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A group working to resurrect the mothballed Gisborne-to-Napier railway line has not yet convinced KiwiRail chief Jim Quinn they can attract enough freight to create an economic business.
The Shortline Project Group includes transport and tourism operators, and resources companies, and is chaired by Hawke's Bay Regional Council's transport committee head Alan Dick.
It said today it is investigating the viability of a separately run, privately owned rail service that would lease the line and infrastructure from the state-owned railway company.
KiwiRail shuttered the line last October, saying the $4 million cost to reopen the track after repairing massive slips and other maintenance was not viable given annual costs on the line were forecast to rise to $6 million a year.
That decision was made as the government earmarked $4 million to upgrade State Highway 2 between Gisborne and Napier.
"Alan Dick says he is cautiously optimistic. I would be slightly more pessimistic than he is," Mr Quinn told BusinessDesk. "They've identified some new freight, which I think is great. Whether it is enough, I don't know. Is it sustainable? I don't know."
Mr Quinn, who finishes at KiwiRail in February having begun the difficult task of steering the railway back toward economic sustainability, says he has people working with the Shortline group, "talking around some of the assumptions and options," to help them get to detailed figures.
Mr Dick says he will not identify the group's backers. A rough estimate to reopen the line between Naiper and Wairoa is as little as $100,000 but to fix the washouts north of Wairoa could be $2 million to $4 million.
"We're at the stage where we're working this up to whether a business case can be made to work or not," he says. The equity of the new operating company has not been finalised, though he expects the company would need to be capitalised to between $6 million and $10 million.
"The objective is to get this proposal to an investment-ready point in the next four to six weeks. With all parties co-operating, good management and a bit of luck, trains could be running out of Wairoa by Christmas."
The southern end of the line could be opened immediately, given "substantial volumes of logs and other freight out of and to a hub to be established in Wairoa, using existing railway yards in the town. Opening the northern part of the line depends on gaining agreement on repairs.
Hawke's Bay Regional Council is helping fund the work and the council "strongly supports re-establishment of the rail service," council chairman and Wairoa councillor Fenton Wilson says.