Hawke's Bay's most valuable asset may be for sale

Tuesday, 11 December 2018

Napier Port, Hawkes Bay region's most valuable asset, could be sold by the the council to pay for its redevelopment.

The port has been 100 per cent publicly owned through the Hawke's Bay regional investment company, a subsidiary of Hawke's Bay regional council, since 1989.

In October a public consultation document put forth options for financing the future development of the port, which due to a significant increase in both the number and size of cargo and cruise ships, can no longer keep up with demand. Forecasts indicate the cargo volume is likely to increase a further 26 per cent by 2028.

To finance a reduction in debt and make investments, the council seeks to raise $86.6 million through selling a minority stake of 49 per cent in an initial public offering on the share market (IPO).

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'This will enable continued community ownership and control, fund the port's growth, and give the people of Hawke's Bay, port staff and tāngata whenua the opportunity to invest directly in this core community asset. This will also allow the regional council to better manage investment risk – currently 76 per cent of the regional council's revenue-generating assets rest in the port,' the consultation document stated.

After a month-long consultation process, 57 per cent of respondents supported the regional council's preferred option of an IPO.

Councillors received 3500 submissions and 54 verbal submissions at a public hearing last week. Councillors are due to vote on a the final decision on December 19.

Not all stakeholders are happy with the way the consultation process was run, however.

Anna Lorck, a local business owner, rate payer, and founder of the 'Our Port Our Say' petition said: 'A public referendum on the final option is the only way to give everyone a fair and equal opportunity to have their say. Hawke's Bay had a people's vote to build the port, we should have a people's vote to decide if we sell it. Instead, nine councillors will decide alone.'

Anna Lorck, ratepayer and local business owner said the final option should be put to a people's vote.

In an about-face, the council has backed off from an earlier decision not to advise an IPO as the best route forward.

Rex Graham, chairman of Hawke's Bay Regional Council, said the council consulted widely on options for the port's funding.

In the consultation document sent to public in October, an IPO was the council's 'preferred option'. It differs from recommendations made in a March 2018 capital structure review, which recommended that a long-term lease to another party was the most beneficial option.

'This panel was made up of respected, experienced members - appointed by the council. Why is the council then ignoring its advice…What happened to make them change their minds? Who lobbied them? Who provided the alternative view point and was there an independent report that counteracted the review panel's recommendation? [Are] the rest of the review panel still against the IPO?…If it was too risky then, why is it not now?' said Lorck.

When asked about how the council had come to move away from the March recommendations for port funding options, Hawkes Bay Regional Council chairman Rex Graham said: 'From the point of view of the council, [the capital structure review] it was only one of the sources that the council went to….we also talked to cabinet ministers, people in the community, we talked to the chairman of the Bay of Plenty council. I personally spent a lot of time talking to financial advisors out of Auckland, and as a consequence the council changed its mind…the same people that criticise us for listening to people and changing out minds will criticise us for not listening to people.'

Economist Shamubeel Euqub of Sense Partners said there would be a lot of interest in the outcome outside of Napier. 'Lines companies will be interested, as a lot of them are still owned by communities,'

He said striking the right balance was tricky. 'What's right for the business and what's right for the owners? How much do you need to own to have [a positive] effect? The alternative question from an economist's perspective is by freeing up money, what would you do with it?…I look at Napier and it has some deep needs - infrastructure financing, housing supply.'