D.—sa

9

doubtful, the following figures exhibit approximately the loss the company would sustain by agreeing to the terms now proposed by the Government : — Amount of purchase-money ... ... ... 106,000 Less debentures ... ... ... ... 75,000 31,000 Moiety of three years'rates, say ... ... ... ... 7,000 Government quota of guaranteed interest for current year, say ... 2,000 40,000 Due to sundry creditors, say ... ... ... ... 15,000 Amount payable to shareholders ... ... ... ... £25,000 The paid-up capital being £35,610, the shareholders would lose £10,610, or equal to about 28 per cent, of their capital. Considering the company's improved position and prospects, my directors would not be justified in recommending the shareholders to part with what is now undoubtedly a good property on anything like the terms proposed by you. At the same time they would be prepared to agree to any arrangement that would have the effect of lessening the guarantors' contribution without diminishing the amount of guaranteed interest secured to the company by law. It is estimated that a saving in the working expenses of at least £2,000 per annum can be effected, and the income increased, by the line being worked as part of the Government system; so that it will be seen that, were Government to lease the line at a rental equivalent to the guaranteed interest, the guarantors would be considerably relieved. At the same time the directors recognize the fact that the guarantors would be relieved to a much greater extent by the Government purchasing the railway. Without committing the company to the price assumed, the following will serve to illustrate my meaning : — Assuming the Government purchased the line at, say, £125,000 in 4-per-cent. debentures, the annual charge would be £5,000. The profits under the existing system of working may be set down at £1,000, which, added to the estimated saving of £2,000 in working expenses, and allowing nothing for increased traffic which would undoubtedly result from the line being worked as part of the Government system, would leave £2,000 to be contributed by the guarantors instead of about £6,600 as at present : thus— £ s. d. 7 per cent, on £108,713 (certified cost) ... ... ... 7,609 18 2 Deduct profit, say ... ... ... ... ... 1,000 0 0 6,609 18 2 It will be seen that the difference between the interest on £125,000 at 4 per cent, and the profits would about equal the Government quota of guaranteed interest; so that by purchasing the line at the price assumed the ratepayers would be entirely relieved without increasing the present annual charge upon the Consolidated Fund. I have, Ac, R. H. Leaey, The Hon. the Minister for Public Works, Wellington. Secretary.

'12.—The Secretary, Waimea Plains Railway Company, to the Hon. the Minister for Public Works. Re Proposed Purchase of the Waimea Plains Hallway by Government. The Waimea Plains Railway Company (Limited), Sib,— Dunedin, 20th February, 1885. I am instructed by my directors to inquire whether there is any prospect of the Government entering into an agreement with the company for leasing or purchasing the railway. Prom the correspondence that has passed between yourself and the company, my directors understand that relief of the ratepayers is one of the objects of the Government in seeking to acquire the company's line, and they have therefore deferred taking further action towards recovery of the two years' rates in arrear in the expectation of a provisional arrangement being made between the Government and the company, one of the conditions of which would probably affect the question of collecting the rates. As already pointed out in the correspondence, the company has to depend mainly upon the rates for funds to meet interest on loans and current liabilities. The early collection of the rates is a matter of pressing necessity, and cannot be delayed much longer. My directors would therefore be obliged if the Government would intimate whether they desire to continue negotiations for the purchase of the line. The directors regret that the offers that have been made by the Government have been so far below what will return to shareholders the capital invested as to preclude their being entertained, and direct me to repeat that they are willing to dispose of the line on fair terms, and such as will undoubtedly be considered reasonable by the Legislature. Having previously shown that the guaranteed interest will admit of the payment of a dividend of 8-J per cent, on the paid-up capital of the company, it cannot be expected that the shareholders will consent to part with their property at a price that will yield less than the paid-up capital. With a view to bringing the negotiations to an issue, my directors have resolved to make the following offer to the Government, subject to confirmation by the shareholders, namely :— The company will sell the railway and its equipment (including two locomotives) to the Government for the sum of £108,713, that being the cost of the railway as certified to by the Hon. the Minister for Public Works; the Government to take over the debenture loan (£75,000), and pay the company the balance—say £33,713 —in 4-per-eent. debentures having a currency of twenty years, interest and principal being made payable in London.

2—D. sa.