annual report 2011 KIWIRAIL OVERVIEW KiwiRail is a State Owned Enterprise and the backbone of New Zealand’s integrated transport network. Our vision is to be a world class mover of freight and people by rail and ships, and to be the natural choice for our customers in the markets in which we operate. We have five business units: ▪ KiwiRail Freight provides rail freight services and locomotives for passenger services ▪ KiwiRail Interislander operates the ferry passenger and freight services Whangarei Dargaville ▪ KiwiRail Mechanical manages the rolling stock including workshop operations of design, build and refurbishment ▪ KiwiRail Network maintains and improves the rail network and controls AUCKLAND the operation of trains on the network ▪ KiwiRail Passenger provides urban passenger services in Wellington under contract to the Greater Wellington Regional Council through the Tranz Metro team, Tauranga and the Tranz Scenic team operates the long distance passenger rail services. Hamilton Kawerau Te Kuiti Kinleith > Operations Gisborne Each week, train control operations manage the movement of: Taumarunui New Plymouth ▪ 900 freight trains Stratford ▪ 52 inter-city passenger trains Waiouru Napier ▪ Approximately 2,200 suburban passenger services in Wellington Whanganui ▪ Approximately 1,900 suburban passenger services in Auckland. Dannevirke Palmerston North In a year, Interislander manages 5,500 sailings carrying: Otaki Masterton ▪ 785,000 passengers Featherston ▪ 53,000 rail wagons Picton WELLINGTON Blenheim ▪ 73,000 trucks Westport ▪ 210,000 cars. Reefton > Assets Greymouth Kaikoura Hokitika ▪ 4,000 kms track ▪ 1,656 bridges ▪ 18,000 ha of land managed Rolleston CHRISTCHURCH ▪ 175 mainline locomotives Ashburton ▪ 4,264 freight wagons ▪ 2 owned and 1 leased Timaru ferry ▪ 4,100 staff Oamaru approximately. > Further information Port Chalmers DUNEDIN Wairio For assistance, publications or information concerning KiwiRail please visit our website Invercargill Bluff at www.kiwirail.co.nz or contact: KiwiRail Communications PO Box 593, Wellington , 6140 Telephone: 0800 801 070 Email: [email protected] CONTENTS KiwiRail at a Glance 2 Highlights 4 Chair and Chief Executive’s Report 5 Business Reviews 9 - Freight 10 - Interislander 14 - Passenger 16 - Mechanical 19 - Network 21 - Property 24 Our People 25 Safety 28 Environment 31 Rail in the Community 33 Governance 34 Board 36 Executive Team 38 Key Performance Indicators 40 Financial Statements 43 KIWIRAIL AT A GLANCE Group Freight Passenger > Overview > Overview > Overview ▪ Revenue of $667m ▪ Revenue of $397m ▪ Revenue of $87m ▪ EBITDA $100.3m* ▪ EBITDA $118m ▪ EBITDA $10.5m ▪ Delivery of Matangi ▪ 4,100 staff ▪ 60% of group revenue trains to Wellington 4,000km rail network IMEX increased revenue ▪ ▪ ▪ Increase in on-time by 13% performance to 84% ▪ Total assets $52m > Results > Results > Results Revenue and EBITDA Revenue and EBITDA* Revenue and EBITDA 800 450 100 700 400 90 80 600 350 70 300 500 60 250 400 50 200 300 40 150 30 200 100 20 100 50 10 0 0 0 2008/09 2009/10 2010/11 2009/10 2010/11 2009/10 2010/11 Revenue (m) EBITDA (m) Revenue (m) EBITDA (m) Revenue (m) EBITDA (m) Revenues by Business Unit Segment Revenue Segment Revenue Bulk Domestic Metro Tranz Alpine Freight Network IMEX Other Overlander Passenger Mechanical Other Coastal Pacific Interislander Property * 2008/2009 figures have not been included * EBITDA = Operating surplus before as they are not easily comparable due to depreciation, amortisation and grant income ownership changes. 2 KiwiRail Annual Report 2011 Network Interislander Mechanical > Overview > Overview > Overview ▪ Revenue of $20m ▪ Revenue of $123m* ▪ Revenue of $9m ▪ Investment of $216.6m* ▪ EBITDA of $19.2m ▪ Assets of $59m ▪ Wellington and Auckland upgrades largely completed ▪ Assets of $106m ▪ 20 new freight ▪ Number of derailments at ▪ Aratere stretch project locomotives 10 year low with 30% increase in ▪ 535 new container ▪ 10% reduction in speed freight capacity wagons restrictions > Results > Results > Results Network Investment ($m) Revenue and EBITDA MDBF* (kms) 250 140 45,000 120 40,000 200 35,000 100 30,000 150 80 25,000 20,000 100 60 15,000 40 50 10,000 20 5,000 0 0 0 2008/09 2009/10 2010/11 2009/10 2010/11 2007/08 2008/09 2009/10 2010/11 Revenue (m) EBITDA (m) Number of Derailments Segment Revenue Cost of Maintenance ($m) 50 60 45 50 40 35 40 30 30 25 20 20 Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May 10 FY 2009 FY 2010 FY 2011 Rail Passenger 0 12 Month Rolling Sum CV Freight Other 2008/09 2009/10 2010/11 * Excludes funding for DART and WRRP Metro projects * Excludes rail deck * Mean distance between failures 3 HIGHLIGHTS Lifted revenue to Freight revenue $667 million increased to almost and delivered EBITDA 20 new locomotives of $100 million an arrived ready to increase of $400 improve capacity for million. our customers 29% Import/Export freight from 2010. increased revenue by Improved track reliability with a 13% 10% Customers are receiving reduction in speed more responsiveness restrictions and better on-time performance increased reliability 535 41% new container decrease in wagons purchased derailments, Aratere stretch project a 10-year low. increased freight volume by Brought together over 30% and passenger capacity by almost New Matangi trains 300 started on the staff into our new Wellington network Stanley Street offices 100% in Auckland Auckland and Wellington metro networks benefitted from investment of $2.5 billion in infrastructure upgrades over the last few years 4 KiwiRail Annual Report 2011 CHAIR AND CHIEF EXECUTIVE’S REPORT John Spencer, Chairman Jim Quinn, Chief Executive The past year was one of challenge, opportunity and some While the focus of this report is on our business, forward steps for KiwiRail in the first year of our plan to we can’t ignore the fact that we are an integral part of create a financially self-sustaining business. the communities that were affected by these events. In Because of their impact on New Zealand, the challenges the case of the Christchurch earthquakes and Pike River, are well documented. The two Christchurch earthquakes the impact of what occurred will be long-lasting. and the Pike River mine disaster had an enormous Our thoughts remain with these communities as they social and economic impact on communities as well as work towards recovery and rebuilding their lives consequences for us. The two rock slides in Kaikoura and businesses. and Manawatu, and a drought followed by floods in the From KiwiRail’s perspective these events had the effect central North Island, were other challenges we met in the of disrupting revenue and diverting our attention and course of the year. resources away from our Turnaround Plan while we To lift revenue by 2.6 percent and EBITDA by 29 percent in made repairs and carried out support tasks. They also these circumstances, combined with generally flat trading showed the resilience of rail, our capacity to respond conditions, is a considerable achievement. to our customers’ needs and the work our team does to Revenue by Business Unit ($m) Measure Freight Interislander Passenger Mechanical Network Corporate Group External revenue 396.7 122.9 87.0 9.0 20.0 31.8 667.4 EBITDA1 117.7 19.2 10.5 (2.2) (58.2) 13.3 100.3 Grants - - - - 332.1 12.5 344.6 EBIT2 86.9 12.8 4.5 (4.7) 46.6 15.7 161.8 Total assets 523.2 106.4 51.8 59.2 12,589.3 240.2 13,570.1 1 EBITDA is earnings before interest, tax, depreciation and amortisation. In our financial statements this is described as operating surplus before depreciation, amortisation and grant income. 2 Excludes loss on transfer of assets to Greater Wellington Regional Council (GWRC). 5 keep the network going through the most challenging intermodal containers. We are working with the Greater circumstances. Having dealt with these issues our singular Wellington Regional Council to upgrade the Wellington focus is on driving our plan and the trends outlined in it. metro fleet of electric multiple units. The first new Matangi units have been introduced into service, with Our customers have responded to the plan we have set by supporting it and enabling us to grow. They tell us others to arrive in the future. they are seeing improved responsiveness from our team, The Ganz Mavag fleet that has been Wellington more proactivity and flexibility in approach, and greater metro’s work-horse for many years will begin overdue willingness to find solutions in times of both pressure refurbishment in the New Year. The completion of most and business as usual. Many are keen to position their of the major Wellington network projects associated with own businesses closer to rail. The new Mainfreight site the introduction of Matangi trains has increased network in our Wellington rail yards opens in September, the reliability. Funding has been secured for the continued first of several new customer premises that are under network improvements so we can deliver the service our construction or negotiation. Rail can be more effective Wellington customers deserve and have been waiting for. for our customers if we help reduce the time and cost of In Auckland we are near completion of the DART project modal switching. for the western rail network, well advanced on the Our capability is improving. We have reduced the transit AEP project for electrification, and about to select the time between Wellington and Auckland for our premier successful manufacturer for the new electric units, which trains. That means we are more reliable and we will be able will be owned by Auckland Transport. to launch some new direct services on the North Island Main Trunk in November to capitalise on that improvement.