Site manager Kevin Kearney said the company's 190 staff began work this week on "remanufacturing" 30 SA railcars and six SD railcars imported from British Rail, which were bound for the Auckland rail network.
The first railcars would roll off the production line in June next year and all 36 would be completed by December 2010.
Mr Kearney said the new contract provided the company's "biggest forward visibility" for 30 years and more than half a dozen extra staff would be needed to keep up with the workload.
"It's fantastic - tremendous.
''This is testament to the huge skill and pride of the workforce here.
''What they produce is significant in terms of quality."
In light of the redundancy announcements by PPCS Burnside, Tamahine and Fisher and Paykel, Mr Kearney said he felt fortunate.
"There are very few engineering companies in New Zealand at the moment that have contracts lasting over the next two years.
"This contract is also really good for Dunedin because we contract out a lot of work to other Dunedin engineering companies."
Since 2004, the company had won $150 million worth of contracts and Mr Kearney believed the new Government ownership of the rail network could create business opportunities.
Auckland Regional Transport Authority (ARTA) customer services general manager Mark Lambert said patronage on Auckland's rail network continued to show strong growth.
In the past year, more than 6 million passengers were carried on the network - double the number of people three years ago.
"As we increase services on the network even further, we can only see this trend continuing, hence the current requirement for more trains."
Toll Rail Auckland Metro Services manager Paul Ashton said once the present contract was complete, Hillside Engineering would have delivered 104 SA-SD railcars for ARTA.
"This is certainly good news for Dunedin as the majority of production is local.
''Since Toll took over Hillside Engineering, staff numbers have doubled and it certainly bodes well for the future."
