peter reidy - kiwirail - transformation programme
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NZ Rail 2014
Peter Reidy, Chief Executive 17 June 2014
Agenda for today • Snap Shot
• Our Supply Chain
• Zero Harm
• Transformation Road Map
• Progress on Turn Around Plan
• Opportunities
• Shareholder Funding
• Challenges
• Todays Problem
• Things we need to get right
• Changing the performance conversation
• Insights after 100 Days
Snap Shot
Snap Shot Each week
• 900 freight trains
• 44 inter-city passenger trains
• 2,200 suburban passenger services in Wellington
• 2,000 suburban passenger services in Auckland
Annually Interislander manages 4,600 sailings carrying:
• 755,000 passengers
• 53,000 rail wagons
• 73,000 trucks
• 212,000 cars
Assets:
• 4,100 staff
• 4,000 kms track and1,656 bridges
• 18,000 hectares of land managed
• 198 mainline locomotives and 4,585
freight wagons
• Two owned and one leased ferry
Our Supply Chain
Network Management
Asset Management
Customer Partnering
Logistics
Zero Harm – Total injuries reduced by
44% year on year
Identify & Reduce
Critical Risk
Implement Compliant Systems Build Zero
Harm Capability
Regain unconditional
Licence to Operate from
our Board, Owner,
Customers and the
Community
Workforce engagement
Operating discipline
Act
ive
Enga
ged
Lea
der
ship
APPROACH
Hazards / Issues
Work Practices
/ Actions
Systems / Controls
Capability / Culture
Leadership
6
Transformation Road Map
2008 2014 2014-2016 2016 +
TIMELINE
Rail Investment
Case
One Group
Commercial Performance
Cost Eficient Value
Proposition
FOCUS
Road vs Rail Integrated Transport
Intermodal Shift
OU
TCO
ME
$1.4B Investment Programme
• Freight Growth • Product Investment
• Standardisation • Internal Efficiency • Leadership and Culture • Customer Partnering
• Specialise and Partner • Long Term Funding • Cost efficient service
…………………………………
Strategic Reset
(October 2014)
Progress on Turn Around Plan(TAP) • Freight revenue growth - CAGR of 8.0% since 2010
• Committed export and domestic customers.
• Asset condition improving – Funding making a difference
• Wellington Metro and Trans Scenic passenger strong customer experience and growth
• Freight forwarders (Toll/Mainfreight etc) – our business partners not competitors
• Employment engagement lifting
• Closure of uneconomical activities ( Hillside workshop, Napier – Gisborne Line)
• Partnership plan with Treasury for October 2014 strategy reset – NZTA engaged
Opportunities • Freight demand growth dominated by Diary/Forestry –
benefits Rail network
• Fonterra and major port freight consolidation – Rail
reduces cost in the supply chain
• Growth of intermodal “freight villages” – inland ports
• Passenger proposition – (Metro plus)
• Private sector investment- rolling stock/network
• Mothballing/closure of uncommercial lines – regional
authority investment
• Train asset utilisation and freight tariff improvement
Committed Shareholder Funding…$1.0B
funding over 5 years
250 250198
146122
30 76
0
50
100
150
200
250
300
FY11 FY12 FY13 FY14 FY15 FY16
Equity Funding ($m)
"TAP" Aratere Extra approved in Budget 2014
176198
?
A few challenges considering…
• Geographical comprehensive network
• Relatively high fixed cost
• Difficult terrain
• Narrow gauge
• Historical under invested network
• Concentrated bulk freight customer segment
• 1 year funding model for long life assets (50 years)
Challenges…Network Legacy
• Bridge structural timber – 25 years of replacement works
remain
• Timber sleepers – 30 year programme to catch-up
• Signalling systems – still operating one from 1928, several
from late 1950s; reliable and safe but harder to repair
• Civil asset – drains, slopes and formation essential for
long term asset stability have been ignored to deal with
the immediate renewals and upgrades
Challenges…Capital Investment
900
800
700
600
500
400
300
200
100
0
EAR
NIN
GS
$200M Gap
CA
PEX
Or another way of looking at it
900
800
700
600
500
400
300
200
100
0
$200 M Gap
CA
SH F
LOW
OU
T
CA
SH F
LOW
IN
• Safe Systems – Safe people
• Leadership and Culture – The KiwiRail Way
• Cook Strait Strategy
o Ship optimisation and configuration
o Do ships need to have rail deck ?– alternative models
• Customer and market sector penetration
• Rail hubs = Partners
• Interislander Ontime performance Recovery
Things we need to get right – 2 years
• Productivity and Asset Utilisation
• Freight Yields
• Stakeholder Engagement
o Unions
o Government agencies regional and central
o Customers
• SCI – performance framework
• A plan for Auckland
Things we need to get right – 2 years
Changing the performance
conversation… • What drives value in the KiwiRail Group?
• What elements of the Network are commercially attractive, sustainable and do not require government funding?
• What elements of the network are not commercially attractive will require government funding?
• What assets should we:
o Divest
o Mothball
• Where should Government invest to recognise NZ Transport public value benefits?
o Cost to deliver?
o Implications?
Re
set
Pro
ject
20
45
O
ct 2
01
4
Insights after 100 days • Half way through a long term infrastructure rebuild
• Strong export and domestic freight growth – customers committed to Rail rebuild
• Customer focus is encouraging
• Funding is making an impact on Asset condition
• Passenger Metro OTP/Customer Service delivery is strong
• Interislander history of OTP – now going through credibility recovery face
• Treasury and Transport agencies are engaged to evaluate alternative strategies
However…
• Cost efficiency must improve
• Freight tariffs need to increase
• Asset productivity needs to lift
• Union engagement is a key stakeholder
• Collaboration and Intermodal partnering critical
• Funding needs to match long life asset operational model
Thank you
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