Four op­tions to fund port growth

Napier Courier - - NEWS -

Hawke’s Bay Re­gional Coun­cil (HBRC) has pro­posed four po­ten­tial op­tions to fund Napier Port’s growth re­quire­ments, re­tain ma­jor­ity own­er­ship and bal­ance coun­cil’s in­vest­ments.

Napier Port is owned by the HBRC on be­half of ratepay­ers. It needs $320 to $350 mil­lion over 10 years for it to sup­port the grow­ing Hawke’s Bay econ­omy.

A con­sul­ta­tion doc­u­ment was up­loaded on the re­gional coun­cil’s web­site last week and con­sul­ta­tion starts on Oc­to­ber 15 and runs for a month. The doc­u­ment, which will be de­liv­ered to ev­ery let­ter­box in Hawke’s Bay in the mid­dle of Oc­to­ber, sets out four op­tions and states a pref­er­ence for a share­mar­ket list­ing of up to 49 per cent of the port.

HBRC chair Rex Gra­ham says the coun­cil has been con­sid­er­ing port fund­ing op­tions for two years and was open-minded on the po­ten­tial op­tions. He says do­ing noth­ing would neg­a­tively af­fect the Hawke’s Bay econ­omy and cost jobs. At the other end of the spec­trum, fund­ing the port’s growth via rates would mean av­er­age rates rise by 53 per cent over the next year.

“Napier Port is at a tip­ping point. It is con­strained and turn­ing away larger ship vis­its ev­ery year. Next year the port ex­pects to turn away seven cruise ship vis­its due to a lack of space and at a cost to the lo­cal econ­omy of $3.5 mil­lion.

“The port un­der­pins Hawke’s Bay’s econ­omy, associated with half of the re­gion’s eco­nomic pro­duc­tion and 27,000 lo­cal jobs. We must al­low it to in­vest and to grow,” Rex says.

“The port ex­pe­ri­enced a 25 per cent in­crease in cargo vol­umes over the last two years, bring­ing for­ward its in­vest­ment re­quire­ments. A new wharf cost­ing $142 mil­lion needs to be built by the end of 2022 with con­struc­tion start­ing next year.

“The port can’t bor­row more with­out tak­ing debt to im­pru­dent lev­els. Coun­cil bor­row­ing to fund the port would see sig­nif­i­cant rates rises across Hawke’s Bay, take debt to high lev­els and re­duce coun­cil’s fi­nan­cial flex­i­bil­ity to do its job.”

Rex Gra­ham says he be­lieves float­ing a 45 per cent stake of the port on the New Zealand Stock Ex­change was the best op­tion for the peo­ple and econ­omy of Hawke’s Bay, though coun­cil had a very open mind to other op­tions.

“This op­tion would clear the port’s $86 mil­lion of debt, from which point it will be able to self­fund its growth. This op­tion funds the port’s growth, al­lows lo­cals to main­tain own­er­ship and con­trol, pro­vides an op­por­tu­nity to in­vest di­rectly in our port and does not re­quire more money from ratepay­ers.

“Ad­di­tion­ally, the port cur­rently makes up three quar­ters of the re­gional coun­cil’s rev­enue-gen­er­at­ing as­sets. This is poor risk man­age­ment. A mi­nor­ity share float al­lows coun­cil to di­ver­sify in­vest­ments while ben­e­fit­ing from con­tin­u­ing to own a strong com­mer­cial as­set.”

Rex Gra­ham says the pro­posal was main­stream. It was the same ap­proach as that used at the Port of Tau­ranga, un­der which the port and its share­hold­ers have thrived.

“There’s a lot to con­sider. We’re con­sult­ing the com­mu­nity for a full month on these four op­tions and we urge peo­ple to have a say.

“We will con­sult thor­oughly — ev­ery house­hold will re­ceive a pro­posal doc­u­ment in the post from the mid­dle of Oc­to­ber, in­clud­ing de­tail on how to par­tic­i­pate in the con­ver­sa­tion. There will be a great deal of back­ground in­for­ma­tion on­line, we will hold pub­lic in­for­ma­tion ses­sions and ev­ery lo­cal will have an op­por­tu­nity to be heard on this de­ci­sion.”

Rex Gra­ham says he ex­pects a call from some quar­ters for a ref­er­en­dum but says this kind of con­sul­ta­tion is the right way for de­ci­sions of this sig­nif­i­cance and com­plex­ity.

“We’re deal­ing with a chal­lenge that lo­cal author­i­ties around the world are now deal­ing with — how to fund ma­jor in­vest­ment in strate­gic as­sets while re­tain­ing own­er­ship. We don’t have time to wait, as the port needs to get on with in­vest­ing in our re­gion’s fu­ture.

“A 45 per cent mar­ket list­ing will serve our re­gion and our port well, but we’re open to other ways. Now it’s time for Hawke’s Bay lo­cals to en­gage in this con­ver­sa­tion and have their say.”

Napier Port Chair Alas­dair MacLeod says the board sup­ports the re­gional coun­cil’s de­ci­sion to con­sult on the own­er­ship struc­ture.

“Coun­cil’s pre­ferred op­tion of mak­ing an ini­tial pub­lic of­fer­ing of a mi­nor­ity stake in the port has our full sup­port. En­sur­ing Napier port’s con­tin­ued de­vel­op­ment is cru­cial to un­lock­ing the re­gion’s eco­nomic po­ten­tial and Napier Port will sup­port coun­cil’s ul­ti­mate de­ci­sion on how that can be funded.

“We’d like to com­mend coun­cil’s com­mit­ment to mak­ing this im­por­tant de­ci­sion for the re­gion of Hawke’s Bay.”

Napier Port

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