Kiwirail Valuation Adds NZD 1.8M to Deficit

June 28, 2012 New Zealand Finance

Kiwirail to be revaluatedKiwirail is set to slash the value of its assets by approximately half, a move that will see the national budget deficit stretch out even further.

On June 28th the Minister of Finance Bill English and the Minister of State Owned Enterprises made a joint announcement that Kiwirail will soon write down the value of its own commercial assets, which will also have the effect of widening the government’s budget deficit for the current fiscal year.

The revision will see approximately NZD 6.7 billion slashed from the value of Kiwirail’s land and network assets.

Kiwirail already has a NZD 4.9 billion revaluation reserve on its books, and the new evaluation will only affect the company’s bottom line by NZD 1.8 billion. The NZD 1.8 billion drop will also be reflected on the government’s statements.

Commenting on the revaluation, Bill English said that “…this will leave KiwiRail with a balance sheet that better reflects commercial reality and gives the company an opportunity to earn a return over time.”

According to Bill English, the revaluation is a “non-cash write down” and will not have an effect of the net debt and will not alter the government’s current borrowing program.

The leader of the New Zealand First Party Winston Peters has already stepped forward to claim that there is only one reason for Kiwirail to undergo a revaluation, saying that it “is the first step by the Government towards privatizing our rail network.”

Photo by Noel C. Hankamer