Reliable. Sustainable. Valuable - REPORT 2017 - KiwiRail
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Reliable. Sustainable. Valuable. A N N UA L I N T E G R AT E D REPORT 2017
F.18a
Welcome – Tēnā koe
For more than 150 years rail has played a vital role as an enabler of
economic growth in New Zealand, evolving and adapting to meet customer
needs despite significant geographical challenges and changing trends in
trade.
In the 1800s engineers designed a rail network that could operate in New
Zealand’s uncompromising landscape, implementing wooden infrastructure
that ran across swamps, rugged mountains, dense forests and wide rivers,
to connect otherwise isolated communities and industries to the market.
Much has changed since KiwiRail’s humble beginnings in 1863. Wooden
infrastructure has been replaced by more resilient materials and today
we look to advanced technological solutions to ensure the safety of the
network and our people. To this day KiwiRail’s rail network continues to
connect businesses, communities, importers and exporters to the world.
As history shows, rail is adept at changing its services to meet the evolving
needs of industry. As port flows increase and commuter demands continue
to grow, KiwiRail is developing dynamic and innovative solutions to meet
New Zealand’s changing transport requirements.
2 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017
Contents
Overview of our business Capitals review Governance review
At a glance 4 Main North Line case study 20 The KiwiRail Board 48
Who we are and what we do 6 Financial 22 The KiwiRail Executive Team 50
Tourism case study 25 How we are governed 52
Management review People 27
Our reporting approach 9 HPHE Hotworks case study 30 Statutory review
How KiwiRail creates value 10 Assets 31 Key Performance Indicators 56
Chairman’s message 12 Rolling Stock case study 33 Vote Transport 58
Milestones 14 Skills & know-how 34 Financial statements 60
Chief Executive’s report 16 Port of Tauranga case study 35 Independent Auditor’s report 93
Relationships 36 Directory 96
Business review Stakeholder relationships 40
Tangiwai case study 42
Performance of our
business units 18 Environment 43
Environment case study 45
Strategic outlook 47
Tim Eddy, Matt Thompson, Kevin Day, Paul Jones, Bob Day and Jamie
Reliable. Williams,Valuable.
Sustainable. KiwiRail staff working
| KiwiRail with the Report
Annual Integrated NCTIR2017
alliance
| 3
Overview of our business: At a glance
At a glance
Highlights from FY17
Relationships
• In Budget 2017, the Government announces two year funding of $450 million and a Rail
Review to investigate long-term funding options
• Interislander customer satisfaction ratings reach 90% in June 2017, up from 82% June 2016
Financial
• $52 million operating surplus
• $92 million underlying operating surplus excluding $40 million impact from Kaikoura
earthquake, exceeding FY16 underlying result
• $18 million productivity and efficiency savings, building on $27 million saved from initiatives
in FY16
People
• Participation in the employee survey increases from 47% in FY16 to 74%
• 12% of workforce complete in-house leadership programmes
• 15% reduction in total injuries and a 45% reduction in Total Recordable Injuries Frequency
Rate over three years
Assets
• $322 million is invested in renewal and upgrade of network, property and rolling stock,
excluding Main North Line reinstatement
• 150 new intermodal IH wagons and 15 diesel locomotives are purchased to better On-Time
Performance (OTP)
• On Time Performance for premium freight trains improves by 20% year-on-year to 89%
• KiwiRail acquires Interislander ferry, Kaitaki, securing capacity to move freight and people
between islands for years to come
Skills and Know-How
• KiwiRail’s operational response keeps the North Island to South Island supply chain moving
after the Kaikoura earthquake
• The award-winning TranzAlpine returns to service six weeks after a 300ha fire closes the
Midland Line
• A 24 hour, 10 day operation delivers new rail sidings at Southdown (Auckland) container
terminal
• An intermodal solution enables road bridging while the Aratere is in dry-dock
Environment
• Reduced heavy vehicle impact on New Zealand roads of 1.1 million truck trips, saving
69.5 million litres of fuel and 188,939 tonnes of CO2 emissions
• KiwiRail’s award winning fuel efficiency programme Driver Advisory System saved
5.7 million litres of fuel
• 93% of EECA energy saving target reached two years ahead of schedule
4 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017
Overview of our business: At a glance
The High Performance High Engagement team wins the New Zealand Workplace Safety Awards
‘Engagement’ category, recognising the best initiative to encourage worker involvement in health and safety
Achievements
• KiwiRail’s work with customers in the aftermath • The Auckland Electrification Project wins the
of the Kaikoura earthquake, wins the Rail Best Project Award at the Conference on Railway
Excellence Award at the Australasian Rail Excellence 2016
Industry Awards 2017
• KiwiRail’s Back to Basics programme is a finalist
• High Performance High Engagement initiative, in the Skills Highway category at the 2017
Hotworks, wins the Engagement category of the Diversity NZ Awards
2017 New Zealand Workplace Health and Safety
• Track Occupancy is a finalist in the Work-Related
Awards
Safety category at the 2017 New Zealand
• Locomotive Fuel Conservation project wins the Workplace Health and Safety Awards
Large Energy User Initiative of the Year category • KiwiRail is a finalist for the Auckland University
at the 2016 Deloitte Energy Excellence Awards of Technology Business School’s Excellence
• Integrated Report 2016 wins bronze and the in Business Support Awards in two categories:
Special Award for Communications at the 2017 Export Support and Government
Australasian Reporting Awards • Great Journeys of New Zealand is nominated
for a Tourism Industry Federation Award in the
• TrackSAFE NZ and KiwiRail’s social/digital media
Business Excellence category
campaign for Rail Safety Week 2016, Conscious
Crossings, wins eight golds at the Axis Awards • Great Journeys’ experience, the TranzAlpine, is
and the overall Grand Axis Award rated one of the top 10 most scenic train journeys
in the world by National Geographic.
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 5
Overview of our business: Who we are and what we do
Who we are Our Vision:
Trusted Kiwi-owned logistics partner
and what we do growing New Zealand
We connect people and communities
32 million One million 17%
We help commuters make We carry more than We enable passenger
more than 32 million low- one million tourist growth of 17% in
carbon journeys each year passengers each year Auckland (2016 /17)
• Manage 18,000ha of land • 3,400 employees
• Own more than 1,500 buildings • 76% union members
• 46 years - average
employee age
• 45% decrease in Total • 3 long distance
Recordable Injury passenger
Frequency Rate in experiences
• Over $1b invested in renewal last three years between Auckland
and upgrade of rail network, and Greymouth
rolling stock and property over • 160,000 passengers
the last five years per year
• 3,090 signals
• Stops at 23 towns
• 3,500 km of track • 1,500 public and cities in NZ
operated and maintained level crossings
• 6.6m sleepers, of which
48% are concrete
6 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017
Overview of our business: Who we are and what we do
We keep freight moving
18 million 16% 25%
We move 18 million We carry around 16% We transport
tonnes of freight of New Zealand’s total around 25% of
each year freight task (tonnes-km) New Zealand’s exports
• 3 ships
• 98 tunnels • 750,000 passengers
• 1,322 bridges • 4,000 sailings per year • Reduce heavy
vehicle impact by
• 1 million net tonnes more than one million
• 4,578 wagons
of freight carried per truck trips per year
annum
• Every tonne of freight
carried by rail is
a 66% emissions
• 244 locomotives saving over road
• Average locomotive
age 30 years
• 91% of all freight
arrives on time
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 7
Management review: Our reporting approach
James Gobbe, Senior Track Maintainer, Christchurch
8 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017
Management review: Our reporting approach
Our reporting
approach
This is KiwiRail’s second Integrated transport system and in the health of invest and demonstrates how it creates
Report, which uses the International the economy, our communities and value through reliable, sustainable and
Integrated Reporting Council’s (IIRC) people. Reliability is about meeting our cost-effective services.
framework to explain KiwiRail’s customer promise and empowering
This year there is a strong focus on
business performance. our people to succeed. Sustainability
the reporting capital areas of People
explains how rail can create enduring,
It sets out to provide in-depth and Environment, to reflect the
long-term value and explores more
information about our relationship growing importance and influence
than just KiwiRail’s environmental
with stakeholders, what we do in our of these activities on our day-to-day
credentials, encompassing the safety
business and our role as an enabler of operations. These areas are growing
and Zero Harm of our people and the
growth in New Zealand for the year to and changing in line with evolving
public. KiwiRail’s value lies in our role
30 June 2017. business and customer needs and are
in growing our customers and the
at different stages of development and
Within the report we demonstrate how economy, in working closely with our
implementation.
we create value for our stakeholders, agency partners on New Zealand’s
our customers, and our business in future transport needs and in our In People, we discuss the successful
the short, medium and long term. The long-term ability to deliver for all New application of a Zero Harm culture
report also covers key material issues, Zealanders. across all levels of KiwiRail and the
the issues that are most important development of visible health and
This report is also designed to provide
to KiwiRail and its stakeholders: safety leadership and ownership. We
an overview of KiwiRail activities, to
customer relationships, financial also detail our desire to drive greater
describe how each capital contributes
performance, work health and safety, diversity across the business.
to our strategy and to provide a
operational efficiency, energy and
transparent assessment of overall We also delve deeper into material
carbon emissions, transport resilience,
performance, future prospects and issues, environmental and social
commercial focus, employee relations,
risks in relation to finance, people, values, and we discuss what each
and public safety.
assets, knowledge, relationships and issue means to our stakeholders.
Our title, ‘Reliable. Sustainable. the environment. Each area has an
More information on the Integrated
Valuable.’ highlights the integral role overview of our activities describing
Reporting framework can be found at:
KiwiRail plays in New Zealand’s how that area contributes to our
http://integratedreporting.org
strategy to simplify, standardise and
Statement of
We, the Board of KiwiRail, Audit New Zealand has provided
acknowledge our responsibility a statement of assurance for the
financial statements in this report,
Responsibility
to ensure the integrity of this
Integrated Report. In preparing and but we have not sought external
approving the content of the report, assurance of the contents of this
we are confident that it aligns with Integrated Report.
the principles of the International
Integrated Reporting Framework.
Trevor D Janes Dame Paula Rebstock
Chairman Deputy Chair
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 9
Management review: How KiwiRail creates value
How KiwiRail
creates value
Providing
Growing a resilience
highly-engaged, to the NZ
safe and transport
Our productive Supporting network
inputs: workforce customers
to grow NZ’s
economy
Financial :
on
v isi
r
Ou ED
O WN R
I - NE
D KIW ART
TE S P NZ
US ISTIC ING
People T R G
LO GRO
W
Assets
We move people
Skills &
know-how
Our strategy:
Relationships Simplify
Standardise
Environment
Invest
10 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Management review: How KiwiRail creates value
Delivering
world class Providing a
tourism sustainable Our
Facilitating experiences transport
outcomes:
efficient alternative
flows to/ and reducing
from ports emissions*
Connecting
people and
places by
enabling
commuter
journeys
Reliable
Sustainable
and freight
Valuable
Our values:
*Around 16% of all total freight task carried,
under 1% of all transport emissions
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 11Management review: Chairman’s message
Chairman’s
message
“
The culture of an
organisation is
brought to the fore
in the face of crisis
and challenge and
I want to thank
KiwiRail’s 3,400
people for their
immense efforts It has been an extraordinary 10 months
since I joined the KiwiRail Board on
event is testament to the skills of all
those involved and the support that
this year.” 1 November 2016, just a fortnight
before the Kaikoura earthquake hit,
has been received from our customers
and stakeholders.
devastating our rail network in the
The speed of KiwiRail’s recovery was
South Island.
assisted by the Government’s early
I took over the Chairman’s role from and welcome commitment to fund
John Spencer who had spent six years any uninsured portion in our rebuild
at the helm of KiwiRail. John, more costs. In Budget 2017 two years’ of
than anyone, knows the intestinal Government funding was confirmed,
fortitude required of our people this with the promise of longer-term funding
year as they tackled the biggest rebuild through a Rail Review to ensure
of rail since World War II. It has been a KiwiRail is operating on the most
privilege for me to be part of it. sustainable footing possible.
As this publication goes to press, The challenge of running a business
the Main North Line from Picton to that invests in multi-decade assets
Christchurch is carrying some of its on a year-by-year funding basis
first freight loads on services at night, should not be underestimated and I
while we work with our NZTA partner am pleased that the Government is
in the North Canterbury Transport recognising and addressing this issue.
Infrastructure Recovery (NCTIR)
The earthquake may have defined
alliance on the continuing rebuild of the
much of our year, but it does not define
road and rail during daylight hours.
our business. The results to 30 June
This partnership has highlighted just 2017, impacted as they are by the
how important an integrated transport disrupted freight flows and tourism
network is for New Zealand. We are services in the South Island, are
stronger together, road and rail, and testament to the success of KiwiRail’s
this alliance is paving the way for even strategy and the transformation of the
greater collaboration in future. business in recent years.
That we could run freight just 10 We have achieved a creditable $52
months after that dramatic natural million operating surplus. If the impact
12 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Management review: Chairman’s message
of November’s earthquake and However, the revenue impact of that thank KiwiRail’s 3,400 people for
resulting decrease in revenue and event has effectively been absorbed by their immense efforts this year.
increase in costs is taken into account, the business – testament to the strong Our valued customers have also
a $92 million Earnings Before Interest, operational platform that Peter Reidy shown remarkable support for the
Taxes, Depreciation and Amortisation and his management team have spent organisation, even as their own
(EBITDA) would have been achieved. the past three years building. businesses were disrupted by events.
That underlying operating surplus,
Productivity and efficiency gains, more Those customer relationships and
which takes into account the
reliable services for our customers, partnerships will be a key part of our
earthquake’s $40 million impact, meets
strong partnerships with New Zealand’s next 12 months as we look to continue
our commitment to Government and
ports for our importers and exporters our strategy to simplify the business,
is ahead of budget, forecast and last
and the ability to adapt to the changing standardise our operations and invest
year’s underlying $86 million result.
nature of international freight through in our people. Rail is of growing
One of the earthquake’s stranger the “big ships” now plying our waters, importance to New Zealand in both our
effects is that it has increased have all set the organisation in good congested cities and for the efficient
asset impairment. An accounting stead for the challenges faced. movement of freight, as has been seen
requirement of the organisation by the events in the South Island this
The importance of safety for our
means capital expenditure is written year.
people and the public is always top
off each year, which consequently
of mind at KiwiRail, and is as critical We look forward to embracing the
values assets at substantially below
for the Board as it is for our frontline challenges of the 12 months ahead.
replacement cost.
workers. Some good results in injury
This treatment has never been more reduction have been recorded this
anomalous than this year as we have year, building on previous years’ work,
written off all of the earthquake rebuild but there is always more to do and
costs, despite it delivering significant it will continue to be a focus of our
value to New Zealand. High Performance High Engagement
programme of work with our union
When a large forestry fire took out
partners.
KiwiRail’s award-winning TranzAlpine
service just three months after The culture of an organisation is Trevor D Janes
November’s earthquake, it appeared brought to the fore in the face of Chairman KiwiRail
nature was working against us. crisis and challenge and I want to
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 13Management review: Milestones
Milestones
September
• KiwiRail and the Rail and
November
Maritime Transport Union sign
a joint High Performance High
Engagement Charter to guide
future engagement and projects • A 7.8 magnitude earthquake
strikes Kaikoura suspending
• The 007 bridge programme
the freight and Coastal Pacific
July replaces eight timber bridges
along the North Island Main
services on the Main North Line
Trunk (NIMT) • KiwiRail signs an agreement
• KiwiRail signs an agreement with the Energy Efficiency and
to purchase 15 diesel Conservation Authority (EECA)
locomotives
• Road-bridging successfully
fulfills customers’ needs
when the Aratere’s dry dock
leaves New Zealand without
a rail enabled ferry for the
first time in 56 years
October December
• Napier Port signs an • KiwiRail enters the coastal
agreement for a log service shipping freight market with
between Napier and Wairoa, NZ Connect which operates
signalling the reopening of the between Auckland and
Napier/Gisborne line Christchurch
• The arrival of Aotea Maersk • The Northern Explorer passes
August marks the beginning of “big
ships” in New Zealand waters,
the one million kilometre mark
since commencing service in
to meet increased demand June 2012
• The opening of the KiwiRail upgrades services to
Waingawa transport hub • KiwiRail decides to replace
and from the Port of Tauranga electric locomotives with
in Wellington takes 16,000
trucks off roads per annum • KiwiRail signs an agreement diesel locomotives on the
for 150 new intermodal IH NIMT enhancing reliability and
• Two Auckland – wagons efficiency
Whangarei freight services
are consolidated into a
single service, maximising
operating efficiencies
2016
14 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Management review: Milestones
May
March • KiwiRail purchases
Interislander ferry, Kaitaki,
• The Midland Line reopens
and the TranzAlpine securing capacity to move
returns to service six freight and people between
January weeks after the 300ha fire
• A three-year project
islands for years to come
• The Coastal Pacific, Northern
to strengthen the line Explorer, TranzAlpine and
• The first work train
since the earthquake between Castlecliff and Interislander tourism journeys
transports equipment Port Taranaki commences are rebranded as The Great
along the Main North Journeys of New Zealand
Line between Grassmere
and Clarence River
April
• Railbike Adventures wins
June
February the bid for the Wairoa
– Gisborne section of the
• The Clarence Bridge
reopens on the Main North
Napier/Gisborne Line Line enabling the first work
• A 300ha fire results in
the cancellation of freight • Ventilation, track and train since the earthquake
and passenger services communications upgrades to travel from Kaikoura to
on the Midland Line strengthen resilience in Picton
the Kaimai Tunnel, on the
• The Discovery Channel route between Auckland – • KiwiRail commences
airs a Megatrains Hamilton – Tauranga e-learning, providing our
episode about KiwiRail people with the tools needed
internationally to develop their skills
anywhere, anytime
2017
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 15Management review: Chief Executive’s report
Chief Executive’s
report
“
KiwiRail will
invest to build
an efficient and
reliable operating
platform with a
highly engaged
and productive
team focused on
customer growth There is an overused sporting axiom across the Strait without a rail enabled
that describes a match as a “game of ferry.
strategies and the two halves”. I’m loathe to repeat it but
Months of planning meant we were
safety of all”
if ever a year deserved that cliché, it
heading into a peak season having
has been this year in review.
reduced speed restrictions by 45
When we kicked off last July 1, all of minutes on the North Island Main
the key rail and ferry system elements Trunk Line, with our highest wagon
were in place to produce what our availability in years.
teams expected to be a record
Our people were focused and
peak freight and passenger year for
driven, the result of two years’ work
KiwiRail.
to transform our organisation into
We had made significant progress in a customer-focused, commercially
standardising our train fleet, simplifying driven business helping to grow our
our asset maintenance and train customers and the New Zealand
planning and investing in the network economy.
to ensure the best reliability for our
The whistle blew when the 7.8
customers, lifting the average On-Time
earthquake struck near Kaikoura
Performance (OTP) by 22% in the four
just after midnight on November 14.
months of FY17.
What ensued as the dust settled,
Tourism was booming with rail fundamentally changed not only that
passenger numbers up 12%. Our peak season, but our year and our
partnerships and commercial priorities: New Zealand’s supply chain
arrangements with ports were paying was disrupted, Wellington’s port closed
off with the Port of Tauranga tracking and our domestic freight revenue was
19% up in volume. Interislander impacted in the South Island. We had
customer ratings were up and we’d to close our successful Coastal Pacific
successfully completed a drydock for rail journey for at least 12 months and
our Aratere ferry – the first time in 56 we were facing the biggest rail rebuild
years that we’d kept freight moving in generations.
16 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Management review: Chief Executive’s report
Our response to that natural event to find solutions to the challenges they (HSAT) and introducing lead indicators
required innovation at speed: our – and we – faced. The investment we to stimulate health and safety as
teams got two Cook Strait ferries up had made prior to the quake to build everyone’s responsibility. Our ambition
and running within 24 hours, beginning an efficient and reliable operating is still to be one of New Zealand’s
plans for our first coastal freight platform made that work possible leading health and safety organisations
shipping service NZ Connect from but I thank them for their patience and that goal will be a key strategic
Auckland to Lyttelton. We opened a and encouragement as we worked focus in the next 24 months.
new inland freight hub in Blenheim to get the Main North Line (MNL)
As we rebuild from this unexpected
for customers to enable the transfer reopened in a limited capacity, months
six months of disruption, challenge
of freight from rail to road so it could ahead of schedule, and to rebuild the
and opportunity, our long-term vision
still reach Christchurch through the Midland Line after Waitangi weekend’s
remains: KiwiRail will invest to build an
inland routes. We shifted passenger unexpected fire.
efficient and reliable operating platform
carriages to the North Island and
We are heading into a new financial with a highly engaged and productive
brought our key freight customers
year in better shape than most team focused on customer growth
together in Auckland to plan for the
expected, but there is still a lot of work strategies and the safety of all.
next 10 months of disrupted service.
to be done.
As the second half of this year closed
The results of that work and the
Like many organisations which are out, the public support KiwiRail
organisation we had built for success
some way down the road to health received has been overwhelming. New
prior to the earthquake can be seen
and safety success, our focus on Zealanders have embraced the MNL
in the numbers reported in this
awareness, education and cultural rebuild and recognised the benefit that
publication - an operating surplus of
change over the past two years has our critical infrastructure plays in our
$52 million despite the earthquake’s
paid dividends in reducing safety transport system to help New Zealand
$40 million impact on our freight
incidents. KiwiRail has achieved grow.
and passenger revenues; On-Time
significant reductions in Total
Performance that is still 20% up year I am pleased that our people have
Recordable Injuries Frequency Rate
on year for our premium trains; growth continued to drive the business
(TRIFR), medical injuries and Lost
in forestry and ports; productivity and forward for New Zealand through every
Time Injuries Frequency Rate (LTIFR),
efficiency gains of $18 million building challenge this year and committed to
meeting its targets and celebrating that
on the $27 million achieved the year a continuing improvement focus for
success.
prior, and signs that our tourism future generations.
revenue will return with gusto when the But in the past year those
Coastal Pacific is back. achievements have levelled off and
we need the next intervention to make
It is an incredible testament to the
a step-change in the organisation,
skills and determination of our people
empowering our people to see safety
that these results have been achieved
as a capability not an outcome. Our
in such a challenging year, and
focus is systems and people, building
that through this time our employee
our risk management and assurance
engagement measures have risen
for our critical risks and independent Peter Reidy
so dramatically, with participation
key controls to reduce risks if our Chief Executive KiwiRail
increased by 27%.
processes and assets fail. We are
It is a year in which we have had to also engaging our people through our
work closely with our freight customers local Health & Safety Action Teams
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 17Business review: Performance of our business units
Performance of
our business units
Freight Interislander Tourism
Freight remains the biggest Interislander is an extension of State This year KiwiRail rebranded its
income earner for KiwiRail and Highway One, linking road and rail acclaimed Scenic Journeys the
contributes 58% of total operating networks between Auckland and TranzAlpine, Coastal Pacific and
revenue. Volumes of freight were Christchurch. In 2016/17 the ferries Northern Explorer rail journeys
significantly affected by the Kaikoura carried more than one million net and Interislander ferries under
earthquake in 2016/17, when tonnes of freight and transported one streamlined service, “The
Centreport sustained damage to more than 750,000 passengers. Great Journeys of New Zealand”.
its infrastructure and roads and The experiences are continuing
This year 85% of sailings were
rail closed in the South Island, to gain national and international
on or ahead of their scheduled
changing freight flows across recognition with all three rail
arrival times resulting in continued
the country. These disruptions services receiving a Certificate of
improvement of Interislander’s
were partially offset by continued Excellence from Trip Advisor and
customer satisfaction ratings, which
growth in forestry freight volumes regularly topping lists of the best
were 90% as at June 2017.
and KiwiRail’s drive to support long-distance rail services in the
port growth through strategic port The Kaikoura earthquake had a world.
partnerships. significant effect on passenger and
Great Journeys’ rail services
rail freight volumes, as some tourists
KiwiRail works closely with its port were impacted by the Kaikoura
avoided the upper South Island and
partners to progress new rail-served earthquake in November 2016 and
freight shifted from rail to trucks.
operations. Rail infrastructure such the Midland Line fire in February
During this period, Interislander saw
as intermodal hubs, will see more 2017. The earthquake resulted
an increase of 67% in commercial
customers and ports using rail as an in the cancellation of the Coastal
vehicle activity and a decline in
integral component in their supply Pacific for the remainder of the
passenger numbers of 6%.
chains, leading to overall efficiencies 2017 season and the fire saw the
that will support the positive growth In June 2017, KiwiRail purchased TranzAlpine suspended for six
of New Zealand’s ports. the Kaitaki ferry which was weeks. As a result, revenue for our
previously leased until 2020, long-distance passenger services is
Reliability for freight customers
ensuring that it has the capacity to down 23% compared to June 2016.
remains KiwiRail’s core strategic
move freight and people between
focus, with a number of In spite of these events, demand
islands while continuing to work on a
improvements implemented over for Great Journeys’ experiences
long-term fleet strategy.
the last year under the strategy remains high and gives the business
to simplify train plans, improve confidence that the 8% growth seen
network reliability and invest in new before the Kaikoura earthquake is
rolling stock. This sustained focus sustainable in the longer term.
has resulted in KiwiRail’s On-Time
Performance (OTP) average for all
freight trains increasing to 91% in
FY17 from 83% in FY16.
18 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Business review: Performance of our business units
Infrastructure Property Rolling stock
KiwiRail continues to align its KiwiRail is driving a commercial KiwiRail is transitioning to an
infrastructure investment priorities approach to the property portfolio intermodal asset base, providing
with customer needs and freight it manages, with more than 1,500 customers with flexibility within the
demand. Over the last 12 months property assets and over 8,000 third transport system when moving
the organisation invested $185 party interests in its land. goods around New Zealand and
million in the renewal and beyond. More than half of the wagon
Over the last 12 months KiwiRail
upgrade of network including fleet is now intermodal and in the
has continued to review its property
work to upgrade the Kaimai year ahead KiwiRail will embark on
portfolio, to ensure that lease and
Tunnel, Makatote Viaduct and the a rolling stock fleet renewal strategy
licence arrangements are managed
Southdown Container Terminal in to ensure the optimisation of its
in a fair and commercial manner,
Auckland. assets for customers.
and has partnered with a number
KiwiRail continues to focus its of customers to lease land for new In FY17 our diesel locomotive
investment on growth corridors rail served operations adjacent reliability programme made
including the freight critical to rail yards. These initiatives pleasing progress, with locomotive
Auckland-Hamilton-Tauranga have enabled KiwiRail to improve availability at 95% and wagon
route with targeted infrastructure the efficiency of customers’ availability at 90%. KiwiRail also
investments that will support supply chains and to generate undertook initiatives to standardise,
growing volumes at New Zealand income growth through long term, simplify and invest the rolling stock
ports. sustainable, leasing arrangements. area: investing in control, asset
procurement and maintenance
Continuing to maintain and upgrade The revised FY18 KiwiRail property
specific teams, and continuing its
urban metro rail networks in strategy focuses on protection of the
development of a 10 year fleet plan
Auckland and Wellington to enable active rail portfolio and increasing
to meet forecast freight growth.
passenger growth is a key area of revenue from this land, streamlining
focus for KiwiRail. In 2018 work will the grant and encroachment In June 2017, 150 new intermodal
begin to upgrade the Wellington processes, optimisation of the yard IH wagons arrived in New Zealand,
Metro, increasing network resilience and terminal assets and maximising adding to the 1,200 wagons
by removing speed restrictions and the release of capital from non- purchased since 2008 and 15
improving reliability for passenger active rail land. additional diesel locomotives were
and freight customers. purchased in August 2016. The
addition of new rolling stock to
In Auckland, the key focus will
KiwiRail’s ageing fleet is crucial for
be the on-going consideration of
the improvement of asset reliability
the wider transport requirements
and On-Time Performance, two
including how best KiwiRail can
factors which are key criteria for
work with key stakeholders to
customers as they look to move
reduce congestion, improve network
more freight onto rail.
resilience and better freight flows to
and from the Ports of Auckland and
Port of Tauranga (see p.35).
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 19Case study: Main North Line
Main North Line (MNL)
Case study
Staff on the Main North Line worked long hours in difficult conditions, often far
from home. Maungamaunu, just north of Kaikoura
On 14 November 2016, mountains moved, of the South Island, and NZ Connect, our first
tracks twisted, tunnels cracked and bridges coastal shipping service, integrated road and rail
shifted when a 7.8 magnitude earthquake struck links between Auckland and Lyttelton. Our quick
Kaikoura just after midnight. In the immediate customer-centric response won the Freight Rail
aftermath, all passenger and freight rail services Excellence Award category at the Australian Rail
across New Zealand stopped, and Interislander Industry Awards in July 2017.
sailings were anchored for 48 hours. At the heart
The skill of our workforce and the strength of
of Kaikoura, where the effects of the earthquake
our partnerships with NZTA through the North
were most devastating, the land rose up by 1.5
Canterbury Transport Infrastructure Recovery
metres sweeping the tracks of the Main North
(NCTIR) alliance enabled us to expedite MNL
Line (MNL) towards the sea, resulting in 750
repairs. Teams of world-class engineers moved
separate worksites, more than 90 slips and
across the country to Kaikoura to progress the
landslides, and damage to 21 tunnels and nine
reinstatement of the line through accelerated
bridges between Christchurch and Picton.
bridge, signal and tunnel designs, condensing
KiwiRail acted quickly to lessen the significant processes that typically take several months,
impact of broken freight links for its customers. into weeks. This expedited the physical rebuild,
While two of our ferries were back in operation enabling work trains to operate on sections of
within 48 hours of the event, the MNL required the line from January 2017 to assist road crews
the biggest rail rebuild in New Zealand since in the rebuild of State Highway One, delivering
World War II. The line, which typically carries building materials to remote locations, and
one million tonnes of freight per annum, is a preparing the line for freight trains.
critical transportation link between the North and
Just 10 months after the earthquake devastated
South Islands and is vital to the success of our
the MNL, restricted, freight-only services,
customers’ operations.
are operating again, providing much needed
To enable freight flows between the islands, capacity and resilience to New Zealand’s
KiwiRail established two new freight options transport system, while taking 2000 trucks
for our customers within weeks of the quake. per month off the vulnerable alternate routes
The Blenheim freight hub ensured the smooth and continuing to assist in the rebuild of State
transfer of freight from rail to road at the top Highway One.
20 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Case study: Main North Line
Bridge 90, which crosses Boundary Stream just north of Ferniehurst, was so badly damaged it had to be demolished
Main North Line >1,500 Within six months of the
reinstatement people involved earthquake:
key statistics in the project
40%
150,000 damaged rail sites fully repaired
average person hours
worked each month 50%
track repairs required for a restricted
150km opening of line were complete
line tamped
60%
5,000 of slips (372,788 cubic metres) had
new concrete been cleared
sleepers laid
Work trains running
5km between the following routes:
track realigned • Christchurch and Claverley
• Picton and Mirza
12km • Claverley and Oaro
track has been rebuilt • Mirza and Wharanui
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 21Capitals review: Financial
Financial
“
KiwiRail has achieved significant productivity Highlights
and efficiency improvements over the last two
years, despite the challenges of the November
$52m
Operating surplus
2016 earthquake and Midland Line fire”
Minister of Transport, Hon Simon Bridges $92m
Underlying operating surplus
$18m
improvement on the underlying FY16
results of $86 million, and exceeds
Our Financial Capital KiwiRail’s SCI target of $80-$85 Productivity and efficiency
million for a second year running. savings
A key part of KiwiRail’s strategy is to
simplify our business, standardise our
assets, and invest in our people. We
continue to work with teams across
Challenges
Operational Revenue the organisation to identify a range of
productivity initiatives, that will enable
the delivery of a more efficient and $40m
Earthquake impact on
Government Investment effective service to our customers and
shareholders. In FY16 productivity and operating surplus
efficiency initiatives resulted in savings
of $27 million and in FY17 productivity
Grant Funding initiatives delivered a further $18
million in savings, a reflection of
KiwiRail’s commitment to efficient
services for our customers and
Asset Sale Proceeds shareholders. Key initiatives included:
continuing to target efficiencies in
labour, materials and fuel spend,
and simplifying our train plan.
Debt Funding
Rail Review
KiwiRail has made significant In Budget 2017, the Government
achievements throughout a announced a rail review which will
challenging year while continuing assess KiwiRail’s operating structure
to operate in a commercial manner and longer-term capital requirements.
for its shareholders. The FY17 At the time of the announcement
result shows a $52 million operating Transport Minister, Hon Simon
surplus achieved despite $40 Bridges stated that the review will
provide KiwiRail with a “long-term,
million revenue and cost impact
transparent, sustainable model.”
from the Kaikoura earthquake.
The review is an opportunity to
This year KiwiRail’s focus was on
highlight KiwiRail’s role in an
achieving underlying financial targets integrated transport system delivering
and managing costs with the reduced for New Zealand. It will look at rail’s
available cash flow. The business purpose and will establish a position
was able to absorb the impacts of on KiwiRail’s role within an integrated
the Midland Line fire ($9 million) transport system. The review will
and reach an underlying operating also investigate the wider benefits
surplus of $92 million. This is an of transporting freight by rail.
22 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Capitals review: Financial
Financial statements
The financial statements are included from page 60 onwards and
detail the financial performance for the year and the financial
position at 30 June 2017.
Notes which may be of particular interest to our readers are:
Note 2 – Revenue provides the split of revenue between business
units
Note 3 – Operating Expenses shows KiwiRail’s key operating costs
Note 9 (c) – Impairment explains why KiwiRail impairs $296 million
of railway infrastructure assets
Note 26 – Financial Risk Management Policies and Objectives
explains the financial risks KiwiRail faces, how these risks impact
On August 8 2017, just north of the financial statements and how KiwiRail manages these risks
Kaikoura, KiwiRail linked the line Note 27 – Impact of earthquake outlines the earthquake impacts
between Picton and Christchurch for on the financial statements
the first time since the earthquake
Economic Value of Rail
Rail freight delivers a range
of benefits to New Zealand
which are not recognised when
undertaking traditional “return
on investment” analysis of Helping commuters
expenditure on the rail network. Reducing heavy vehicle Avoiding over
make 32 million
impact by more than 188,000 tonnes of
These benefits include a range of one million truck trips
low–carbon journeys
carbon emissions
positive outcomes that would not each year
be possible without rail and are
considered to be items that would
incur costs for other parties in
the absence of rail freight. These
represent the value of rail, rather
than a narrow view of the cost of
rail. Benefits of rail include:
• reduced ongoing road Avoiding approximately
69 million litres of Reducing congestion,
maintenance costs making our roads safer
diesel consumption by
• a safer national transport road freight
network for New Zealanders
to connect, work and travel
• reduced traffic congestion
which saves millions of hours
in lost productivity
• reduced CO2 emissions
• a resilient transport network Creating long–lasting
Contributing to Helping community
two–way relationships with
that underpins New Zealand’s New Zealand’s groups, schools and
customers, suppliers and
growth in overseas trade economic growth sports groups to travel
other stakeholders
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 23Capitals review: Financial
Outlook and challenges to the change in international freight effect from falls in bulk freight such
flows and “big ships” by investing as steel and gas. Passenger volumes
67% of KiwiRail’s revenue in
in infrastructure to receive larger on the Interislander also took a hit
FY18 is expected to come from
ships. KiwiRail is supporting parties as tourists avoided road travel to
rail freight and Interislander
that are investing in inland ports to Christchurch, and the Coastal Pacific
commercial vehicles
be ready for the expected customer tourism service was cancelled.
The current outlook for coal, forestry growth (see more on p.36).
Our focus is to work with our NZTA
and milk-based products is positive
18% of KiwiRail’s revenue in FY18 partner in the NCTIR alliance to
and volumes have lifted. To support
is expected to come from tourism get the Main North Line back to full
increasing demand from these
freight capacity, benefitting South
sectors, KiwiRail has continued to International tourism is forecast to Island consumers due to reduced
drive a strong partnership strategy grow and KiwiRail is actively targeting supply chain costs. The Government’s
with New Zealand’s exporters and strategic partnerships with other commitment to fund the uninsured
ports, leveraging our ability to move tourism operators that will support balance of the Main North Line
large volumes of freight as customers and enable the growing demand reinstatement is critical, as without
experience growth. KiwiRail is for services. KiwiRail’s tourism this funding KiwiRail would be unable
developing long term strategies in strategy is discussed on p.25. to undertake the project. The line
preparation for expected increases
is a critical part of New Zealand’s
in coal export volumes and the ‘wall We will continue to focus on
transport network, carrying around
of wood’, which is predicted to reach the on-going reinstatement
one million tonnes of freight annually
peak harvest in 15 years’ time. of the Main North Line as a
before the earthquake. Reopening
In September 2017, KiwiRail reset critical strategic project
the line will not only lower the cost
prices on key domestic corridors to The devastating Kaikoura earthquake to customers of moving freight
optimise freight services and to lift had widespread revenue and cost between the islands, it will reduce
contribution. The new prices, whilst impacts for KiwiRail as freight flows greenhouse gas emissions as every
remaining a competitive option around New Zealand changed, along tonne of freight carried by rail is a 66%
compared to road, secure a fair return with the effects on passenger services emissions saving for New Zealand.
for the services provided. It will reward on the Interislander ferries and rail Strong customer demand is expected
customers booking return journeys, tourism journeys. The $40 million once the line is again fully operational
removing the costs incurred when impact is made up predominantly of as freight forwarders have had to use
repositioning empty equipment. domestic freight revenue loss as the vulnerable alternate road routes while
Main North Line closed, plus some the Main North Line was being rebuilt.
New Zealand ports are responding
KiwiRail brought in a 132-wheel transporter to tackle the huge job of moving two
locomotives, each weighing 102 tonnes, that were stranded by the Kaikoura earthquake
24 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Case study: Tourism
Tourism
Case study
Tugane Rosson, Customer Services Manager, Interislander
KiwiRail’s passenger tourism journeys In 2017, KiwiRail rebranded its tourism
have experienced double digit growth experiences under The Great Journeys
in recent years and continue to deliver of New Zealand moniker, maximising our
strong economic benefits to the country’s unique position as a connected journey
regions. Our connected journey strategy throughout the country. This provides
encourages tourists to explore out-of-the- wholesalers with the opportunity to bundle
way destinations, boosting regional towns all of our services in a single sale and
and cities. enables our customers to travel seamlessly
from Auckland to Greymouth using a
Coastal Pacific, Northern Explorer and
streamlined booking service.
the TranzAlpine rail journeys, along with
our Interislander ferry services, give The strategy is closely aligned with the
international visitors an otherwise unseen Government’s Tourism 2025 - Growing
view of New Zealand’s remote landscapes. Value Together plan which encourages
Our services are in high demand from organisations to support regions as visitor
international visitors and domestic numbers increase. KiwiRail is partnering
tourists alike, outpacing the national with local tourism operators to provide our
growth average. The economic benefits customers with premium experiences and
of our experiences are most keenly felt in packages in areas where our passenger
smaller towns, such as Greymouth, where services operate. This will ensure that
businesses including hotels, restaurants, we offer high quality activities that attract
and car hire companies rely on train visitors to the regions all year round while
passengers. West Coast Tourism estimates increasing demand for our Great Journeys
that the TranzAlpine brings in excess of experiences.
$15 million per annum to the region.
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 25Capitals review: People
Wayne Sullivan was the driver stranded in his locomotive when the earthquake struck in
November last year. Just 10 months later, he drove the first freight service back into Christchurch
26 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Capitals review: People
People
KiwiRail is one of New Zealand’s
largest employers with 3,400 people
company strategy and vision as well
as increased opportunities for career Highlights
in 50 towns and cities across the growth.
country. We share a long and proud
history with our people, many Zero Harm 74%
of whom are the third or fourth KiwiRail’s people culture is Participation in employee survey
generation of their family to work underpinned by our commitment to
12%
in rail. Zero Harm, which keeps our people
People are vital to the success healthy and safe, and our business
of our organisation as we and the environment sustainable. Zero Of workforce completed in-house
transform to a customer-focused, Harm has been implemented at every leadership programmes
commercial business that helps level of the organisation, from the
grow New Zealand. The significant frontline to the Executive Team and
improvements made to KiwiRail’s Board, and is valued as a proxy for
leadership within the organisation.
Hotworks
performance in recent years are HPHE initiative wins Engagement
a testament to the skills of our Engagement with our people is key to category at New Zealand Workplace
workforce, our strategy to standardise Health & Safety Awards
developing procedures and initiatives
our business, simplify our operations that improve worksite health and
and invest in our people.
Challenges
safety. Our Health and Safety Action
In 2017, several members of the Teams (HSAT) engage with our
KiwiRail leadership and operational frontline people to facilitate a strong
teams were finalists in national safety culture at local places of work
Addressing levelled off
and our leaders are encouraged to
awards, reflecting KiwiRail’s focus to
attract, retain and develop world-class place Zero Harm at the forefront of Injury rates
talent across the business. day-to-day work activities. Our goal
is to ensure that our employees and
Areas for focus in the next 12 contractors get home safely at the end
months include a greater emphasis of their day.
on communication with people
leaders throughout the business, a We continue to invest in our people,
stronger focus on communicating safety initiatives and systems, to
Our workforce statistics
63% 37%
new appointments new appointments
48 years 41 years Women
average age average age 15%
15 years 7 years
average service average service
Men
97% 94%
85% permanent contract permanent contract
78% 22%
Executive Team Executive Team
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 27Capitals review: People
Fitting of Self Contained Self Rescuer units in the tunnel simulator during Tunnel Operations training
deliver notable reductions in the Diversity KiwiRail this year established a
number of mainline derailments year- National Diversity Council, which will
KiwiRail is committed to being an
on-year since 2012, as well as our address the potential skills deficit in
inclusive and diverse workplace with
Total Recordable Injury Frequency 2027. We have also implemented a
a workforce fit for the future needs
Rate (TRIFR) and Lost Time Injury KiwiRail graduate programme, which
of our industry. Currently, our legacy
Frequency Rate (LTIFR). In the past will focus on recruitment and retention
workforce comprises of just 15%
three years TRIFR decreased by an of a younger workforce.
women and our average worker age is
impressive 45% and in the past 12
46 which could lead to a skills deficit
months KiwiRail has seen a 15%
in the next decade as a number of our High Performance High
reduction in total injuries and a 3%
skilled workers retire. Engagement
reduction in the TRIFR, building on
The High Performance High
reductions in the previous two years. Senior women in the organisation
Engagement (HPHE) programme,
were boosted by the Executive Team
To improve safety capabilities, KiwiRail a joint project with KiwiRail’s union
increasing to 22% (two out of nine)
engages leadership through training partners, empowers our frontline
this year and the number of women in
programmes such as Just and Fair people to find solutions to the
leadership roles across the business
Culture and the Core Leadership challenges facing our business.
increased to 25%. We are developing
programme which provides mid-level
KiwiRail’s Diversity and Inclusiveness HPHE raises productivity, improves
and senior leaders with the skills they
Strategy to establish initiatives that will safety, engages employees and
need to progress as a Zero Harm
lift the profile and number of women in strengthens our customer commitment
Leader.
the workplace. through enhanced performance and
28 | Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017Capitals review: People
“
more effective processes. The advises the business of appropriate
results of early HPHE projects ways to implement Māori culture
are already making a difference into our day to day activities. TKM Every month managers
in our worksites, from small scale is a key part of our public activities
improvements to processes that and regularly performs karakia visit all the teams in
focus on larger logistical procedures. (blessings), powhiri (welcoming their patch to share
A good example of HPHE methods ceremonies) and te pure (ritual
being used to find a solution to cleansings of sites and machinery) information that’s
frontline issues is the Hotworks at our events. relevant and which
safety programme which won the
Engagement category of the New
KiwiRail’s Toi Toi Maori Leadership shows how what we do
Programme gives staff members
Zealand Workplace Health and
exposure to a Te Ao Maori learning plays a big part in the
Safety Awards (see more on p.30).
environment using Kaitohutohu success of KiwiRail.
(mentors) to aid the personal and
This year the Rail and Maritime
Transport Union (RMTU) and professional development of the It’s important to let
KiwiRail HPHE Governance Council programme’s Tauira (cadets). them know the positive
developed an HPHE Charter to
provide a solid governance structure
Employee survey impact their work has
to the programme that will guide The KiwiRail annual employee for our customers and
for our company.”
engagement and projects. survey is used to measure
our people’s engagement and
KiwiRail continues to learn from Air satisfaction levels and to assess Henare Clarke, North Island
New Zealand, the only other New potential areas of improvement Network Services Manager
Zealand organisation to implement across the business.
the programme in such depth,
Internal communications and
and to invest in HPHE training for
leadership around the survey have
delegates and managers.
been improved and participation
increased from 47% in 2016 to 74%
Providing leadership and
in 2017. This result reflects the pride
training and passion our people feel for
KiwiRail actively invests in the their work, their colleagues and the
leadership and training development purpose of our business.
of our people. This drives employee
engagement across the business, Outlook: Workforce planning
and enables better prospects by Digital disruption is shaping and
extending the capabilities of our transforming society and industry
workforce. globally. To successfully adapt
Leadership development to changes in rail, freight and
programmes include Diversity NZ engineering technology KiwiRail
Award finalist Back to Basics, which must plan and prepare for artificial
focuses on long-term business intelligence, big data and the
issues for KiwiRail while addressing automation of processes.
the literacy and numeracy learning KiwiRail is seeking ways to prepare
needs of our people. our workforce for the rapidly
In response to the global trend changing future of the logistics
of digital transformation, KiwiRail industry as technology disrupts
has modernised our courses by traditional work patterns, including
developing an e-learning platform investment in programmes that
that provides our people with the expand transferrable skills of our
tools needed to develop their skills people.
and capabilities anywhere, anytime. KiwiRail is also developing initiatives
to attract new and diverse talent
Ahurea - Culture who will broaden the skill set of the
Our Māori network, Te Kupenga business and meet the future needs
Mahi (TKM), helps our people to of our customers.
reconnect with their whakapapa and
Reliable. Sustainable. Valuable. | KiwiRail Annual Integrated Report 2017 | 29You can also read
