Why KiwiRail boss has ‘no plans’ to fall on his sword

KiwiRail is pressing on with addressing the Cook Strait ferry conundrum, completing Auckland’s city rail link and potentially building a new freight line through to Whangārei, the company’s chief executive says.
Peter Reidy has been at the big Building Nations infrastructure conference in Auckland, where Infrastructure Minister Chris Bishop announced a new National Infrastructure Agency, that will be required to work closely with KiwiRail in developing a 30-year plan for transport infrastructure.
KiwiRail’s leadership has faced pointed criticism from Finance Minister Nicola Willis, who declined the state-owned enterprise’s request for an extra $1.47 billion for portside infrastructure needed for big new Cook Strait ferries. She also directed the company to cancel its purchase of the ferries from a Korean shipyard, at a reported cost of $1b.
And she challenged the millions KiwiRail spent on consultants McKinsey & Co, telling media in June that she didn’t think an organisation with such highly paid executives should have to spend so much on consultants for advice on how to run its core business.
“Frankly, if I were on the board, I would have been asking why couldn’t my executive come up with this themselves,” she said.
But Reidy doesn’t report to Willis – he reports to KiwiRail’s board. And he tells Newsroom he’s working well with the new acting chair, Rob Jager.
Asked for an assurance that he isn’t planning on resigning any time on the foreseeable future, Reidy replies: “Not today at the Building Nations conference. No, we’ve got a strong plan and a strong future, and I’m enjoying it.”
Pressed further on whether he has any resignation plans beyond this week, he says: “No, not at all.”
This is Reidy’s second stint as chief executive, after Greg Miller resigned under the shadow of an independent review into bullying claims.
“I got asked to come back to this role,” says Reidy. “I got asked to come back to really build a culture. It’s about integrated transport. There’s been massive investment in rail by both governments. We’ve got to deliver the job.”
KiwiRail’s Interislander line has three ferries making about 3300 sailings a year. They move around 75,000 commercial vehicles and provide around 600,000 passenger trips.
But they’ve been beset by problems including the grounding of the Aratere in the Marlborough Sounds in June, and then further damage when it hit the vehicle ramp while docking in Wellington this month.
Despite the ferry woes and the cancellation of the iRex project, Reidy says the investment in the rail network has been done really well. “We’re investing in the city rail link. We’re investing in the network. We’re delivering that, and we’ve got a strong plan for growth. So absolutely, I’m committed.”
Rob Jager stepped into the role of acting chair this month, after the iRex cancellation and the expedited announcement of the retirement of chair David McLean. Directors Rachel Pinn, Ed Sims, and Maryan Street all announced their resignations around the same time.
KiwiRail is pushing on with a more constrained vision for New Zealand’s rail network, underpinned by a Government decision to not give it any more funding from road user charges.
It’s doing engineering design work on a new rail spur to Marsden Point, which would allow forestry and other Northland producers direct access to Northport. It would require about $40m of land purchases.
Much hangs on that spur: the project to reopen the rail line north of Whangārei, and the construction of a heavy rail route from Southdown in Auckland, across Onehunga to Avondale and then joining up through to Whangārei. It is scheduled to deliver its proposal to ministers next year.
“The first thing now is to evaluate what that cost is going to be,” Reidy says. “And then we have to work through, what are the connections for distribution of freight? Because you can’t come through central Auckland, so that then starts to open up the Avondale-Southdown corridor.”
In a sneak peek at its annual report, the company’s disclosed that businesses and freight companies choosing to put their goods on rail saved nearly 230,000 tonnes of CO2 emissions in the past financial year. It says rail averted a million heavy truck trips, easing road congestion, reducing road maintenance costs and saving 84.7 million litres of fuel.
And its new statement of corporate intent for 2025-27 says it’s working with the ministerial advisory group on future options for ships and terminals to deliver safe, reliable Cook Strait services for people and freight. It is also working with the Ministry of Transport on its assessment of long-term inter-island service requirements.
There have been arguments made for privatising the Cook Strait ferries. “There are different options,” Reidy says. “It’s up to the government how they want to look at it. We’ve always been quite clear around what we would need for our customers, and what we would need for the Cook Strait trade route.
“It’s a logistics job to move people and freight. For us, as long as we can turn the ships around and meet the turnaround time, there’s various options as to the type of ships. That hasn’t been decided yet.
“Rail across the Cook Strait was always our preferred option. But obviously, the Govt today has actually said, well no, that’s probably not the option at the table now. So that’s fine. There are fiscal challenges.
“The shareholding ministers have said they need to be investing in ships for the Cook Strait. And we await that decision, and we’re working through that. That’s really a Government decision.”
KiwiRail’s current valuation is negative $986m – which sounds terrible, but it’s actually an improvement on a eyewatering negative value of $2,467m a year ago. The key reasons for the improvement are the cancellation of the iReX project, with an increase in forecast cash flows because of one year less of equity-funded capital expenditure.
But the only rail projects that the Government has committed to in its Government policy statement on land transport are the Marsden Rail Spur investigation, the completion of Auckland’s city rail link with accompanying network upgrades and electrification, and the $803 million Lower North Island rail integrated mobility project, forecast to be funded from a combination of Crown grants, National Land Transport Fund and Local Share contributions.
The policy statement promises an unexpected $30m for coastal shipping, but it doesn’t even mention the Cook Strait ferries – it is as if KiwiRail’s debacular IRex project never happened.
That said, the policy statement does promise to continue to invest in the national rail freight network – on a taxpayer value-for-money basis – to support economic growth and productivity.
It says KiwiRail has received more than $6b in Crown funding over the past 10 years, used for its network investment programme and to progress large capital projects including new rolling stock, and the South Island main line reinstatement after the Kaikōura earthquake.
Despite the increase in investment in the national rail freight network – almost $2.5b over six years, including cross-subsidisation of the network by road users – the amount of freight being moved via rail has continued to decline to a level lower than 2012.
So the Government says it will focus on maintaining the network between the busiest and most productive parts of the existing rail network – Auckland, Hamilton, and Tauranga. Investment in the rail freight network will no longer be cross-subsidised from revenue generated from road users.
“It is unfair to ask people using the roads to fund rail infrastructure,” the policy statement says.
KiwiRail has delivered its 2024-27 rail network investment programme to Transport Minister Simeon Brown, and it is awaiting public release. It was directed to “take a cautious and prudent approach” by prioritising investments and identifying potential savings.
In the three-year pipeline of work, KiwiRail argues the case for rail as having 70 percent fewer carbon emissions per tonne carried, compared to road freight.
This Government has already agreed a variation to the existing network investment programme, to allow up to $220m additional funding to be put into repairing the lines damaged by last year’s North Island weather events.