TDHL asked about ‘increased oversight’, in wake of Alpine Energy overcharge scandal

Thursday, 12 December 2024

Councillor Allan Booth sought an assurance there would be “no more surprises” from Alpine Energy following the historic overcharging issue announced in April. (File photo)

A Timaru councillor has sought an assurance from the council’s holdings company that it has “increased oversight” over the performance of community owned lines company, Alpine Energy, in the wake of a multi-million dollar overcharging scandal.

Timaru District Holdings Limited (TDHL) general manager Frazer Munro and chairperson Mark Rogers delivered the council controlled financial organisation’s audited annual report for 2023/24 at Tuesday’s council meeting.

Rogers spoke of challenging trading conditions, reduced returns and the lack of dividend from Alpine Energy but said the company’s underlying financial operations remained “strong”, with its property revenue increasing 12.6%.

Rogers said that, combined with “disciplined cost controls”, had supported a net cash surplus from its operations of $1.4 million. The surplus was down from $2.3m last year, he said.

Three new directors were appointed to the Alpine Energy board in November.

Councillor Allan Booth asked whether TDHL had increased its oversight of the performance of Alpine Energy in light of the historic overcharging saga.

In April, the lines company admitted it had been overcharging its customers to the tune of millions of dollars over more than nine years. Following that, it announced a decision to suspend dividends to shareholders, and in September confirmed it would stop its community sponsorship grants.

Rogers said he wouldn’t say they had increased oversight, but rather continued “proactive oversight” over the company.

He said they had also put “appropriate” structures in place, and there was a joint letter of expectation with the other shareholders, as well as a demand for ongoing engagement, increased officer-to-officer meetings, and quarterly updates from Alpine Energy.

“So, no more surprises then?” Booth asked.

“I can’t guarantee what Alpine will come out with councillor, but we don’t see any surprises,” Rogers said.

TDHL chairperson Mark Rogers spoke of a challenging conditions faced by PrimePort Timaru (pictured) and Alpine Energy.

He said TDHL’s total income for the year was $6.6m, down from $31.4m last year, and the company’s property portfolio had been revalued at $67.4m.

“The total assets have increased by $5.6m to $215.5m, while total liabilities have remained relatively stagnant at $30m.”

TDHL had prioritised its financial support to the council, paying a $1m dividend as well as $1.5m in interest payments, he said.

Rogers told councillors the importance of TDHL’s strategy of growing a diverse investment portfolio had “become increasingly apparent this year”.

TDHL owns a row of properties on Timaru’s Stafford St.

“The mid-year loss of the Alpine dividend, due to the price path correction, coupled with the ongoing challenging conditions faced by both PrimePort and Alpine [Energy], has resulted in a notable decline in dividends and incorporated equity returns from our associates, compared to previous years.”

However, Rogers said this had been mitigated by a “robust performance in the property portfolio”, which had allowed the holdings company to fulfil its commitment to its shareholder (Timaru District Council).

“The events this year have reinforced the need to reinvest in the portfolio, pursue diversification options and continue to invest in relationships with our shareholder, joint venture partner and associates.”

Rogers credited strong relationships, “built over the last three years”, with helping to ensure the holdings company was “better equipped to respond to current challenges”.

“A great example of this is the collaboration that is occurring with our fellow shareholders in Alpine [Energy], through the joint director appointment process which has, subsequently, led to the appointment of three new independent directors.”

Looking ahead, Rogers said they planned to continue to leverage that relationship, actively engage with the council to increase alignment to its 2024-34 Long Term Plan, and identify and pursue opportunities.

Councillor Stu Piddington asked for an update on the Commerce Commission investigation into the Alpine Energy overcharging issue. (File photo)

Booth also asked what the financial benefits might be once TDHL got sign off to use the Local Government Funding Agency (LGFA).

Rogers said they were still working through finalising the paperwork, but Munro said it would give them access to “materially lower interest rates and reduced interest costs”.

“That will just support the diversification drive.”

The LGFA provides financing to local authorities and council-controlled organisations.

Councillor Stu Piddington asked whether there was any update on the Commerce Commission’s investigation into the historic overcharging saga.

Munro said that was still being worked through with Alpine and they were “hoping to have something out in the next couple of months”.

A Commerce Commission spokesperson confirmed it was still working through the matter.

TDHL is the major shareholder in Alpine Energy (47.5%), followed by LineTrust South Canterbury (40%), Waimate District Council (7.54%) and the Mackenzie District Council (4.96%).