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Pressure to buy back rail

Published: 6:04PM Thursday September 05, 2002

Calls for the government to buy back more of New Zealand's national railway are intensifying.

Wellington mayors say that region's network is in trouble, with thousands of commuters losing confidence, and in the past week Tranz Rail's share price has dropped nearly 50 cents.

Some 37,000 commuters take the train in Wellington each day, 10 million customers last year alone.

Tranz Rail says that is a sign that all is well, but Wellington mayors say otherwise, given a spate of strikes and accidents.

"The prices are going up, maintenance is poor, people potentially are losing confidence in the system, the shareholders are, it's a matter of time before commuters are," says Wellington City Mayor Kerry Prendergast.

"That is my concern and I want it fixed quickly."

Other mayors in the region are calling for the government to buy back the rail network, or at least the Wellington rail corridor.

A similar deal in Auckland cost $81 million.

"They've done it with Air New Zealand, here's another very good case in point," says Lower Hutt City Mayor John Terris.

Tranz Rail's share price closed at $1.50 on Thursday, 50 cents down on last Tuesday.

"With Tranz Rail in the financial situation it is, it will be trying to exact the best possible price," Terris says.

"Frankly I would see some wisdom in the government waiting until Tranz Rail collapses financially completely, as it appears that it is not unlikely to do, because then it seems to me they could name their price."

But Michael Beard of Tranz Rail defended the company's financial state.

"It is a profitable operation and I can't imagine... why people would be stating that," he says.

Ian Witters of ASB Securities says he does not believe Tranz Rail will collapse.

"They have some fabulous assets there, the issue here is about the management of them."

The government, meanwhile, is giving no indication it is interested in buying - yet.

"The market usually determines failure rate by the price it puts on the stock exchange and we're seeing that fall, that is true, but I can't comment on that, that's for the market," says Acting Prime Minister Jim Anderton.

And it is the market the mayors are now counting on.

"If that means that Tranz Rail has to go out of business for the government to pick it up, it's certainly where we're coming from," Prendergast says.