Peck Mark: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Peck Mark: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 19 June 2003. Volume:609;Page:6416. Text is incorporated into the Bound Volume.] 
1. MARK PECK (NZ Labour—Invercargill) 
 to the  
Minister of Finance 
: Has he received any reports that Toll Holdings will be looking for Government support to maintain and upgrade the rail network if its 95c a share takeover bid for Tranz Rail is successful; if so will Government support be forthcoming? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 That was the statement yesterday by the chief executive of Toll Holdings. I have to point out that if Toll Holdings’ takeover bid succeeds the change of ownership condition of the present heads of agreement with Tranz Rail will be triggered and the subsidy implicit in that heads of agreement would not be forthcoming and neither would the guaranteed investment in the track. 
Mark Peck 
: What are the components of the heads of agreement between the Government and Tranz Rail as they relate to the track? 
Hon Dr MICHAEL CULLEN 
: Under the deal we would buy back the track and infrastructure for $1 set up an entity called Track Co. to manage it charge Tranz Rail for access impose a series of service-level agreements with step-in rights in the event of non-compliance and invest $100 million over the next 5 years to upgrade the network. 
Hon Roger Sowry 
: Given that he has said “the Government is not necessarily committed to remaining a long-term shareholder in the operating company.” will he negotiate with Toll Holdings to buy the track instead of publicly insulting Toll Holdings? 
Hon Dr MICHAEL CULLEN 
: I have done no such thing. Given the fact that the chief executive on Monday seemed to think that there was a built-in $20 million and appeared not to have read the heads of agreements at that point I think it would have been hard to insult the chief executive. 
Hon Roger Sowry 
: Another insult! 
Hon Dr MICHAEL CULLEN 
: No that is a statement of fact. That is not an insult about Toll Holdings. Toll Holdings will be able to come back to the Government if it so wishes should it gain approval at its present price to achieve an agreement exactly the same as the one we have with Tranz Rail at the present time. Its share bid is based upon the Government not being there. Toll Holdings cannot expect therefore to get a deal at least as good as the one it is looking for if it takes over. 
Gerry Brownlee 
: It is threatening! 
Hon Dr MICHAEL CULLEN 
: No it is a statement of commercial realities. 
Peter Brown 
: As some major institutional investors in Tranz Rail are openly supporting the Toll Holdings bid in order to get rid of the Tranz Rail senior management does that send a signal to this Government and will it have any influence on the Minister’s intention of giving Tranz Rail monopoly operating rights on the track? 
Hon Dr MICHAEL CULLEN 
: I can assure the member that Toll Holdings certainly wants monopoly operating rights on the track. 
Stephen Franks 
: How will the Government assure New Zealanders that this is not just a bail-out for the existing shareholders and more that the efficient shipping competitors of Tranz Rail are not driven to bankruptcy by continued subsidised predatory underpricing through the Government’s rescue of that company and its shareholders instead of simply ensuring that the track is sound for any user? 
Hon Dr MICHAEL CULLEN 
: To achieve an upgrade of the track will require significant investment as the member’s own leader has pointed out in the recent past. That is unlikely to be achieved without some degree of assistance from the Government. I am simply signalling very clearly to Toll Holdings that it cannot expect to come in and pick up a subsidy that is not available to it as of right under the present heads of agreement. 
Jeanette Fitzsimons 
: Is the existing rail operator receiving any Government subsidy to maintain the rail network at present? 
Hon Dr MICHAEL CULLEN 
: The only subsidy I can think of was implicit in the fact that the Government has given and Auckland had agreed to an excessive price to buy the Auckland track. The Government had to step in and pay certainly more than that track was worth. 
John Key 
: Does the Minister believe that his Government is in a stronger or weaker position negotiating with Toll Holdings before it owns 51 percent of Tranz Rail or after? 
Hon Dr MICHAEL CULLEN 
: The Government sought cooperation with Tranz Rail for an understanding before any further bids proceeded but that was turned down by Toll Holdings. I simply signalled to Toll Holdings that there are consequences that flow from not achieving prior agreement. Toll Holdings cannot expect to come in afterwards and get the same kind of deal that it seems to be expecting. 
Jeanette Fitzsimons 
: Would it be prudent for existing Tranz Rail shareholders to assume that there would be a Government subsidy for the rail network even if the network were in private hands given all the difficulties there would be in determining whether the money would be going into the rail line or into its bottom line? 
Hon Dr MICHAEL CULLEN 
: The heads of agreement provides for the separation of the operating company from the rest of Tranz Rail to ensure that any subsidy implicit in the access charge remains within the Tranz Rail rail operating structure as opposed to say for example flowing across into the other operations of Tranz Rail.