Holdco can handle forests sale from here

Directorships of Invercargill City Councilowned companies are not what they were. It’s a good thing. For ages it had been mandatory for some of the directors of the council’s holding company, Holdco, to be drawn from the ranks of councillors – and far from uncommon for them also to be directors of Holdco’s subsidiary companies in the electricity retailing, forestry, and airport businesses.

This changed a year ago after councillor Ian Pottinger successfully tabled a motion that the council should not appoint directors from the ranks of its own elected members.

This harmonised with the view of the auditorgeneral that it wasn’t a good model, and that councils could still maintain appropriate control through the appointment of suitably skilled independent directors, acting under the guidance of a wellformed statement of intent.

So exit councillor-directors, replaced by others appointed, presumably, for their professionalism alone. It would be drawing too long a bow to imply that all major decisions since then have reflected this change, but the fact remains that since this, and the arrivals and departures of some council officers, it hasn’t exactly been business as usual.

Not the least of the changes has been Holdco’s decision to sell one of its subsidiaries, Invercargill City Forests Ltd, deeming it not a good investment fit. Meaning? The company’s debt position, forecast reduction in harvesting revenue and risks associated with owning forestry were the cited reasons.

Frankly, City Forests hadn’t been short of critics in terms of annual returns either. Nor for the oversight of the unhappier dealings of its own subsidiary, Forest Growth Holdings.

The sale of its 14 forests has hardly been a headlong affair. Expressions of interest have been called for and the next stage is to decide which parties to invite to make offers.

But in these Covid-19 times, Holdco, seeking here-and-now savings, has effectively forced City Forest’s three directors to resign in advance of the sale decision and company liquidation.

At least two of the displaced City Forests directors are left lamenting the institutional knowledge and background work they will not now be able to carry into a ‘‘sensitive stage’’ of the sales process.

And this for a saving of maybe two or three months worth of directors’ fees and costs, a total running at $10,000 a month.

But no, Holdco’s made a reasonable call here. Chairman Brian Wood sees the saving as legitimate and timely and he’s scarcely tippy-toeing around the sensitivities of those involved departing with a sense of unfinished business.

This is a council business he flatly labels an under-performing investment that owes Holdco $24 million, thank you very much.

With, he says, 90 per cent of the task complete, Holdco’s directors are, in the circumstances, entitled to take the view they have, which is that they’ll handle things from here.

After all, it wasn’t as if their job was otherwise to be mere passive observers of the process.

The forest company directors’ decisions would have had to go to Holdco for ratification anyway.

Steely oversight hasn’t always been a strength of the city council’s companies by any means.

These may be ungentle times around some of the board tables but that, in itself, isn’t necessarily going to spook onlooking ratepayers.

After all, it wasn’t as if their job was otherwise to be mere passive observers of the process. The forest company directors’ decisions would have had to go to Holdco for ratification anyway.