Minutes of Corporate and Strategic Committee

1. Welcome/Apologies/Notices

The Chairman welcomed everyone to the meeting.

Resolution

C&S11/15 That the apology from Cr Rex Graham for absence be received.

Barker/Beaven

CARRIED

2. Conflict of Interest Declarations

There were no conflict of interest declarations.

3. Confirmation of Minutes of the Corporate and Strategic Committee Meeting Held on 11 February 2015

C&S12/15

Resolution

Minutes of the Corporate and Strategic Committee meeting held on Wednesday, 11 February 2015, a copy having been circulated prior to the meeting, were taken as read and confirmed as a true and accurate record.

Scott/Pipe

CARRIED

4. Matters Arising From Minutes of The Corporate and Strategic Committee Held on 11 February 2015

There was a request in relation to the Business HB presentation, for Councillors to meet with Governance level of the organisation as well as operational staff in future.

There were no matters arising from the minutes.

5.	Call For Any Minor Items not on the Agenda
	There were no minor items raised for discussion

Business Case - Napier-Gisborne Rail

The Chairman welcomed Don Selby (Chairman, Napier-Gisborne Railway Group) and Stephen Underwood (consultant) – who presented the NGR proposal for establishment of a Wairoa to Napier short line freight service, which the group considers is a viable business proposition. The presentation covered:

· The proposition is for HBRC to support a rail service for moving logs from a hub in Wairoa to Napier Port through lease of the rail line from KiwiRail

· Council to ask KiwiRail to extend deadline for lease agreement to 30 June 2015 pending negotiations of the terms of lease and operational matters, and confirmation of an operator with sufficient funding

· Council to allocate $500k capital to restore the track and consider a disaster contingency facility

· Notes – no income budgeted for anything other than log freight, extension of the service beyond Wairoa to Kopuawhara subject to freight demand and development of rail tourism opportunities, service north of Wairoa subject to more investigation and securing of funding for track reinstatement, and commercially information excluded from the business case document provided

· Shortline model is for a short, single line (logs) focus on sustainable traffic volumes with local support.

Queries and discussion covered:

· 30 June 2015 deadline extension and whether KiwiRail is prepared to agree

· Outstanding issues for resolution with KiwiRail, and the material outcomes for a business proposition to be finalised – and matters which must be resolved prior to any lease agreements being signed

· Negotiations with KiwiRail have been carried out, and Neil Buchanan was introduced to speak to the process and results to date

· The log volume projections (initial 145k tonnes/yr rising to 250k tonnes in 4-5 years) and contract processes to ‘secure’ that business, as well as the reliability of the harvest volumes projected (Nick Cornwall), the risks associated with freight options for operators, the locations of the forests in relation to a Wairoa hub, and an explanation that another possible 50% of forests that are less than 1000ha in size so not included on the map dated 2008 (provided by MAF).

· Budgets for track maintenance and repairs estimated as being 50% of the average yearly spend, based on conservative figures, operating costs calculated using standard industry methods and include Above Rail and Below Rail operating costs, bridge maintenance, track and a $3M disaster contingency facility.

· Rolling stock of 5 locomotives and 20-35 wagons required as well as hi rail diggers and plant for track maintenance, a log loader for Wairoa and communications equipment.

· HBRC investment to include initial investment to ensure Napier-Wairoa track is fit for purpose ($500k) and disaster contingency ($3M suggested) – with contingency fee repaid annually to HBRC by Operaton to secure underwriting of capital, 6% return on HBRC investment paid annually on the outstanding balance of any HBRC contribution to the track, and repayment planned with a 10 year period with no repayment until pre-profitability losses recovered and a sustained level of profitability achieved.

· HBRC risks include Capital Risk (mitigate by negotiating reasonable lease rate/terms), Contingent Capital Risk (mitigate by including track, bridges, culverts, etc in HBRC assets under insurance policy), and Financial Risk (mitigate by negotiating reasonable lease rate/terms)

Mr Mohi was excused from the meeting at 10.20am

· The financial figures provided, the private investment of $5-10M required and the reality that no investment will be made until all matters with KiwiRail are resolved to the point where a complete business case can be prepared, inclusive of financial details proving the commercial viability of the proposal.

· Matters still to be resolved with KiwiRail include the lease terms (term, track rental cost, Napier locomotive depot), the costs for using 5km of track from Napier to the Port (including piloting trains), cost and availability of locomotives, wagons (plus certification and accreditation) and parts, public liability insurance cover, liability for operator damage to the track, interchange rate for freight from Wairoa to go beyond Napier, access and cost of KiwiRail maintenance facilities and staff, access to KR purchasing system, events that may cause or enable Council termination of the lease.

· Proposal hinges on HBRC securing an operator, on acceptable terms, to provide at least a log freight service between Wairoa and Napier.

The meeting adjourned at 10.33am and reconvened at 10.55

Final points raised and discussions traversed the total amount of investment by Council, the length of line to be leased, the proposition being for Wairoa to Napier log freight service only, KiwiRail negotiations, and Napier Port’s view of the proposition.

C&S13/15

Resolutions

1. That the Corporate and Strategic Committee receives the “Business Case – Napier-Gisborne Rail Corridor” staff report.

The Corporate and Strategic Committee recommends that Council:

2. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted policy on significance and that Council can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 and make decisions on this issue without conferring directly with the community and persons likely to be affected by or to have an interest in the decision due to the nature and significance of the issue to be considered and decided.

3. Receives the abridged NGR Business Case Report from the Napier-Gisborne Rail Group.

4. Notes that commendably good progress has been made in a short time, three months less the unavoidable down time for the Christmas break.

5. Notes that the business case supports the opening of a rail service, initially from Wairoa to Napier, for the principle purposes of moving export logs from a Wairoa hub to the Napier Port, and that the initial findings of the business case provide justification for HBRC to continue work on the proposal to lease the Napier Gisborne railway line.

6. Advises KiwiRail that, in principle, it agrees to a lease of the line subject to the terms of the lease and a number of operational matters involving KiwiRail and a rail operator being resolved to the satisfaction of both KiwiRail and HBRC.

7. Seeks from KiwiRail a reasonable extension of the time to resolve the few remaining issues that were unable to be completed due to the compressed time and loss of opportunity with the Christmas break, with the prospect that with continuation of the goodwill and cooperation by all parties a successful conclusion can be arrived at.

8. Sets the new and final deadline of 30 June 2015 to resolve all outstanding issues between HBRC and KiwiRail to their mutual satisfaction and for an operator to confirm the availability of funding, including equity funding, and for the operator to be able to commence initiating the business of operating the rail service.

9. Provides adequate resourcing for the remaining investigative tasks, to be under control of the Chief Executive and Chairman, and to be from and within the present budget allocation.

10. Continues to consider all options for the re-opening of the rail line in the interim.

11. Authorises the Chairman of HBRC to liaise with all interested parties, including NGR, Port of Napier, HBRIC Ltd, other transport interests and KiwiRail to explore what other configurations would be possible to enhance the prospects of this initiative succeeding.

Barker/Dick

CARRIED

7.	Minor Items not on the Agenda
	There were no Minor Items for discussion.

Closure:

There being no further business the Chairman declared the meeting closed at 11.30am on Wednesday, 18 February 2015.

Signed as a true and correct record.

DATE: ................................................ CHAIRMAN: ...............................................