"In a year in which we, and the country, have had to meet momentous challenges, we have delivered an operating surplus increase of almost 29%, and an increase in operating revenue to $667 million. While this result was below our target, in the context of these challenges it was a positive result and an improvement on the previous year," Mr Spencer said.

This was also the first year KiwiRail has not required an operating grant from Government, which in the previous year had been $90 million.

"The performance of the freight business during this time was particularly encouraging with an increase in revenue of 8% to almost $400 million, which is approximately 60% of the company's overall revenue,"

During the 2010/2011 financial year KiwiRail and the NZ Government mad capital investment of nearly $1.25 billion on major infrastructure improvement projects, of which over $1 billion was spent and sourced in New Zealand.

"This year new rolling stock arrived, we completed some major network improvements and extended the Aratere, to increase freight and passenger capacity. The arrival of 20 new locomotives, 535 wagons and increasing the capacity and reliability of the network ensures that our business can continue to grow and improve for our customers."

"We have had to make tough purchasing decisions, but we have a finite amount to spend in many areas to get this business functioning efficiently and safely. We will continue making these hard calls to ensure our assets provide value for money and we deliver the sustainable railway that our customers need."

During this year KiwiRail has also been conducting a review of the company's asset valuation system and structure.

"While this process is still a proposal while we work through the technical details it is clear that the current valuation of $13 billion for our assets based on a replacement cost is not an appropriate valuation for the business," said Mr Spencer.

"We have recommended to our shareholder that we change the company entity structure and value our assets according to their productive earning value. This will mean an asset value write-down of approximately six billion dollars and will create a balance sheet more appropriate for our business as we continue to deliver on our plan."

According to Chief Executive, Jim Quinn, it is really in the last year there has been real and tangible progress and the business is starting to see the benefits.

"We are getting more customers, we are increasing the amount of freight moved, we are improving our on time performance and reliability, and we are getting better equipment," he said.