Ski fields grapple mountain of debt
This season’s shortage of snow has compounded the challenges currently facing operations on Ruapehu
The future of the Whakapapa and Tū roa ski fields on Mt Ruapehu hangs in the balance as Ruapehu Alpine Lifts struggles with significant debts, some ski lifts that need major upgrades — and, this year, a lack of snow.
The not-for-profit company, with shareholders who don’t receive returns, is struggling under a mountain of debt ($32.8 million), two years of Covid-19 restrictions, and now, slopes that look decidedly rocky.
Environmentalists will point the finger at the melting snow and blame climate change. Others will shrug and say “It’s La Nina, it’s a one-off”.
Whatever the reason, the disastrous 2022 snow season has had a marked effect on RAL’s ability to claw its way out of of debt and find funds to replace ageing ski lifts, and improve facilities at Whakapapa and Tū roa.
Last year RAL’s accounts showed an overall loss of $5.87m, with an operating loss of $10.16m after stripping out income, including $2.2m in Covid wage subsidies.
Debts include $5.9m to the ANZ bank, a $10m loan from MBIE’s provincial growth fund plus another $5m in emergency funding, and a $500,000 loan from the
Ruapehu District Council. The council’s loan and MBIE’s $10m are to be repaid by 2028.
There’s little doubt that luck hasn’t been on RAL’s side. It runs a business reliant on good snow falls and enough money to keep multimillion-dollar ski lifts running.
They do it on a mountain which has been known to erupt, with a crater lake on its summit which is sometimes at volcanic alert level two, the same as White Island before it erupted. And then La Nina brings in warm, moist northeasterlies that melt snow as fast as the snow machines can make it.
Covid-19 hit Mt Ruapehu hard. Apart from the $2.2m in wage subsidies, RAL was granted $1m in relief from Department of Conservation licences, and a $5m emergency loan from MBIE to help address safety issues with Tū roa’s Movenpick and Parklane chairlifts, both installed in 1987.
RAL has high hopes for its $25m Sky Waka, opened in 2019, which takes passengers on a 1.8km journey up from Whakapapa’s existing ski base to the Knoll Ridge Chalet. It hoped the high-speed gondola, featuring 10-seater cabins with leather seats, would attract not only skiers but sightseers to the mountain. But again Covid restrictions and border closures meant the tourists didn’t come.
To help fund the Sky Waka, RAL raised a $13.5m loan through the sale of Tourism Infrastructure Bonds to local iwi, Taupō District Council, community trusts and private entities. But last year investors received just $429,000 in returns between them, $1.1m less than was forecast in a 2017 business case.
MBIE contributed a $10m loan and the Bay of Plenty’s Bay Trust tipped in $1.5m towards the gondola’s construction.
Last month the company was forced to make 135 people, about a third of their workforce, redundant. Although Whakapapa has remained open, Tū roa closed for nine days before the High Noon Express lift reopened this week. If enough snow builds up before the mountain’s closing date, October 24, other slopes may reopen, the company says.
Earlier this year RAL put multimillion-dollar plans for a Tū roa upgrade on hold, citing financial restraints.
The plans included a gondola to replace the ageing Movenpick and Parklane chairlifts, replacing the Jumbo T Bar and the Giant Express chairlift, upgraded beginner facilities at the Wintergarden, a new 400-seat cafe at Blyth Flat, extending the Alpine and Wintergarden cafes, expanding snowmaking, and modifying ski area terrain.
Some of Tū roa’s oldest lifts need either major upgrades or replacement due to “reliability and safety” issues. RAL has engaged ski-lift company Dopplemayr to report on the cost of ongoing maintenance versus replacement.
Two years ago RAL’s board raised the possibility of selling half of its shares to a long-term strategic partner to raise $30m, to repay debt and invest in infrastructure. But no-one took
the bait and many RAL shareholders weren’t keen on sharing the ski fields with a corporate.
The possibility of introducing a commercial partner was raised at the company’s AGM earlier this year, but again shareholders were wary. In addition, a commercial partner would require a change to the company’s tax-free status. As things stand, any profits are invested back into the mountain, which is part of the World Heritage-listed Tongariro National Park.
RAL chairman Geoff Taylor told the Herald he could not comment on various options on the table until after this week’s board meeting.
“This year is clearly a very poor year. We’ve got to review our position.”