News Release

Tuesday 20 November 2012

Council seeking views on two proposals: joining Funding Agency and joint venture structure for TERAX

ROTORUA 20.11.12: Rotorua District Council has released two proposals to the public and is seeking feedback on both from residents, by 4 December.

The first proposal the council is currently considering is to become a shareholding local authority (SLA) in the recently formed Local Government Funding Agency (LGFA).

The funding agency was formed in 2011 by a group of 18 councils, along with the Crown which holds a 20% shareholding. LGFA’s primary purpose is to provide lending sources for councils at lower cost than other lending institutions in the marketplace.

The highest level of participation for councils in LGFA is as a shareholding local authority and requires councils to invest capital. Those participating councils would however expect to receive a return on their investment while also becoming a guarantor of the agency.

Corporate & Customer Services Committee chair Janet Wepa says membership would allow Rotorua District Council to borrow at lower interest rates than at present. She said the benefits would outweigh any potential costs or risks involved.

“Participation in the funding agency would also spread our debt maturity profile and strengthen our liquidity requirements by increasing the options for accessing secure long term funding.

“We could expect a net funding benefit of $30,000 per annum for every $10 million raised in loans,” said Mrs Wepa.

“However if 50% of our borrowing requirements, as signalled in the Long-term Plan, were sourced through LGFA we could expect to save an estimated $750,000 in interest payments over a five year period.”

LGFA has been awarded an AA+ credit rating from both Standard and Poor’s, and Flitch, a rating that is on par or stronger than banks operating in New Zealand.

The other proposal Rotorua District Council is currently consulting with the community on is a proposed Limited Partnership structure between the council and Scion.

This legal entity would provide for joint-venture management of the commercialisation of TERAX, the patented and trademarked technology developed by Scion for transforming waste biosolids from the city’s wastewater treatment plant into usable products.

Rotorua District Council Infrastructure Services Committee chair Glenys Searancke said the council preferred the Limited Partnership option for managing the commercial licensing of TERAX to third parties.

“This option offers the best structure, given our need to limit liability, provide flexibility and optimise tax efficiency, while protecting our 50 per cent ownership of the intellectual property.”

TERAX technology is an innovative world-first process for managing organic waste. It “cooks” biosolids and breaks the material down into useful industrial chemicals, energy or fertiliser products.

The council and Scion have built a large-scale pilot plant to trial the new technology and this is now operating successfully at the council’s wastewater treatment plant.

Copies of both the Local Government Funding Agency and TERAX proposals are available from the council’s customer centre or can be downloaded online from the council website www.rdc.govt.nz.

Submitters will be given the opportunity to speak to the mayor and councillors in support of their Local Government Funding Agency proposal submissions or TERAX proposal submissions at public hearings on 10 December.

Submissions close with the council on Tuesday 4 December.

[ENDS]

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