New Zealand buys back rail network from Toll

WELLINGTON, May 5 (Reuters) - The New Zealand government said on Monday it was buying back the rail network from Australia's Toll Holdings Ltd (TOL.AX).

It said it would pay NZ$665 million ($520 million) for the operation, including inter-island passenger and freight ferries, and take control on June 30.

Finance Minister Michael Cullen said the privatisation of the rail network in the early 1990s had been painful and seen the asset run down.

"During the negotiations with Toll it transpired that buying the rail operating business including the ferries was the best way to increase investment in the industry and enable it to be more responsive to the needs of New Zealand customers," Cullen said in a statement.

Toll, Australia's biggest transport group, acquired control of the rail operation after a protracted takeover bid for TranzRail Holdings Ltd in 2003.

At that stage the New Zealand government bought the rail track network for NZ$200 million and gave Toll exclusive use for an annual fee based on performance along with promises to invest in new rolling stock.

The railways were sold in 1993 to a consortium that included U.S. rail operator Wisconsin Central. ($1=NZ$1.28)