UPDATE: Infratil loses big chunk of Wellington council bus contract

(Adds Infratil comment in 4th, 5th and 11th paragraphs, updates share price) 

Infratil, the publicly listed infrastructure investor, has lost most of its bus contract with the Greater Wellington Regional Council to Masterton-based Tranzit Group, which the council says can offer the service cheaper.

The council named Tranzit, run by the Snelgrove family, as the preferred bidder for eight of its bus contracts, and Palmerston North-based UZAbus for a contract to deliver bus services on the Kapiti Coast. It received 86 bids from nine tenderers. Tranzit's share of services will jump to 60 percent from 1 percent, while UZAbus will edge up to 6 percent from 1 percent.

Infratil's NZ Bus service, which runs the distinctive yellow 'Go Wellington' bus service throughout Wellington city, the 'Valley Flyer' services connecting Upper Hutt, Wainuiomata, Eastbourne, Stokes Valley and Wellington, and 'The Airport Flyer' express bus service running from Upper Hutt, through Lower Hutt and central Wellington to Wellington International Airport, is the biggest loser in the change, seeing its share of services fall to 28 percent from 73 percent. Mana Coach Services, which runs services between Johnsonville and Wellington, will see its share drop to 6 percent from 25 percent.

The Wellington-based company said it didn't tender for the Hutt Valley contracts and missed out on the three contracts it bid for. However, it still has four contracts in Wellington city that as an incumbent operator it can directly negotiate for, and are subject to price negotiation. 

"The four DAUs in the central city enable us to focus on maximising the efficiencies of our Go Wellington services," NZ Bus chief executive Zane Fulljames said. 

The council put its bus services out to tender under the government's new public transport operating model, known as PTOM, for bus, ferry and rail, which attempts to get better value for money by linking payment to growth in patronage and reduced reliance on subsidies. The council's bus changes are scheduled to take effect by mid-2018.

"The outcome of the tender is expected to reduce operating costs by several million dollars a year, paving the way for new public transport initiatives such as fare discounts," the council said in a statement last night.

Tranzit said it will build 228 new buses and hire 380 additional drivers, with as many as possible coming from Wellington public transport Metlink system. The company currently provides urban and regional bus services, InterCity bus services, school bus runs and specialist vehicle hire across the North Island and throughout Christchurch.

The council said the new fleet will be "more environmentally friendly", improving air quality across the region and reducing emissions of harmful pollutants by at least 38 percent in Wellington and by 84 percent in the Hutt Valley.

Infratil warned at its annual investor briefing in March that it expected its NZ Bus business to be two thirds the size of its current business as it went through major recontracting in the Wellington and Auckland markets under PTOM. Still, it said market share and margin pressures were likely to be offset by productivity gains and the potential to repower its fleet.

The result was consistent with Infratil's recent comments on "the expected future scale of the NZ Business business and earnings guidance," it said. 

Shares of Infratil fell 0.3 percent to $2.975, and have shed 3.7 percent the past 12 months.

(BusinessDesk)