Cut in Alpine dividend a worry

A Timaru District councillor has accused lines company Alpine Energy of steering the council’s holdings company towards a ‘‘financial tornado’’.

Cr Stu Piddington’s remarks came after a presentation from the council’s chief financial officer David Codyre about Timaru District Holdings Ltd’s (TDHL) latest quarterly report that said its annual dividend to council was predicted to drop from $2.75 million for the 2019-20 financial year to $2m in 2020-21, and to $1m in 2021-22 and 2022-23.

The drop was largely down to the fact that Alpine Energy – 47.5 per cent-owned by the Timaru District Council – was not expected to pay a full dividend to TDHL and then onto council in 2021-22 and 2022-23, Codyre said.

In the past five years, Alpine Energy has paid out around $21m in dividends to the TDHL.

As Codyre confirmed the drop in dividend to the council could amount to about a 1.5 per cent increase in rates, Piddington said there needed to be some accountability.

‘‘Alpine Energy have talked about ‘financial headwinds’, I reckon it’s more of a financial tornado,’’ Piddington said.

Codyre explained that Alpine Energy’s projected drop in dividend was largely down to a Commerce Commission ruling in late 2019 which ordered the lines company to reduce is revenue by 19 per cent.

Piddington said traditionally the dividend had been used to ‘‘smooth out’’ any sharp increases in the rates rise, with Codyre adding TDHL has a policy of retaining $3m in cash reserves which could be used in just that very situation.

TDHL paid dividends to council of about $2.65m in 2017-18 and about 2.75m in 2018-19.

Cr Steve Wills asked whether Alpine Energy was facing a mounting bill for infrastructure upgrades.

‘‘Alpine Energy have talked about ‘financial headwinds’, I reckon it’s more of a financial tornado.’’ Cr Stu Piddington

Mayor Nigel Bowen said if there had been any concern about Alpine’s infrastructure it would have been informed about it.

However, Bowen also wondered whether Alpine Energy, which puts hundreds of thousands of dollars into community projects every year, would continue its philanthropy.

TDHL chairman Ian Fitzgerald said yesterday the drop in projected dividends that would be paid to council was a ‘‘best guess estimate’’ based on expected income from Alpine and other assets.

‘‘We live in uncertain times, economically speaking, but we are in a good position to weather the financial storms due to our diversified streams,’’ Fitzgerald said.

‘‘It’s not just our port and Alpine Energy income, it’s also our strong property portfolio.’’

Ftizgerald said Alpine Energy had signalled the drop in dividend, and TDHL was working on that basis.

He said the TDHL board had been informed well in advance about the likelihood of the Commerce Commission ruling affecting Alpine Energy, but like the Alpine directors had been surprised by the magnitude of the reduction.

TDHL was also committed to continuing to pay down debt, which would also keep it in a good financial position, he said.

Alpine chief executive Andrew Tombs said it remains a profitable business.

‘‘The board are yet to finalise dividend payments for periods beyond April 2020. However, it is reasonable to assume there will be a continuation of dividend albeit at reduced levels.

‘‘We have signalled to shareholders that a reduction in dividend is a realistic outcome.’’