Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Chch mulls sale of strategic assets stake for rebuild

Christchurch considers selling strategic assets stake to fund rebuild

By Pattrick Smellie

Aug. 1 (BusinessDesk) - Christchurch City Council is contemplating the sale of a strategic stake in the holding company that controls the city's port, airport and electricity network to help close the growing gap between its available funding and the likely size of its share of earthquake rebuild costs.

A new report from investment bankers Cameron Partners, published this morning, has added as much as $400 million to the $440 million funding shortfall already identified in a report by accounting firm Korda Mentha on the same issues earlier this year, threatening the city's credit rating and legal obligations to control debt.

Rather than sell shares in each of its most important strategic assets, mayor Lianne Dalziel will argue the city would gain strategic advantage from bringing on new investors to the holding company that controls them, ensuring better support for the city's long-term strategic needs at the same time as addressing a funding shortfall which, on a worst case scenario, could top $800 million.

At that level, the city's A+ credit rating from Standard & Poor's would be threatened at the peak of the quake rebuild funding cycle, projected to hit in 2019, as well as risking a breach in its financial obligations under local government finance legislation.

Such a move would also shield Christchurch ratepayers from other alternatives for fund-raising, including "exponential rates increases."

"Releasing capital from our balance sheet alongside the other options, (including increased income, reduced operational expenditure and government assistance), is clearly one of the ways we can address the uncertainty around the city’s finances," said Dalziel.

"We would protect the city’s long-term interests by ring-fencing the quantum of any such proposal and ensuring that the shares return to the council through a right of first refusal so they are not available to the open market," said mayor Lianne Dalziel at a press conference in Christchurch.

It is understood the council would contemplate selling up to 25 percent of CCCHL, targeting "one or more" strategic, New Zealand-based investors such as the New Zealand Superannuation Fund, Accident Compensation Corp, NZX-listed infrastructure investor Infratil and the increasingly powerful commercial arm of local iwi Ngai Tahu.

CCCHL owns 89.3 percent of Orion, the city's electricity network, 75 percent of Christchurch International Airport, and 79.3 percent of NZX-listed Port of Lyttelton, as well as fully controlling the Red Bus company, City Care, Enable Services and Ecocentral.

"The purpose of releasing capital would be to generate funds to assist in solving the identified funding shortfall; provide the level of confidence and certainty required to develop a credible long term financial strategy and get on with the rebuild of our community facilities, infrastructure and housing; allow CCC to buffer Christchurch residents and businesses from the exponential rates increases; and allow CCC to align our vision and strategic objectives for the rebuild with our asset portfolio - that is, what we own and operate," said Dalziel.

The blueprint gained immediate endorsement from Christchurch Recovery Minister Gerry Brownlee, and may have assisted in securing renewed public commitment by the government to increased funding for the Canterbury rebuild.

"The Cameron Partners report makes it clear some major areas of financial uncertainty are causing headaches for Christchurch city, including the cost of repairing and replacing the city’s essential horizontal infrastructure," said Brownlee. That was why the June 2013 cost-sharing agreement between central and local government had included a cost review by Dec 1 this year.

"We are confident Christchurch city has the balance sheet capacity and political leadership to meet these challenges," said Brownlee of the one year-old council leadership, which largely replaced a council previously regarded as divided and dysfunctional even before the 2010 and 2011 quakes flattened much of the city.

Labour Party Canterbury recovery spokesperson Ruth Dyson said there "plenty of options" for funding the Christchurch rebuild, but asset sales would "leave the city worse off financial and strategically in the long term" and were not an option.

However, Dalziel, a former Labour Cabinet Minister, said the release of up to $400 million from the CCC balance sheet was a "prudent proposal" against total council assets of $8.3 billion, and that the council would retain a right of first refusal to repurchase shares sold to any strategic investor. There would be no shares offered to the public, unlike the government's recently completed partial privatisation programme.

"We will be making it clear that if a decision is made to release the capital, CCC proposes to maintain our key infrastructure assets, which are Christchurch International Airport, of which we own 75% with central government owning the balance over which the council has the right of first refusal, followed by Ngai Tahu, the Lyttelton Port Company, a publicly listed company in which we hold 79.6% of shares, and Orion, of which we own 89% alongside the Selwyn District Council."

Public consultations on the proposals will take place over two months, beginning Sept 4, the fourth anniversary of the first of the series of quakes that "changed our city forever."

"This will be a defining moment for our city, a turning point in our recovery," Dalziel said.

The Cameron Partners report portrays the choices about council-owned strategic assets as choices relating not only to funding the city's part of the rebuild, although it notes "there is considerable scope to impact CCC's funding position through partial sale, where CCC retains control, if it considers that its strategic objectives can be met through partnership or other arrangements."

However, it says the current ownership arrangements are "sub-optimal" for the rebuild and reflect CCC's pre-quake asset management approach, which was to maintain a "steady state" approach.

Instead, it proposes creating a new asset-holding entity which would undertake a "respecification and realignment of their (CCC commercial subsidiaries') existing mandates into one which is focused on CCC's challenges/objectives in relation to rebuilding a new city and managing the transition from Crown involvement to council control."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news