Wednesday 27th June 2012
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KiwiRail is to be restructured, with its land holdings shifted to another entity, resulting in a write-down of some $6.7 billion and allow the state-owned railroad to produce better returns.
KiwiRail has gained government approval to pour its rail and ferry operating assets into a SOE while Crown land held for rail purposes will be held by NZ Railways Corp. This will result in the commercial arm of KiwiRail carrying assets of between $1.1 billion and $1.3 billion, down from about $7.8 billion currently, chairman John Spencer said in a statement.
The proposal was first flagged at the railroad’s annual meeting in November.
“This is a much more realistic valuation of the company’s assets, which will greatly assist KiwiRail in meeting its commercial objectives and provide more discipline in driving improved performance,” Spencer said. The changes mean the carrying value of KiwiRail’s assets reflect “the revenue they generate.”
Railways Corp has revaluation reserves of about $5 billion, ‘which would be written off first as a result of a writedown in the assets’ value,” KiwiRail said. “Any writedown in excess of $5 billion would affect NZRC’s bottom line.”
The writedown in the value of KiwiRail’s assets would be taken in the current year ending June 30, with the final amount to be determined after independent valuations.
The composition of the new boards of the KiwiRail SOE and NZRC haven’t yet been decided though they are likely to include “a majority of common directors,” it said.
In February, KiwiRail said full-year earnings would miss the target in its statement of corporate intent of $139.5 million on an ebitda basis. Earnings were expected to be in the range of $105 million to $115 million, though that was before any writedown.
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