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Peter reidy, kiwirail
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Peter reidy, kiwirail

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  • 1. NZ Rail 2014 Peter Reidy, Chief Executive 17 June 2014
  • 2. Agenda for today • Snap Shot • Our Supply Chain • Zero Harm • Transformation Road Map • Progress on Turn Around Plan • Opportunities • Shareholder Funding • Challenges • Todays Problem • Things we need to get right • Changing the performance conversation • Insights after 100 Days
  • 3. Snap Shot
  • 4. Snap Shot Each week • 900 freight trains • 44 inter-city passenger trains • 2,200 suburban passenger services in Wellington • 2,000 suburban passenger services in Auckland Annually Interislander manages 4,600 sailings carrying: • 755,000 passengers • 53,000 rail wagons • 73,000 trucks • 212,000 cars Assets: • 4,100 staff • 4,000 kms track and1,656 bridges • 18,000 hectares of land managed • 198 mainline locomotives and 4,585 freight wagons • Two owned and one leased ferry
  • 5. Our Supply Chain Network Management Asset Management Customer Partnering Logistics
  • 6. Zero Harm – Total injuries reduced by 44% year on year Identify & Reduce Critical Risk Implement Compliant SystemsBuild Zero Harm Capability Regain unconditional Licence to Operate from our Board, Owner, Customers and the Community Workforce engagement Operating discipline ActiveEngagedLeadership APPROACH Hazards / Issues Work Practices / Actions Systems / Controls Capability / Culture Leadership 6
  • 7. Transformation Road Map 2008 2014 2014-2016 2016 + TIMELINE Rail Investment Case One Group Commercial Performance Cost Eficient Value Proposition F O C U S Road vs Rail Integrated Transport Intermodal Shift OUTCOME $1.4B Investment Programme • Freight Growth • Product Investment • Standardisation • Internal Efficiency • Leadership and Culture • Customer Partnering • Specialise and Partner • Long Term Funding • Cost efficient service ………………………………… Strategic Reset (October 2014)
  • 8. Progress on Turn Around Plan(TAP) • Freight revenue growth - CAGR of 8.0% since 2010 • Committed export and domestic customers. • Asset condition improving – Funding making a difference • Wellington Metro and Trans Scenic passenger strong customer experience and growth • Freight forwarders (Toll/Mainfreight etc) – our business partners not competitors • Employment engagement lifting • Closure of uneconomical activities ( Hillside workshop, Napier – Gisborne Line) • Partnership plan with Treasury for October 2014 strategy reset – NZTA engaged
  • 9. Opportunities • Freight demand growth dominated by Diary/Forestry – benefits Rail network • Fonterra and major port freight consolidation – Rail reduces cost in the supply chain • Growth of intermodal “freight villages” – inland ports • Passenger proposition – (Metro plus) • Private sector investment- rolling stock/network • Mothballing/closure of uncommercial lines – regional authority investment • Train asset utilisation and freight tariff improvement
  • 10. Committed Shareholder Funding…$1.0B funding over 5 years 250 250 198 146 122 30 76 0 50 100 150 200 250 300 FY11 FY12 FY13 FY14 FY15 FY16 Equity Funding ($m) "TAP" Aratere Extra approved in Budget 2014 176 198 ?
  • 11. A few challenges considering… • Geographical comprehensive network • Relatively high fixed cost • Difficult terrain • Narrow gauge • Historical under invested network • Concentrated bulk freight customer segment • 1 year funding model for long life assets (50 years)
  • 12. Challenges…Network Legacy • Bridge structural timber – 25 years of replacement works remain • Timber sleepers – 30 year programme to catch-up • Signalling systems – still operating one from 1928, several from late 1950s; reliable and safe but harder to repair • Civil asset – drains, slopes and formation essential for long term asset stability have been ignored to deal with the immediate renewals and upgrades
  • 13. Challenges…Capital Investment 900 800 700 600 500 400 300 200 100 0 EARNINGS $200M Gap CAPEX Or another way of looking at it 900 800 700 600 500 400 300 200 100 0 $200 M Gap CASHFLOWOUT CASHFLOWIN
  • 14. • Safe Systems – Safe people • Leadership and Culture – The KiwiRail Way • Cook Strait Strategy o Ship optimisation and configuration o Do ships need to have rail deck ?– alternative models • Customer and market sector penetration • Rail hubs = Partners • Interislander Ontime performance Recovery Things we need to get right – 2 years
  • 15. • Productivity and Asset Utilisation • Freight Yields • Stakeholder Engagement o Unions o Government agencies regional and central o Customers • SCI – performance framework • A plan for Auckland Things we need to get right – 2 years
  • 16. Changing the performance conversation… • What drives value in the KiwiRail Group? • What elements of the Network are commercially attractive, sustainable and do not require government funding? • What elements of the network are not commercially attractive will require government funding? • What assets should we: o Divest o Mothball • Where should Government invest to recognise NZ Transport public value benefits? o Cost to deliver? o Implications? Reset Project2045 Oct2014
  • 17. Insights after 100 days • Half way through a long term infrastructure rebuild • Strong export and domestic freight growth – customers committed to Rail rebuild • Customer focus is encouraging • Funding is making an impact on Asset condition • Passenger Metro OTP/Customer Service delivery is strong • Interislander history of OTP – now going through credibility recovery face • Treasury and Transport agencies are engaged to evaluate alternative strategies However… • Cost efficiency must improve • Freight tariffs need to increase • Asset productivity needs to lift • Union engagement is a key stakeholder • Collaboration and Intermodal partnering critical • Funding needs to match long life asset operational model
  • 18. Thank you