Peter reidy, kiwirail

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Peter reidy, kiwirail

  1. 1. NZ Rail 2014 Peter Reidy, Chief Executive 17 June 2014
  2. 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. 3. Snap Shot
  4. 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. 5. Our Supply Chain Network Management Asset Management Customer Partnering Logistics
  6. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 18. Thank you

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