Mass resignation at Christchurch City Holdings Ltd

Wednesday, 15 May 2024

Abby Foote, the now-former chair of the CCHL board, says her resignation follows a breakdown in her relationship with the council. (File photo).

Four directors of the company which holds Christchurch City Council’s assets have resigned, effective immediately.

Christchurch City Holdings Ltd (CCHL) board chair Abby Foote, in a letter to Mayor Phil Mauger dated Wednesday, said the resignations were due to a relationship breakdown between the directors and council.

Their resignation comes a week after a handful of Christchurch city councillors called for CCHL's board to resign, saying they have no confidence in its ability to carry out the council's new investment direction.

The Press understands this matter was discussed during a public excluded session of the Wednesday council meeting, hours before the resignations were announced.

On behalf of fellow now-former directors Chris Day, Martin Goldfinch and David Hunt, Foote said they were resigning over the council’s recent decision to demand maximised short-term dividends of CCHL, at the expense of paying down debt of the companies within CCHL.

Foote told the council ahead of the April 17 decision that it put them in an “extraordinarily difficult position” because there was “no more money”.

Lyttelton Port is one of the city’s key assets, overseen by CCHL.

CCHL holds $5.8 billion worth of assets on behalf of the city council, including its 75% stake of Christchurch Airport, 89.3% of electricity distribution company Orion, and 100% of Lyttelton Port Company.

Six months ago, the council narrowly voted against CCHL’s request to take control of managing the city’s assets off of the city council, in a move that many believed would have paved the way for asset sales.

In a letter to the mayor, Foote said the decision was made “with sadness, disappointment and regret”.

She asked Mauger to read her letter alongside a detailed email “on a range of financial matters” from interim CCHL chief executive Paul Silk, dated May 13.

In her email she said the council’s actions were “inconsistent with its own investment objectives”. She said CCHL’s strategic review had highlighted “multiple competing objectives and challenges” including: significant capital constraints; $2.3 billion in debt that was not being paid down as agreed by previous councils; the council’s desire for higher dividends to offset rating pressure.

The email said if CCHL had been allowed to manage assets actively, it would have lifted dividends to the council by $450 million over the next 10 years, enabled debt to be paid down and for capital to be invested in the city’s assets. Eighty-five per cent of the portfolio would have remained invested in infrastructure assets.

Foote’s email criticised “politically convenient slogans around asset sales” as mischaracterising CCHL’s proposal and the organisation was “committed to growing the value of the city’s pool of assets”.

However, as the council’s draft LTP was being developed, it became clear the “enhanced status quo” option voted for by councillors “was not going to be sufficient” to meet the council’s desire for much higher dividends, the capital needs of the wider CCHL Group, and to pay off debts.

The council asked CCHL to deliver dividends of $55m next year, $65m in 2025/26, and $65m in 2026/27. Foote said these sums “far exceed” those projected under previous models and amounted to 'a brand-new request for materially higher dividends“.

She said the request to “prioritise and maximise dividends to council” over the capital needs of CCHL’s subsidiary companies represented “a risk appetite” the four independent directors did not share.

“This is where the relationship between council and these independent directors has broken down.”

Her email concluded by criticising the council for decisions which have “created an environment inconsistent with the principles of good governance and responsible infrastructure ownership”.

Foote was appointed chair of the CCHL board in February 2023. Her appointment followed the December 2022 decision of the council to ask CCHL to develop a detailed business case which explored how it managed the city’s assets.

Day, Goldfinch and Hunt were appointed to the CCHL board after Foote became chair.

In a statement issued on Thursday morning, remaning directors Bridget Geisen and Gill Cox confirmed they would remain on the board along with the two councillor appointed directors, Sara Templeton and Sam MacDonald.