For Immediate Release 30 November, 2001
Tranz Scenic Sale Confirmed
Tranz Rail today announced the signing of contracts for the $33 million sale of its Tranz Scenic operations to
Australian-based West Coast Railway operators Don Gibson and Gary McDonald.
Details of the sale were finalised today with the transaction completing a further step in Tranz Rail's strategic plan
to concentrate on freight services. A new company will be formed to run the Tranz Scenic business and will assume
responsibility for the operation from mid December.
"Following on from the $81 million agreement to sell Tranz Metro Auckland, we are now well down the track of divesting
passenger operations to allow us to concentrate on our core freight business," said Tranz Rail Managing Director,
Michael Beard.
"West Coast Railway is a specialist passenger service operator with the marketing and management expertise to gain the
best returns and provide the best service possible on the current Tranz Scenic routes," said Mr Beard.
West Coast Railway Director Don Gibson said he expects to build on the existing tourism success of Tranz Scenic and to
look at developing new routes.
"The Tranz Alpine route has experienced growth of 30% in the past five years and passenger booking numbers remain strong
despite current world events. The demand on scenic tourism routes is growing and we expect that to continue."
Under the agreement Tranz Rail and West Coast Railways' shareholders Gibson and McDonald are 50-50 partners in the new
company. The new company will manage and operate the five Tranz Scenic routes it has purchased and will own all of Tranz
rail's long distance, passenger rolling stock.
Both partners will contribute $5 million in equity into the new company with the ASB Bank providing additional finance.
The new company has purchased the Northerner and Overlander between Auckland and Wellington, the TranzCoastal service
between Picton and Christchurch and the TranzAlpine, which runs over the Southern Alps between Christchurch and
Greymouth. Also acquired is the Capital Connection long-distance commuter service between Wellington and Palmerston
North and Tranz Scenic's charter business.
Assets include 13 operating, mainline locomotives, nine other locomotives, 76 carriages, 3 railcar sets, 16 power or
observation vans, brands, selected station buildings around the country and carriage maintenance depots in Christchurch
and Otahuhu.
Mr Beard said Tranz Rail sees additional value for Tranz Rail in maintaining an interest in the new passenger operations
while drawing on the benefits of having those operations managed by a specialist passenger transport operator.
"Our new partners operate passenger train services in Victoria and we have always seen additional benefits from a
long-distance passenger service run by a specialist operator. We have decided to retain a positive financial investment
in the new holding company. We will not play an active role in its management but our continued involvement will ensure
effective co-ordination on issues such as track access. Tranz Rail will also have representatives on the Board."
No disruptions for passengers are expected over the busy holiday period, as the same staff will be involved in the day
to day running of the business.
Existing Tranz Scenic staff will be offered positions with the new company and will be seconded to the new operation
under the current agreement until new employment contracts are in place.
Tranz Rail will also continue to operate The Southerner service between Invercargill and Christchurch until the
agreement with Central and Local Government expires on February 10. Rolling stock for The Southerner would be handed
over to the new owners at that point. Mr Beard said any discussions on the future of that service would depend on the
outcome of the current viability study.
Mr Beard said proceeds from the sale would be used to retire Tranz Rail Limited debt.
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