The New Zealand government is to pay Australia's Toll Holdings US$521 million for its rail and ferry business in New Zealand.
The national rail network was first sold to private-sector owners in 1993 for $313.37 million, and renamed Tranz Rail Holdings.Toll Holdings then bought a majority stake in Tranz Rail in 2003 before eventually assuming full ownership last year.
As part of the 2003 deal, the New Zealand government agreed to purchase the train track network from Toll for a nominal sum and to spend $156.68 million upgrading it.
The government has decided that buying the rail operating business is the best way to increase investment in the industry.
Under the terms of the agreement, the government will own 180 mainline locomotives, 4,200 wagons, one rail ferry and leases on two other ferries.
The government acknowledged that the rail operating business will require a significant capital injection, but it didn't provide a specific figure.
Toll managing director Paul Little said that, given a choice, "we probably would have preferred not to have sold the rail and shipping assets".
However, as Toll and the government were unable to reach an agreement on issues primarily related to access agreements "the climate for future investment by Toll was a cloudy one", he said.
Prime Minister Helen Clark said the Labour Party-led government's plan to modernise New Zealand's rail system was a step toward building a sustainable transport network.
"With rising fuel prices and growing awareness about the challenge of global climate change, many nations are looking to rail as a central part of 21st century economic infrastructure," Clark said.
"A modern rail system can lessen the carbon footprint of our wider transportation network, taking pressure off our roads and allowing our trucking and shipping businesses to operate more efficiently," she added.
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