Commercial interests dominate
Is Rex being reckless?
The headlines said “Growers playing with fire”. Well they certainly will be if the council goes with a 55/45 split shareholding in the Hawke’s Bay Port.
Port users — farmers and growers — will have to stump up the same as if user- pays was applied. This because any private capital will demand a commercial rate of return and once they’ve squeezed all they can out of port workers, all they have left to squeeze are port users.
A 55 per cent majority shareholding is not control, and there will be little the councilappointed directors could do.
Under commercial law ports must act in what is deemed the best commercial interests of the business. Private investors can insist on that backed up by law.
The dividend return will come first.
It won’t matter if orchardists are having a hard time — hail one year, late frost the next — they will still be in the firing line if it’s in the commercial interest of the port to put up user charges.
Shane Jones didn’t understand this when he tackled Air NZ about no longer providing a service to some of our smaller regions. He thought a Government majority shareholding would win the day, but no.
He was told it wasn’t in Air NZ’s best commercial interests and to get lost which he had to do.
Rex Graham, in a conversation with Bruce Bissett and myself was clearly unaware of the implications of part privatisation and the negative impact that could befall his voting base, the Heretaunga growers.
Why hadn’t HBRC CEO James Palmer alerted him?
While we have 100 per cent ownership we have total control.
Current directors are under the same obligation to put the port’s commercial interests first but there is wriggle room.
This wriggle room is provided because HBRC can handpick who they choose to be a director.
As Rex confessed, a question was put to councillors a short while ago “do you know any of the port directors? “and the answer was “No” .
The board of directors should have a strong makeup of all port stakeholders.
This would cement the argument that the health of our exporters is important for port profits.
This can be achieved by picking the directors with care and by retaining ownership the HBRC can quite legally replace directors at will.[ Port Companies Act 1988]
With 100 per cent public ownership we can find a balance between the port users, ratepayers desire for a fair return on their asset and ensuring the port has enough retained capital to go about its business and not be pressured into mistreating the people who keep the whole thing working. So what to do?
If ratepayers were to help port users out, our costs could be more affordably spread over the life of the infrastructure. Not just 10 years.
We also need to know all the options the HBRC has not informed the public about.
One is the 2008 Seachange paper now being dusted off by our current government.
This document has a potential national strategy with coastal shipping taking some cargo to one or two hub ports, or central ports, as well as some direct shipping as we have now. This means we wouldn’t have to lay out the large amount of capital needed to build a deepwater port for mega ships as the council is advocating.
The mega ships want a quick turnaround to empty and fill up as soon as possible. Nationally, if we have too many deepwater ports, it won’t work for them as no single port would have enough cargo. Hence the need for bulk cargo concentrated in just a few hub ports.
If this doesn’t happen there is every chance the nearest hub port could be Melbourne or Sydney and our new expensive Port could be under used.
The mega ships could still come but they will dictate the terms and conditions.
When I quizzed the port CEO on his knowledge of this he sidestepped my enquiry and said something to the effect of “the Government said we’re an independent commercial entity and we can make our own choices here in HB”.
When the same question was put to Rex his answer was “we won’t be told by Government what to do”.
I think what CEO said is closer to the truth but we will certainly be told what to do if we have privatisation and/or overcapitalisation of an underused asset.
Under the Government scenario, there would be extra handling costs. However, in the 2008 paper there is a suggestion of some Government funding.
The cost of what the Government is suggesting needs to be stood up against what our council is presenting so we can all see what would be the best economic deal for all.
I support a referendum because we need more time to think this through. It’s too important to be rushed.
Arguments from both sides can go out with the referendum papers so there’s no reason to say people won’t know which box to tick.
Napier port — The dividend return will come first.