Cullen Michael: Urgent Debates — Tranz Rail 
Text is incorporated into the Bound Volume 
Cullen Michael: Urgent Debates — Tranz Rail 
[Sitting date: 10 June 2003. Volume:609;Page:6066. Text is incorporated into the Bound Volume.] 
Hon Dr MICHAEL CULLEN (Deputy Prime Minister) 
: 
 That speech certainly breathed new life into the “Gerry for leader” campaign. He was sitting there purring away and I watched him as he sat there asking himself how he could make himself look more like Kim Beazley than he does at the present time and put himself in for the leadership spill. 
Just occasionally the National Party can connect with the deep dark souls of New Zealanders. When National gets on to race and crime it can suddenly connect with the majority of New Zealanders. But what it can never do is to connect with the hopes and aspirations of the majority of New Zealanders. What did that speech say? It said that this Government is so bad that it has the majority of Parliament the business community the trade unions the major rail users and local government on its side and that National will stand against them. That comes from the brave National Party which is sort of like Horatio—not standing on the bridge but dropping a bomb on the middle of the bridge while it is standing there. That is Mr English’s approach to nearly all major public issues. 
The public wants the rail track to be put back in public ownership. It wants a stronger New Zealand rail system. Mr English says no to that but then of course he did not tell us what his policy was. His policy was to keep as quiet as possible as it is with regard to most issues. On Iraq he was for the war and now he is against the peace unlike most New Zealanders who were against the war and are for the peace. Mr English decided to be on the other side of that issue as well. He said we will create uncertainty and gave one example of uncertainty saying this Government has invented an electricity commission. Does he know what that commission is? It is the Crown electricity governance board provided for in the Electricity Act and it was provided for in case we did not receive support for an industry governance board. What did the industry say? It said it did not want an industry governance board so what did we get? We got a Crown governance board called the Electricity Commission. That is all a surprise to Mr English who apparently went to sleep some time before Coalcorp changed its name and has recently woken up to a whole new world that he has never seen before. He does not know that Air New Zealand is making bigger profits now than it has made for some years thanks to an 83 percent ownership by the Government. 
Mr English wants to swap the present ineffective and inefficient rail system for another ineffective and inefficient system preferably owned by an overseas company whichever company that may be. That is the National Party’s policy. On the Takeovers Code Mr English asks what we will do when we require a waiver. The  
New Zealand Herald 
 stated that we require a waiver so for Mr English that must be true. I ask Mr English to please read the legislation. Takeovers require a waiver when one is buying shares; we are not doing that. There is a rights issue occurring here and just as was the case with Air New Zealand we do not need a waiver from the requirements of the Takeovers Code. I ask Mr English to try to keep up just a bit with what is going on in New Zealand at the present time. 
So we come to what has actually been going on here. What we really have is a story that shows that no matter what the circumstances privatisation is always carried out as a religious belief and not as an economic policy. When National privatised New Zealand Rail in 1993 it was told to keep the track and it said no it would not do that. It wanted to sell the lot and get out as fast as it could. That has always been Richard Prebble’s policy on railways as well. Richard Prebble wanted to save rail so that the purchasers could save him in a number of different ways in the future. In the end the railways are a crucial part of New Zealand’s infrastructure and they are too important to be allowed to fail. How can we have a business that is not allowed to fail and is supposedly operating according to present market disciplines? 
Mr English said that Tranz Rail will still have a monopoly and that that is bad. But National sold the railways as a monopoly. National sold the railways as a monopoly and said that as long as Tranz Rail ran one train down a line a year that line was still operating and even if it took that one train off it had 90 days to find another operator or the tracks could be pulled up. Mr English wants the present offer by Toll Holdings to succeed. Under the present offer Toll Holdings would take over Tranz Rail with the present conditions applying—an absolute monopoly operation on the part of Tranz Rail. Mr English is very silent now. He is not chipping away quite so volubly now is he? The previous National Government should never have done what it did. It should never have sold the track and there should have been better performance measures. It is clear that what happened in that case is that the beneficiaries of the original sale made their millions of dollars gutted the company and cleared off—and they are now living overseas and moaning about New Zealand tax rates just to kind of rub it in in terms of what they did to this country by raping and pillaging the company. 
We have seen Tranz Rail over recent times go into a clear continuous downward spiral and when a company has Air New Zealand charging it cash to buy its airline tickets then the word is out there that that company is in some degree of deep doo-doo. But of course Mr Prebble tells us Tranz Rail was maintaining a cash surplus. Oh yes but it was doing that by not putting any money back into the business as far as possible and by not paying the bills. Most of us can make a cash surplus for a while if we do not pay our bills but sooner or later we cannot keep that particular trick up. Not even Mr Prebble with the help of whoever may be helping him in those respects can do that. 
We have been seeking a viable solution for some months. We have been talking to a variety of partners about how to take over Tranz Rail split off the track for Government ownership—which is why I gave the answer to Mr Brown that I did some few weeks ago which he was a bit shattered about and could not quite understand what I was saying but I was being very accurate in my answers—and seek to see new operators in there if at all possible. On 6 May Tranz Rail approached the Government saying it needed help because it was in serious trouble. The Opposition says we should have just let Tranz Rail fall over and then picked up the pieces. Why would we have picked up the pieces? Why would someone else not have picked up the pieces in that situation? That is about as daft an idea I say to Mr Brown as the Government going on to the open market at 30c a share and bidding 30c a share for a 100 percent buy-up. What did Mr Brown think would have happened to the share price in that situation if the Government’s chequebook was open and it was telling people to hit it and hit it until it finally gave up and went away from that particular bid? That was never an option for the Government to adopt in respect of Tranz Rail. 
We were also intensely worried about New Zealand’s reputation overseas. Members can fancy what would happen if the reputation got out that we had waited for a private company to go into receivership in order to step in and pick up the pieces and that that was the approach the New Zealand Government took to investment within New Zealand. So on 6 May we began talks with officials. Those talks took some time to proceed to a state of near-definition and conclusion. That occurred during the last week though the details were still being settled as late as late Friday morning around some key issues in relation to the deal. In the meantime RailAmerica came and went. My advisers were not surprised that it went. We believed that at 75c a share RailAmerica would be off as soon as it looked at Tranz Rail’s books—and it was. 
A funny person from somewhere wrote in to the  
New Zealand Herald 
 and said that Tranz Rail was worth $3 a share. I wish that person had put his or her money in at that price. I very much doubt that it would have happened but if it had that person would very quickly have become very poor indeed. Of course it could have been a National Party electorate chairman who would have put in $3 a share. I am sure John Key would not have done that. On the Opposition side of the Chamber he has some financial nous—unlike National’s present finance spokesperson I might say on some key issues.  
So those negotiations with Tranz Rail commenced. RailAmerica came and went and Toll Holdings came. Toll Holdings came to my office and we said to its representatives—I was as clear as I could be because we could not tell them the nature of the deal we were engaged in without being in breach of the legislation—that what they were planning to do and what we were talking about doing were on a collision course. Those were my words: “a collision course”. We went through a number of other issues and as the Toll Holdings representatives went out the door I said to my officials that they should talk to Toll Holdings about a possible joint approach that had been signalled in our previous discussions. That joint approach was that Toll Holdings would withdraw its offer we would see some negotiations and we would talk about a joint approach.  
I do not know why Mr Little is amazed that the Government went ahead when Toll Holdings said to the Government that it was not interested in doing that because it wanted to take over the whole company and to talk to us afterwards. But that is what happened and I have a number of witnesses on that point. Mr Little was not in any of the rooms so he is either telling fibs or he is just not in control of his own company and his own negotiators who came over here to talk about that particular matter are not reporting back to him. 
Hon Richard Prebble 
: What are you saying? 
Hon Dr MICHAEL CULLEN 
: Mr Little said he was amazed that the Government had actually put an offer in. We made it pretty clear on Tuesday that an offer was to go ahead. Then he said that Toll Holdings would have been interested in talking about the Government owning the track and asked why we had not talked about that before. We were talking about that before but Toll Holdings wanted to take full control under the present operating conditions and present lease that National signed and then to negotiate with the Government from a position of extreme strength. Why on earth should the Government ever stand by and let that happen? 
This deal that we offer is much better for shareholders than the Toll Holdings deal. There is much more possibility of the share price going up which is one of the main reasons that the Government decided to take an equity stake. If there is an increase in the share as a result of recapitalisation the taxpayer will gain some benefit from that and the entire benefit will not go to the current shareholders. They will receive the majority of the benefit but the Government will share in that benefit. The Government has said that it is not necessarily a long-term shareholder in the operating company. It does not want to be. When and if we receive a decent approach and offer we will consider it. The Opposition members would sell out to the first little overseas fairy that passed by fluffing her wings at them. They would sell out straight away and say that was the appropriate approach. 
Hon Bill English 
: So it is for sale. 
Hon Dr MICHAEL CULLEN 
: I do not know why the member is going on about that. I said that on Friday. If Mr English had bothered to have someone at the press conference he could have found out what was being said instead of going through his usual “Mr Grumpy” “Mr Angry” and “Mr Shock-and-Horror” performance that he puts on day after day in this House. Today Mr English has discovered there is no Coalcorp and he has discovered the nature of the securities and takeovers legislation. The world is his oyster to discover as he stumbles on through life towards his future retirement as the ex-leader of the National Party. 
This is a good deal for New Zealand. This deal offers the real chance to restore rail as a central part of our land transport system. I look forward to this deal proceeding. I hope Tranz Rail’s shareholders approve it. If they do not I believe they will be making a mistake. When and if they do approve it we will proceed from there to operate the tracks more effectively and to restore them to a workable situation. I say to Mr Prebble that it is hard to estimate the total cost of that but we know that the present infrastructure is running down badly. We look forward to working with whoever is involved to ensure a strong efficient operating company dedicated to improving rail in New Zealand. And the National Party is opposed to all that.