It’s been reported in the ODT today that Dunedin Railways is to mothball its operations due to the COVID-19 caused economic recession. 80% of their business comes from overseas tourism, notably cruise ship visits to NZ, which is naturally hugely affected by COVID-19, and it is difficult to run the trips under current lockdown conditions which also curtail domestic tourism.
In addition, the company chairman is quoted in the news reports as saying the company has high running costs and its operations are financially challenging with there being $10 million of deferred maintenance costs on the Taieri Gorge Railway.
At the same time as the mothballing has been announced, Otago Excursion Train Trust (OETT), the joint founder of Dunedin Railways (which started as Taieri Gorge Railway Ltd in 1990) has decided to sell its 28% shareholding in Dunedin Railways to Dunedin City Holdings Ltd (DHCL) which owns the other 72% of Dunedin Railways currently. DCHL is in turn 100% owned by Dunedin City Council (DCC).
OETT originally held a 50% shareholding in DRL/TGRL but this has been reduced over the past 30 years to 28% due to the need for further capital investment into DRL that has been met largely by DCHL. It is well known that since it became a minority shareholder there has been much angst at OETT over their reduced influence on the operations of DRL. However it is not known exactly why OETT has decided to sell out at this stage and we will try to find out if they are willing to comment about this. One possible issue, however, can be found in a statement on OETT’s news page that further capital investment in DRL is needed in rolling stock and track maintenance. Shareholders are normally expected to be able to finance the businesses they own and it may well be the case that OETT would not be in a position to finance any additional capital themselves.
This means that the era of DRL being in rail heritage ownership has come to an end and we don’t like the implications of that. Local government entities have a penchant for running their infrastructure assets into the ground, or appropriating them for other unrelated projects. There has been a change in emphasis on DRL since the new board chairman was elected who has stated that they expect DRL to produce a financial return. This is due to the politicians demanding more income and dividends from all of DHCL’s trading enterprises. The earlier proposal to mothball the line from Pukerangi to Middlemarch is an example because the most obvious solution is to rip the line up and sell the land to raise money. Under a profit focused DHCL this is exactly what could happen.