ES to divest South Port shares
Environment Southland is proposing to sell some of its shares in South Port, saying it wants to reduce its risk exposure.
The council says there is a risk that there is a change in operating circumstances and South Port cannot maintain its forecast dividend, reducing the offset against the general rate which would result in higher rates or more debt.
The regional council’s Financial Strategy Te Rautaki Pūtea, which is a supporting document of the Long-term Plan 2024-34 Consultation Document, which will both be tabled at an extraordinary council meeting on Wednesday.
It says the regional council is the majority shareholder in the publicly listed company, with a 66.48% share.
The port is a strategic asset and the council’s principal reasons for owning these shares are the economic wellbeing of the region and to provide a financial benefit by using the dividends to reduce the general rate, the report says.
A key objective for council is to ensure that it continues to hold a controlling stake in South Port NZ Ltd and that controlling stake remains above 50%.
Maintaining the current level at 66.48% does concentrate councils’ investment portfolio heavily into one industry, so consequently council proposes to look to divest some of this shareholding and reposition this equity into similar if not higher performing investments, reducing investment risk and maintaining or enhancing returns, the report says.
Forecast dividends over the 10-year period of the Long Term Plan are based on receiving 27 cents per share.
The council has not forecast any growth in this return given the uncertainty in what lies ahead.
The South Port dividend is Environment Southland’s single-biggest source of investment income.
The regional council says the closure of Tiwai is still undecided and the new opportunities that lie ahead create uncertainty. If dividends received are less than budgeted, this will create a deficit, increase debt and reduce our resilience, the report says.
Subject to adoption by council, the consultation document Investing in Southland Whakangao ki Murihiku, will be released for public consultation on March 28, with submissions closing on May 6.
The hearing of submissions, and deliberations, will occur in May.