Cynical, Corrupt, Casuistry, Chicanery, Cheating or just straight Cullen

Now that we have witnessed Clark's outburst yesterday when she tried and failed miserably to corner Key on Toll/Tranz Rail the rail deal looks even dodgier.

What is now clear is if this was Labour's so called Neutron bomb - it was a fizzer. The stupid cow couldn't even get the facts right.

In order to get her bomb erected she needed to buy Toll's Rail operation. That provided her with the ploy to flush Key. Imagine spending $1000 million to try to skewer John Key. That is what she tried to do. She spent the money but came home with no prize - no money or bag (apologies to Jude). John Key was the sole reason for wasting so much taxpayers money on buying Toll Rail. That is corrupt.

She wanted a battle ground around privatisation and asset sales. Key was more than equal to the pathetic plan. Key was not an owner of shares at the time.

What is now very clear is Cullen and his sole negotiator were determined to buy Toll rail at any cost. The target was to create a fulcrum to bend John Key. Abject failure for Labour.

The residue is a very expensive asset on the government books eating its head off.

More on the Government's Savage Increase in Road User Charges.

Was the secret, sudden and savage increase in Road User Charges on the same day the Labour Government completed the purchase of Toll Rail simply a mechanism to abruptly increase the value of the railway they purchased that day - a non-road using transport asset?

Was an increase in RUC's part of the sales agreement with Toll - who have a sweet heart deal for some years on rail linehaul charges and access to key transport infrastructure linked directly to the railway network?

Given the paucity of information on the purchase and the Machiavellian and unapologetic approach of Dr Cullen to the public accounts nothing can be discounted.

See here for a good summary of the questions put to Dr Cullen and so far unanswered.

I smell an awful stink.

KiwiRail purchase price confirmed at over $1Billion

Readers of this blog will recall I posted here that the upfront cash commitment by the Labour Government to purchase the rail operations from Toll would be in excess of $1Billion. Once the loss of Toll's current cash contribution of $48million to the network costs was added to the purchase price.

Fran O'Sullivan today confirms my analysis

Toll was supposed to pay Ontrack - another SOE which runs the national rail track assets - some $48 million annually for access fees.

The value of this over 10 n years at seven per cent would have been $340 million - money that will not now come into the overall business.

Add the $340 million forgone revenue to the $690 million purchase price and the $120 million debt and the overall Government investment quickly tops the $1 billion mark.

This is a shocker of a deal. All the benefits the Government claim were available without paying a premium to Toll. The supposed GHG savings from rail operations vs road arise from the mode not who owns the railway. If the efficiency of rail for linehaul is as Clark says, then high fuel prices and yesterday's shock 10% increase in RUC's costs to truckers will move traffic to rail. Again no need to own it. This is how markets work Michael....

The other reason put out by Clark and Cullen was to avoid giving taxpayer's funds to Australians. I guess a cheque for $690Million and forgiveness (sorry, assumption) of $120Million in debt does not count as giving taxpayers funds to Australians. Especially when the goodwill component was at least $400Million....

Bolger and Co have a hospital pass (smirk). He and his ilk cannot survive this. certainly Clark and Cullen will not be there to save them.

The Hive have a good summary of the news media's take on this "investment".

Random Impertinent Questions

How is the railways more environmentally sustainable when Cullen is driving than Paul Little?

How will Cullen owning the railways improve its integration with other transport modes and systems when Toll is a completely integrated transport, logistics, warehousing, freight forwarder and shipping company.

Why did Cullen leave Toll with the exclusivity of the rail freight forwarding business and network connections to the rail business.

Will Cullen have to buy Toll out of the freight forwarding business in order to provide meaningful access to the tracks by other freight forwarders.

If two globally successful railway operators Toll and Wisconsin Central could not make the railways work what has Cullen got that these two don't have?

If Cullen needed to buy the Railways to keep it in NZ hands why didn't he test the market for NZ buyers.

More Thoughts on the Government's Railway "Investment"

Today's investment by the Government buying out Toll's rail business is $1Billion - not $665Million.

I should have added to my earlier post the analysis of the Government investment of $665Million should include the loss of direct cash contribution by Toll of access charges of $48Million per annum. So rather than spending $665Million to avoid providing Toll and its customers a subsidy of $10Million the actual question for analysis is spending $665Million in June 2008 and ALSO losing a net contribution of $48Million per annum to rail operations. The present value of that annual loss of income for 10 years is -$337Million!!! (at a discount rate of 7% - a reasonable sense of what the Government could borrow at).

That makes the Government's direct investment in buying the Rail Operations off Toll as $1,000 Million - $1Billion! ($665M + $337M).

That number is not getting a hearing on the MSM tonight.

Over at Liberty Scott they have a good summary of Railway investment since the 1980's.

I would disagree with some of it - but overall a good summary and think piece. Their thoughts on subsidy are very good.

Historically rail uses a third of the fuel a truck does per tonne kilometre so it is very fuel efficient. I am not sure road user charges recover (on trucks) their full direct costs on the road network including depreciation or new investment.