Restructuring - Coopers & Lybrand report damns main trunk electrification and writing off of NZR debt

This series of articles covers the restructuring of NZRC from 1985 through to 1990, specifically:

• NZRC announcing a loss for the 1985 financial year but predicting profitability in the 1990s, including a description of a wide range of restructuring measures following the Booz Allen report
• Coopers & Lybrand report in 1987 focused on the economics of North Island Main Trunk electrification, but also what else NZRC would need to do to become financially viable
• Agreement with unions to have single person crewing of most freight trains (removing locomotive assistants)
• 1989 article on review of governance of NZRC (which resulted in all of the non-land assets being transferred into a full-fledged SOE - NZ Rail Ltd) and disposal of non-core assets
• 1989 article on the possibility that some NZRC business units could be sold
• 1989 article on the $0.5b loss of NZRC, primarily due to writing off asset values, redundancy costs and interest on debt
• Government writing off $360m of NZRC debt for the cost of the North Island Main Trunk electrification.
• Government writing off the remainder of the $1.1b of debt as part of the process to convert NZRC into a state-owned enterprise. This debt was considered to be due to the cost of restructuring including redundancies.

Key points from the articles include:

• NZRC made a profit of $24m in 1983, but lost $20m in 1985 (this is after "social services subsidies" from government to cover losses for commuter passenger rail and bus services, long distance passenger rail services and marginal branch lines for freight)
• In 1985 NZRC believed it would be returning dividends to shareholders within five years
• 130 "repositioning projects" existed in 1985 to restructure the business
• Deregulation of land transport along with becoming a Corporation had had a traumatic effect on NZRC as it was simply not responsive enough to changes in demand from customers or in responding to competition more generally. "Inefficiency was built into the system". 
• In 1987 Coopers & Lybrand suggested some lines would need to close, RUC would need to increase and NZRC would need a major capital injection if it were to survive
• Coopers & Lybrand said the North Island Main Trunk electrification project should not have proceeded and would lose NZRC $100m over 35 years (even if electricity were free, it would still lose $76m over 35 years).  The main reasons being that deregulation of land transport had reduced demand below levels needed to justify the project, and forecasts that oil prices would rise sharply compared to electricity were wrong (oil prices having dropped 50% since the decision to proceed with the project had been made).
• Coopers & Lybrand also noted that while NZRC had responded to the challenges of reducing costs and becoming more competitive, it needed to do more.  This included having stronger drawgear to enable longer trains and to concentrate on markets where rail can be most competitive, such as haulage of containers.  
• In 1987, Minister of Railways Richard Prebble asked Cabinet for NZRC to get a $400m capital injection (this was subsequently approved for the write-off of debt incurred for the main trunk electrification
• North Island Main Trunk electrification was estimated to cost $337m in total
• NZRC lost $0.148b in the 1987 financial year, primarily due to debt servicing costs
•  NZRC lost $0.57b in the 1989 financial year, although it was only an operating loss of around $41m for the previous 15 months.
• Average train size had increased 20% between 1983 and 1989
• tonne-km of freight moved per staff member had increased 94% between 1983 and 1989
• Staff numbers had been cut 60% between 1983 and 1989