Memorandum
To:
Shane Ellison
From:
Train Services – Metro Services
Date:
29 June 2020
Subject:
Approval to write off the residual depreciation on the SA/SD and SX carriages
Dear Shane,
Since the retirement of the push and pull SA/SD train sets, Auckland Transport (AT) has been
through a sales process which resulted in disposal of 76 SA/SD carriages, out of the original
104 carriages. To date the revenue received from the sales is $4.70M versus the leasing and
security costs of $4.91M. There are 28 SA/SDs and 6 SXs carriages remaining, which are
currently stored at the KiwiRail Taumaranui rail sidings.
Prior to COVID 19 there had been three businesses interested in purchasing the remaining
carriages, all offers were conditional on seeking funding to purchase the SA/SDs. The three
offers were from Kiwi Rail, Octagonal and Pounamu tourism.
Post COVID 19, the three companies have withdrawn their offers to buy the carriages citing
financial hardship and the inability to seek the necessary funding to purchase the carriages
due to the COVID 19 effect on tourism. The offers were between $50,000 to $65,000 for each
carriage, noting that the organisations were still required to refurbish the carriages to operate
Tourist trains.
Auckland Transport Costs
The carriages are stored at Taumaranui, on KiwiRail owned property. AT pays a lease to
KiwiRail to have the carriages stored at their site. Along with storage costs, we also pay for
security and maintenance costs. The maintenance costs are to check the carriages once every
90 days and to carry out a wheel turn. The last check confirmed that the carriages cannot be
moved on the network due to the grease in the bogies separating. If the carriages were to be
refurbished or scrapped, they would need to be moved by road.
The current costs being incurred by AT annually to store the 34 carriages is in the table below.
Description
Cost/Month
Annual Cost
Remarks
Security
$13,535.84
$162,430.08
Storage Fee
$5,000.00
$44,000.00
Movement Fee
$44,000.00
Geodis Contract
$250.00
$3,000.00
Spares Storage
No invoice received
Total Cost 2019/20
$253,430.08
Next steps
AT’s financial team have confirmed that if AT were to write off the carriages, ($479,413.05)
AT would be able to offer them to Kiwi Rail, Octagonal and the Glenbrook museum. The three
parties have confirmed that they are willing to buy each carriage for a dollar. The three parties
Memorandum
will then be responsible for the ongoing costs for movement and storage of the carriages
moving forward. If AT do not write the carriages off then we will continue to bear the costs,
without any certainty that we would be able to recover the costs in the next couple of years.
Indications from the perspective buyers are that the above carriages will be used for future
projects, including providing extra carriages to supplement the commuter rail services for the
Te Huia and Capital Connection. Both Octagonal and Glenbrook have indicated that they
would utilise them for tourism projects at some point in the future.
Please approve the write off for the residual depreciation of the 34 carriages as this would be
provide a reduction of opex costs of approximately $253K annually. The write off cost will be
below the line meaning it is reported outside the normal operating results.
Kind regards
Stephen Fernandes
Contract Manager – Rail
Reviewed:
--------------------------------
Janrich Vasquez – Finance Business Partner
Recommended:
--------------------------------
Craig Inger – Manager Train Services
Recommended:
--------------------------------
Stacey Van Der Putten-Group Manager Metro Services
Recommended:
--------------------------------
Mark Lambert – Exec GM Integrated Networks
Memorandum
Recommended:
--------------------------------
Mark Laing – Exec GM Finance
Approved:
--------------------------------
Shane Ellison – Chief Executive
