Phil Twyford says the cost of capital isn't the only thing being considered by Cabinet, as it decides whether NZTA or the NZ Super Fund and its Canadian partner should build Auckland's light rail

Cabinet is considering a Ministry of Transport recommendation on whether the New Zealand Transport Agency (NZTA) or the New Zealand Superannuation Fund and a Canadian pension fund should run the Auckland light rail project.

However commercial sensitivity means a veil of secrecy remains around the bids.

There is also a lack of clarity over the procurement process, and talk of the three governing parties having opposing views of the project.

The rail is likely to cost several, if not tens, of billions of dollars. Building the first leg between Britomart and Mt Roskill by 2021 was one of Labour's key 2017 election promises.  

Question marks over the process

NZ Super Fund CEO, Matt Whineray, on Wednesday told the Finance and Expenditure committee that NZ Infra (the Super Fund and CDPQ Infra partnership) gave the Ministry of Transport a 1500-page proposal in December, detailing what it believed the light rail should look like, how many stops it should have, etc.

However Ministry of Transport CEO, Peter Mersi, in mid-December told the Transport and Infrastructure committee the Ministry had only just started considering whether NZTA or NZ Infra should lead the project. 

“Once that has been done, obviously the starting point is whatever proposals they have put forward,” he said, giving the impression the Ministry wasn’t yet considering project design.

“Then there will need to be a process of working in partnership to get to the final outcome and that will involve much more engagement with communities and councils.”

However Transport Minister Phil Twyford on Wednesday confirmed: “Cabinet is making a decision about the selection of a delivery partner and the model that is used…

“The two parties have presented a lot of detail on route design and different aspects of the solution.”

Question marks over the proposals

Whineray’s appearance before the committee also raised questions over the cost of NZ Infra’s bid to taxpayers.

He wouldn't say what the target rate of return to NZ Infra was, but noted the Super Fund targeted an 8% long-run rate of return across its entire portfolio (not specific assets, as some will be higher-risk, higher-return and vice-versa).

But, given the Super Fund’s mandate is to invest on a "prudent commercial basis" to help pay for NZ Superannuation in the future, media quizzed Twyford on why the NZ Infra proposal was even being considered, when the Government could effectively issues bonds at 1% and get NZTA to deliver the project.

“The cost of capital is only one factor to be considered. There is an array of other issues,” Twyford said.

“Cost is not the only factor. It’s important, but it’s not the only factor.”

Twyford dismissed a report by Stuff journalist, Thomas Coughlan, who had been told that even though NZ Infra was equally owned by the Super Fund and CDPQ Infra, its returns could be split 70-30 in favour of the Canadians.

Twyford said these figures were wrong, but wouldn’t give a categorical assurance that the returns would be split 50-50 between the two partners, saying he wasn’t going to comment as the proposal was before Cabinet.

Whineray said the proposal was for a 50-50 split. 

He confirmed NZ Infra's bid was for the light rail to go to the airport, but didn't give away hints over whether it was as ambitious/costly as documents leaked to the media have suggested. 

Twyford wouldn’t comment on the length of the proposed contract between NZ Infra and the Crown either, despite previously saying the proposal was for NZ Infra to operate the light rail under a public private partnership model for 50 years.

Question marks over whether political consensus will be reached

In terms of politics, NZ First isn’t a sure supporter of light rail.

NZ First MP and Infrastructure Minister, Shane Jones, specifically pointed out to those at an infrastructure conference last Friday that there was no concrete commitment to building Auckland light rail in NZ First's coalition agreement with Labour. 

He also said those in the party were "doubting Thomases" when it came to the "light rail kaupapa".

Jones has been copied in to a total of nine written briefings on light rail since October 2017. Twyford clarified this in Parliament, as he was being questioned by National’s transport spokesperson, Chris Bishop.

The Green Party is understood to be sceptical about the NZ Infra bid due to concern over this seeing government cede control and profits.

Meanwhile Labour is open-minded to the NZ Infra proposal, if not supportive. This is evident given Twyford directed the Ministry of Transport to lead the project, after deciding the former project lead, the NZTA, wasn’t giving proper consideration to NZ Infra’s unsolicited bid.

Clarifying National's position, Bishop said: "We are in favour of mass transit for Auckland, but on what we've heard so far, we are deeply sceptical about the NZ Infra proposal. We could cancel it if elected if no contract has been agreed." 

Asked whether National would push on with the NZTA proposal or run a new light rail procurment process, Bishop responded: "We will take a mulimodal package to the election to get Auckland moving."