Veolia “May Buy” NZBus – Speculation

Here’s interesting speculation. Veolia to buy NZ Bus.

Infratil selling NZ Bus is today’s bet in the wake of last week’s six-monthly earnings report from Infratil in which they made it clear they’re juggling their accounts to snatch the big prize of Shell NZ.

Infratil is working with the New Zealand Superannuation Fund to acquire Shell’s New Zealand energy distribution and refining assets. “If completed, the transaction would be attractively priced and result in control of an integrated downstream energy business in a stable market with earnings growth opportunities, ” said its earnings report.

The accounts showed that earnings for New Zealand Bus in the six months to September 30 were slightly down on the same period last year.

In today’s Dominion Post, First NZ Capital head of research Rob Bode is quoted as saying NZ Bus had been a” frustrating investment” but was generating a pretty good return but Infratil didn’t want to raise new equity to fund buying Shell, and wanted to keep debt levels down, so everything but the core assets of Trustpower, Wellington Airport and Infratil Energy Australia “could be considered to be sold.” NZBus has also had ongoing industrial problems and, recently in Wellington, been under scrutiny after a run of serious accidents involving buses and pedestrians.

The report says NZ Bus is the biggest provider of public bus services in Wellington and Auckland, and has a book value of $211.8m and lists potential buyers as Ritchies Transport. big Australian operators Veolia Transport,  Transdev-TSL and Swan Transit, all of which have previously indicated an interest in entering the New Zealand bus market.

A Veolia deal would get the company into Wellington and, for Aucklanders, make integrated ticketing and scheduling between main bus services and the train a lot easier. Veolia has done a good job in trying to run train services for Auckland despite the aged fleet and ongoing funding and political issues.

Infratil’s six monthly report to September 30:

NEW ZEALAND BUS earnings fell 13% as patronage was adversely affected by the recession and Auckland’s average fare income was reduced by the introduction of new concessions.  Controllable costs were stable as NZ Bus benefited from its investment in improving fleet processes.

In Wellington discussions are under way with the Regional Council for a more partnership- based contract for Hutt Valley services. It is hoped this becomes a template for creating more incentives for operators to focus on growth and regional transport authorities to more clearly identify value for money and the areas where their investment will have the greatest benefit for their transport networks.  As has been the case over the four years Infratil has owned NZ Bus, change to the regulatory regime continues apace. While the establishment of a stable regulatory environment may still be some way off, it does seem to be heading in the right direction under the current Minister of Transport.

SNAPPER, Infratil’s subsidiary established to facilitate low dollar value transactions (such as paying for bus fares or buying coffee), continues to make excellent progress with the deployment of its system in Wellington and the Hutt Valley. An illustration of how Snapper could fundamentally change public transport charges was trialled when the All Blacks played Australia in Wellington. For that weekend anyone with a Snapper card paid half-priced fares on the buses. Until then Wellington bus fares have only changed twice in the last decade! Snapper provides the tools for transport authorities and operators to more closely align public transport fares and value. Unfortunately Snapper continues to be mired in the political process associated with the Auckland Transport Agency’s wish to use taxpayer and ratepayer funds to buy its own ticketing system which it intends to impose on that region’s public transport operators. Since ARTA initiated this process the focus has changed towards NZTA’s desire to implement a coordinated national approach to integrated ticketing, although standards for such a system have yet to be defined. Uncertainty reigns in the interim.