NEW ZEALAND's rail infrastructure returned to government ownership at 23.57 on June 30, following tense negotiations between the Treasury and Australian logistics group Toll Holdings.

The 4128 km of track was bought back for the same symbolic NZ$1 as it was sold to Tranz Rail in 1993, with the government paying an additional NZ$50m for associated land and buildings. Under the terms of the buy-back announced last July (RG 9.03 p538), the government will provide grants worth NS$200m to rehabilitate the network - half to make up for past under-investment and half to fund enhancements over the next four years. In return, Toll NZ will invest at least NZ$100m in new locomotives and rolling stock. Under the deal, no new passenger operators will be allowed onto the network for three years, and Toll will only be required to run three trains per week on each route to retain exclusive access rights.

According to Finance Minister Michael Cullen, the rail infrastructure 'is seriously run-down'. Paul Harper of the local Rail Freight Action Group estimates that Tranz Rail under-spent between NZ$300m and NZ$400m on maintenance over the past decade. A safety audit commissioned from KBR by the Land Transport Safety Authority published at the end of June warned that the Midland line serving the coalfields and the port of Lyttelton on South Island's west coast would have to close within two years unless at least NZ$70m was spent on urgent repairs to the track and bridges. The government later confirmed that NZ$25m of the backlog funding will be allocated to the line.

Control of the rail infrastructure has been transferred to New Zealand Railways Corp until a state-owned company, provisionally named Track Co, is set up to take over the network plus former Tranz Rail signalling and engineering staff. Apart from the initial NZ$200m grant, Track Co must fund operation and maintenance of the network through track access charges, with Toll paying NZ$38m for the first year.