Government ignored advice on $9.9m Westland loan
The Treasury argued against the Government giving Westland Milk Products a $9.9 million loan but its advice was ignored.
One of the department’s reasons for advising against the loan was that Westland was having problems obtaining a loan from its bank on acceptable terms, and the Government would then be acting as a lender of last resort.
The Government announced the loan in November, but a spokesman for Regional Economic Development Minister Shane Jones said on Thursday that the money had not yet been handed over as contract negotiations were still continuing.
Following an official information request, the Treasury has released papers relating to the Provincial Growth Fund (PGF) including advice it gave on Westland Milk.
‘‘We understand the reason Westland is seeking a loan from the PGF is they cannot get a loan from its bank on acceptable terms. In this case, the Crown would be acting as a lender of last resort,’’ the advice from Treasury policy analyst Erwin Ricketts and policy manager Natalie Labuschagne said.
‘‘Given that Westland Milk is a private company which will substantially internalise the benefits
... there needs to be a clear articulation of why Westland is deserving of PGF investment, over and above other competing firms.’’
The pair were uncomfortable about the appropriateness of loans to private companies.
‘‘The justification for the proposed loan is that value-add dairy is one of the few industries on the West Coast with growth potential. This criterion of ‘growth potential’ alone would not exclude similar loan requests from other companies seeking to establish themselves on the West Coast,’’ they said.
Prime Minister Jacinda Ardern and Jones visited Hokitika in November to announce the loan, to help build a plant to separately process multiple types of special quality milks into high-value products.
The terms of the interest-bearing loan were confidential, Jones said at the time.
‘‘With suppliers from Karamea to the glaciers and 430 employees in Hokitika, an investment in New Zealand-owned Westland Milk Products is an investment in the economy of the whole West Coast,’’ Jones said.
Since then it has been revealed Westland, which needs capital to improve its profitability and payout, could be totally or partially sold to Canadian company Saputo.
However, a condition of the loan was that it would have to be immediately repaid if there was a change of ownership structure.
Jones’ spokesman said no PGF projects could be approved by Jones alone, and the Westland Milk loan was approved by the four regional development ministers (Phil Twyford, Jones, Grant Robertson and David Parker).
‘‘The PGF, when granting a loan, is able to consider wider benefits than a commercial bank would, such as wider regional development and employment outcomes,’’ Jones’ spokesman said.
The National Party’s provincial development spokesman, Paul Goldsmith, said the warning showed the Treasury was doing its job.
‘‘It’s just a pity that it isn’t being listened to by Shane Jones and the other ministers,’’ he said.
‘‘There’s half a million other companies in New Zealand that would quite like to have the same arrangement.’’
Westland Milk chief executive Toni Brendish said the company had studied the PGF eligibility criteria carefully and saw an opportunity that would support the employment, productivity and greater economic sustainability of the West Coast.
‘‘We were delighted that our application was successful and are now working on implementing the $9.9m loan towards the segregation facility,’’ Brendish said.
‘‘Given that Westland Milk is a private company . . . there needs to be a clear articulation of why Westland is deserving of PGF investment, over and above other competing firms.’’ Advice from the Treasury