UPDATED TUESDAY: A $19.2 million railway extension may raise house prices in the locale. 

Documents posted on the Treasury website reveal that in late 2006 officials valued the New Zealand’s rail system at $120 million, some $570 million less than the price the government paid for the business in July this year.

The paper trail clearly shows that throughout the lengthy sale process, Toll had the upper hand in the negotiations because it knew the government was not buying for commercial reasons. Toll also knew that the crown was under time pressure because it had to continue adequate funding to secure the financial viability of the rail business.

Downer EDI has bought New Zealand company HRS Ltd to strengthen its position in the infrastructure sector, including rail.

It did not put a price on the acquisition, which was one of two it announced today.

Industry observers said HRS worked mainly in earth moving, a service used by both road and rail network builders.

The purchase was seen as a positioning for contracts in the wake of the re-nationalisation of rail in New Zealand.

Costs relating to the Government's rail buyback are set to swell by hundreds of millions of dollars in coming months as ministers consider an "aggressive" investment programme for the newly acquired KiwiRail.

The Government today took ownership of Toll's rail and ferry assets after negotiations that ran into the early hours and effectively added an extra $18 million to the $690 million purchase price.

Haggling over the details of the government buyback of Toll Holdings' rail business in New Zealand will go right to the wire today.

The deadline is midnight today and late yesterday agreement on all aspects of the deal had not been reached.

Plans are in place for a big revelation of the new look of the business at Wellington's railway station on Tuesday.

In May the Government and Toll announced a heads of agreement for the government to buy Toll's rail and ferry assets for $665m. There are another $25m of associated costs.

State-owned rail track company Ontrack said it will need another $400 million over five years to bring the tracks up to speed.

This is on top of normal maintenance and the $200m special funding that was injected after the network was purchased from Tranz Rail in 2004.

Chairman Cam Moore said such investments was not a "black hole" for spending when fuel prices were rocketing.