Bloomberg News

New Zealand Rail Writedown Adds $1.4 Billion to Budget Deficit

June 26, 2012

New Zealand is writing down the value of its commercial rail assets, adding to the size of the budget deficit this year, Finance Minister Bill English said.

The charge of about NZ$1.8 billion ($1.4 billion) will be incurred in the year ending June 30, English said in an e-mailed statement released in Wellington. The government last month forecast a deficit of NZ$10.64 billion and will finalize the figures in coming months, he said.

The non-cash charge won’t affect net debt or the government’s borrowing program, English said. In the May 24 budget, he forecast the operating balance excluding revaluations would be in surplus by 2014-15.

“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,” English said in the statement.

Government-owned New Zealand Railways Corp. will reduce the value of the assets, which exclude the land on which rails and buildings sit, by about NZ$6.7 billion. It will reverse an existing NZ$4.9 billion revaluation reserve, leaving the remainder to reduce its bottom line.

The commercial assets including freight, passenger and ferry businesses, rolling stock, plant and equipment will transfer to a new state-owned company under the existing KiwiRail brand. The previous government revalued the assets upward in 2007 by about NZ$5 billion after buying them back, according to the statement.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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