations and refinancing debt.
Taitokerau Forests Limited Loan Write Down
The Crown agreed to write down the existing loans to Taitokerau Forests Limited in 2008/09 by $37 million as part of their loan renegotiations (page 93).
