Ngāti Awa paid $9 million for White Island Tours, now it's worth 'close to zero'
Friday, 13 December 2019
Ngāti Awa paid $9 million to buy White Island Tours in 2017 in a bid to expand its asset base, and develop employment for Iwi members.
That investment now looks to be severely impaired as there is doubt tourist trips to Whakaari/White Island will ever happen again following an eruption on the volcano which is now confirmed to have killed 14 people.
Business valuations expert Bruce Sheppard estimates the value of the tour company's exclusive licence to land vessels on the island to be zero, and the tour company's total value to to be around the value of its assets.
White Island Tours had just turned profitable for the iwi with revenue having expanded from $500,000 to $4.5m, the latest Iwi Investment report showed, and optimism was high.
**READ MORE:
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* Whakaari: Bedlam at Whakatāne Hospital as worker describes eruption aftermath
* Multiple casualties, multiple victims: Man who flew last survivor off Whakaari/White Island speaks
* Whakaari/White Island: Helicopter pilot said 'conditions perfect', but tremors prompt warning
* Whakaari/White Island: The fight to keep people alive after eruption
* Whakaari/White Island: People 'were in real distress' says chopper pilot**
IWI BUILDING WEALTH
The first of a fleet of new boats to take tourists to the island, which was renamed White Island by Captain James Cook, entered service in April.
The Te Puia Whakaari was the model for the replacements that would be bought for White Island Tours' other boats, which were nearing the end of their working lives.
'In April we took delivery of our new vessel Te Puia Whakaari, and it is pleasing to be able to report that it has been performing up to expectations,' said White Island Tours chairman Paul Quinn in the iwi's last annual report.
'This includes the ability to sail more days a month because of its weather tolerance capability being greater than the existing fleeting.'
The purchase of White Island Tours was the latest in a series of ventures by the iwi in a bid to grow its asset base, the foundation of which was established when the iwi settled its Treaty of Waitangi claim with the Crown in 2005 for $42m in cash and Crown-owned land selected by Ngāti Awa, fisheries quota, forests and other assets, according to the latest Iwi Investment report.
Rises in land values, and increases in returns on other investments, had seen Ngāti Awa's assets grow to $151m in 2018, and its debts were low.
ORIGIN OF WHITE ISLAND TOURS
White Island Tours was the brainchild of Jenny and Peter Tait evolving in the 1990s from a diving and fishing charter service when it became clear there was more profit in volcano tourism.
It started when a client asked to be put ashore, the company said on its website, which now only shows an emergency contact page.
'Jenny obliged with the request by a client to be taken ashore the volcano. This visit sparked not only curiosity in Jenny about the island, but led to their operation expanding to include the option of a tour to the island,' it said.
It was a time of unrestricted access to the island. Anyone with a boat could land. Seeing the value in their asset, the owners of the island, the Buttle family who own the island through the Whakaari Trust, granted White Island Tours an exclusive licence to land passengers.
White Island Tours has an exclusive licence for the next 18 years to land passenger vessels at the island, which it valued at $1.99m at the end of June.
When the Taits sold to Ngāti Awa, they had owned the business for 27 years.
In 2016, after the Pee Jay 5 flagship vessel of the White Island Tours fleet burst into flames the company had around 50 employees, but the boat was uninsured.
Sheppard believes White Island Tours would not be able to insure some aspects of its business, such as loss of income due to volcanic activity, as it was exposed to extreme volcano risk.
Three of the 60 people on board – 53 passengers, including children, and seven crew – were treated in hospital.
The spectacular blaze was reported around the world.
WHITE ISLAND TOUR OPERATIONS
Around 10,000 tourists, mostly from overseas, visited the island every year, drawn by the allure of walking on a live volcano, something for which there were few opportunities anywhere in the world.
'Visitors are able to get up close to roaring steam vents, bubbling pits of mud, hot volcanic streams and the amazing lake of steaming acid,' the company's website said.
Questions are now being asked about how it was that tourists were allowed on the island, and so close to the lake in the centre of the crater when activity on the volcano was at a heightened level.
Weather could interrupt visits, White Island Tours' website said, but the tours operated throughout different levels of 'Alert' issued by vulcanologists at the government's geo-science agency GNS.
'White Island Tours operates through the varying alert levels but passengers should be aware that there is always the risk of eruptive activity regardless of the alert level,' the website said.
In 1914, 10 sulphur miners were killed on the island. The remains of the mine-workings feature in the White Island Tours itinerary, leaving visitors in no doubt about the risks of lengthy stays on the island.
THE 2013 YOUTUBE VIDEO
In January and February 2013 volcanic activity led GNS to ban its scientists from visiting the island as the risk was too high.
A video posted on YouTube at the time by Auckland 'film maker, explorer, idiot' Geoff Mackley showed vulcanologist Dr Clive Oppenheimer saying: 'We still don't know a lot about how volcanoes work, and why they erupt at a particular time so that uncertainty has to be build into any risk management.'
White Island Tours, which was still years from being owned by Ngāti Awa, continued to take tourists to the island during this time, the film showed.
A man dressed in White Island Tours blue and white striped T-shirt, identified as general manager Patrick O'Sullivan says in the video: 'We know there's an elevated risk at the moment. We listen to what the scientists are saying. We understand they work for a government body and that there are requirements that prevent them from coming.
'We make all of our tourists aware that what they are coming to is high risk at the moment. There's always a risk of an eruption on a live volcano.
'We are quite comfortable. We have been doing this for 22 years through times of high activity and low activity.'
This week Quinn, who would not comment for this article, told media White Island Tours had previously taken visitors to Whakaari/White Island when the volcano had been at a level 2, as it was immediately before the latest fatal eruption.
'Level 3 and above we liaise more directly with GNS but that level 2 is still within our operational guidelines,' he said.
MONEY AND SAFETY
Tourists are not required to cover their skin when visiting the island, and were taken by tour guides very close to the lake at the heart of the crater.
The adult price of the 'Walking on a Live Volcano' tour was $229, with children aged 15 and under charged $130.
The tour company discouraged, but did not forbid, children aged 8 or under, and recommended pregnant women seek medical advice before taking the trip.
There was no maximum age limit.
White Island Tours' website assured visitors the company had a 'comprehensive safety plan', but had them sign waivers absolving the company of all liability for their safety.
Companies cannot contract out of the Health and Safety at Work Act, which covered adventure tourism operations, and required companies, and the individuals that worked for them, to take all practicable steps to keep people on their work sites- in this case a live volcano- safe.
Worksafe is now investigating whether White Island Tours, and the owners of the island, met their safety obligations.
As an adventure tourism business, White Island Tours had to be registered with Worksafe, and had to have a current safety audit.
It was both, having passed its safety audit by AdventureMark, whose founder and lead auditor Hemi Morete called White Island Tours 'very professional'.
CHILDREN ON THE ISLAND
There were, however, indications that safety equipment was not suitable for all visitors.
'The safety gear we provide (hard hat and gas mask) is of adult sizing and therefore doesn't always fit to a child's head,' the company's website said.
Children did go to the island with schools getting special low-season rates to visit the island, the website said.
During July school holidays children went free with a paying parent.
There was a long-standing tradition of education trips to the island by children.
The company's blog, which ran since the early 2000s reported many visits by school children, including a group of Pukekohe High School students on June 2007, who recorded PH values and temperatures of steam water and sulphur fumeroles on the island while wearing T-shirts with 'Hot and Steamy' logos.
UNPREDICTABLE TERRAIN, CONSTANT CHANGES
Tours guides were never sure what they would find when they arrived at the island. The unstable volcanic landscape was always changing.
In the month after the Pukekohe students visited, the company's blog said: 'While viewing the crater last week we heard a loud boom and a rumbling noise which seemed to come from the far side of the main crater, followed by a big puff of steam. The scientists at GNS have put it down to a small steam explosion in the crater-lake.'
In July 2005 it said: 'Last week one of our tour guides Isaac Tait witnessed an incredible sight in the main crater lake from our Donald Duck viewing point. Before his eyes the lake rose approximately 1.5 metres!! Just as quickly it then dropped back down causing waves on the surface of the lake. The movement of the waves caused ash and rock to erode away from the surrounding walls of the crater!! Scientists from IGNS have advised that there was no seismic activity during that day. It has been concluded that the surge occurred from hydrothermal activity from one of the vents on the lake floor.'
In June 2009, the blog noted: 'Dragons Foot continues to be a force to be reckoned with! During this month the vent overflowed with water right onto the path we walk on, this means our track has completely changed to avoid the Dragons Foot area. The new track still gives fantastic viewing of the ever changing vent but at a safe viewing point! The new track also gets you up close and personal with fascinating sulphur chimneys, steaming vents and plenty of mud pots!'
A blog post from May 2009 said: 'Dragons Foot has undergone radical changes this month! First of all a landslide came down and covered the steaming vent this resulted in the steam finding a new path to come the surface and has changed the area significantly. Isaac also has reported an amazing sight – a geyser of water getting blown out of this area.'
OTHER STRINGS TO THE BOW
White Island Tours does more than just take tourists to the volcano.
It owns a cafe at its check-in area for its tours, and it owns the 4.5 star White Island Rendezvous motel, though both are dependent on tourists preparing to go to the volcano.
But it also runs boat tours to the Moutohorā/Whale Island wildlife sanctuary, just off the Bay of Plenty coastal town of Whakatane, in which White Island Tours is based.
A 73-year-old tourist on a White Island Tours tour to the island in April was killed after falling off a cliff.
Ngāti Awa will have to revalue White Island Tours for its next annual report for the year to June 30, 2020.
Sheppard says a current valuation was possible, but it would have to factor in the uncertainty of the Worksafe inquiry, and whether tourists would ever be allowed back to the island.
'You could, but it would be close to zero,' he says, or at least close to the value of its physical assets.
And the uncertainty is significant.
'No matter what the inquiry finds, punters will say, 'Do we trust them as an operator to take me to the island?'' Sheppard says.
And while global volcano tourists, who have options in Indonesia and Iceland, may be in two minds about choosing White Island after the deaths there, some classes of visitor, including the school groups, would never resume.
'No-one is going to put their kids in jeopardy,' Sheppard says.