KiwiRail has made a huge write down in its asset value and will separate its rail and ferry operations from its land holdings.
It's dropping the value of its operations from $7.8 billion to between $1.1 and $1.3 billion.
Chairman John Spencer says this is a much more realistic valuation of the company’s assets.
He says the Government is supporting this change and putting in place the needed technical and legal process for it to proceed.
To enable this change a new State Owned Enterprise will be created which will own and operate the rail and Interislander businesses under the existing KiwiRail brand.
Crown land held for rail purposes will be retained by New Zealand Railways Corporation and made available for use by KiwiRail.
The Government's restructure of KiwiRail will cost the taxpayer $4.5 billion over the next ten years.
It'll essentially mean the state-owned company won't have to return dividends to the Government.
More than $322 dollars worth of debt is also being written off.
The rail system was sold by the previous National Government but bought back by Labour.
John Key was asked whether this is a classic example of a state asset sale going wrong.
"We sold the cutting rights in New Zealand and got an enormous amount for that, sold KiwiRail and got a good return. It was the previous Labour government that decided to buy it back for a very big number."
Finance minister Bill English says it's all part of the clean up and turning it into a viable business.
"The Government has committed around $4.5 billion to the turnaround plan, we're in a think year three, there are signs of progress. But I think everybody agrees this company was not worth $13 million."
Photo: NZ Herald