Westland Milk loan heightens slush fund suspicions

WELLINGTON: Regional economic development minister Shane Jones’s $3 billion Provincial Growth Fund has the laudable aim of enhancing development opportunities in the regions.

But National’s Paul Goldsmith’s dogged unanswered questioning inevitably raises the spectre that the fund may be little more than Jones’s slush fund.

A loan for a new dairy plant in Hokitika, granted $9.9 million to Westland Milk to help fund a new $22 million factory to produce higher margin dairy products.

Mr Goldsmith has been banging on about the need to know the terms of the loan.

Quite reasonably, he argues that the effectiveness of the fund’s investment cannot be assessed without knowing such details — details still unknown, despite MBIE officials’ many assurances about striving for greater trans parency.

However, even a cursory glance at Westland’s latest accounts shows it was already highly indebted.

Its longterm loans and borrowings at July 31 stood at $232.8 million, unchanged from a year earlier, and it had an additional $21 million of seasonal funding, up from nil a year earlier.

The interest rates it paid in the year ended July ranged from 2.57% to 3.49%.

But Westland’s equity is only 21% of total assets. Even for a homeowner seeking a mortgage, that is on the slim side.

MBIE did tell the select committee that it is working with, rather than in competition with, the banks and that the banks are not abandoning regions such as the West Coast.

Adding to the mystery, Westland has made no secret that it thinks it needs access to more capital to allow it to take advantages of opportunities it sees, such as producing higher margin products which the government’s loan is meant to help..

Westland’s former chief financial officer, Dorian Devers, is likely thanking his lucky stars that he has left that company — he joined Contact Energy as its new CFO earlier this month. — BusinessDesk