Structure for Investment of Powerco Proceeds
14 December 2004
Structure Agreed for Investment of Powerco Proceeds
New Plymouth District Council will aim to maximise returns on the proceeds from its sale of Powerco shares, through the vast experience of Taranaki Investment Management Limited (TIML).
Under the guidance of chairman John Armstrong, TIML will work on the council’s behalf, developing a diversified portfolio with a sensible balance between risk and return.
Mayor Peter Tennent says: “We have agreed a structure that will aim to maximise returns on the $259 million the council received for its Powerco shares.
“The TIML chairman and directors have a wealth of financial experience and acumen and their appointment reflects this council’s approach to our investments - 100 per cent focussed on financial goals and devoid of politics and emotion.
“It’s this approach that will allow us to continue keeping rates among the lowest in the country, while enabling us to work with the community to ensure that the best place to live, work and visit in New Zealand continues to get even better!
“This is how we achieved our AAA credit rating from Standard & Poor’s and this is how we will continue going forward.
“If you want a successful investment strategy you go to the experts. TIML represent some of the best commercial decision-making brains in this country and we have every confidence they will put the Powerco proceeds to work in a considered and intelligent manner.”
Formerly known as New Plymouth Equity Advisors, TIML will manage the new Perpetual Investment Fund for the long term benefit of the New Plymouth District. Its four directors are authorised to make all investment decisions relating to the fund and will report to the council’s Investment Subcommittee on a regular basis, at least quarterly.
In the contract agreement, TIML is required to deliver income to the council of at least $19.3 million (equivalent to the last annual Powerco dividend) per year. Ownership of the fund will remain with the council and at least one council staff member will be appointed to work alongside TIML full-time.
TIML chairman John Armstrong says: “We will manage the Perpetual Investment Fund on a prudent, commercial, diversified and long-term basis.
“As the investment company, we are very much looking forward to working for a council such as New Plymouth, which stands apart from other local authorities in its pragmatic approach to investments.
“As the Mayor says, this council adopts a 100 per cent business approach to its investments, removing emotion and politics which have no role to play in the world of investment management.”
The council has agreed to management costs of 0.25 per cent of the total fund - a figure well below standard investment management costs of 1.25 per cent or more.
Included in this percentage is annual remuneration of $225,000 – an amount based on an independent recommendation by HR consultancy Sheffield – to be split among the directors of TIML.
New Plymouth District Council favours the approach of investing the Powerco sale proceeds over the option of repaying its debt, which currently stands at slightly more than $50 million.
Mayor Peter Tennent says: “The rates of interest available through an intelligent and diversified portfolio are greater than the interest payable on our debt. So it clearly makes financial sense to leave the debt as it is and attempt to maximise returns on our investments.”
Copies of the agreement between New Plymouth District Council and TIML, plus TIML’s statement of investment policies, standards and procedures will shortly be available in the key documents section of the council’s website at www.newplymouthnz.com.
Short biographies of the four TIML directors follow:
John Armstrong has extensive business interests in New Plymouth. He is currently a director of TSB Bank as well as the Links Development in Bell Block (a $30million housing development). John was a New Plymouth City councillor from 1977-89, chairing the council’s energy committee during most of that time. He was also a Member of Parliament from 1990-93, during which time he chaired the caucus energy committee. In addition, John is a former director of Transpower New Zealand Ltd, former vice president of New Zealand Gas Association, former member of TSB Community Trust, and pioneer of The RadioWorks which expanded into a network of about 47 radio stations around New Zealand. He was a board member of Pukeariki Holdings Ltd, the council’s former equity advisory committee, until he became chairman of NPEAL, now TIML, on its formation.
George Green held a variety of senior accounting and management positions in Feltex in Wellington and Auckland before being seconded to the Prime Minister’s Department in 1981. He later joined Price Waterhouse to establish a management consulting practice and was a partner in that firm, and PricewaterhouseCoopers, until
the end of 1999. George has been active in the Institute of Chartered Accountants, serving on several committees, and was chairman of the institute’s cost and management division. He is currently a member of the Appeals Tribunal (admissions) and holds a number of directorships including Sleepyhead Manufacturing Company (chairman), Rapaura Vintners Ltd (chairman), Metrowater, Auckland Regional Transport Network Ltd and Denarau Investments Ltd.
Maier holds a B.A. from Yale University, a J.D. (Doctor of
Jurisprudence) from Harvard Law School and is a member of
the Institute of Directors. He is a management consultant
and is the current chairman of the Caribbean Equity Fund
Investment Committee and the Auckland Regional Economic
Development Agency, as well as a director of Mighty River
Power Ltd, Vertex, and a number of other companies. Sandy’s
former roles include CEO of Citibank/Citicorp (New Zealand),
statutory manager of DFC New Zealand and board member of
Bank of New Zealand.
Keith Sutton is a Bachelor of Commerce and a member of the Institute of Directors in New Zealand and the Institute of Finance Professionals in New Zealand – with Certified Treasury Professional Status (CTP). He is also deputy chairman of the Animal Health Board Incorporated and a director of RECT Funds Management Limited – the Rotorua Energy Charitable Trust’s funds investment vehicle. Keith’s former roles include chairman of the New Zealand Futures Exchange Ltd; board member of DFC New Zealand Limited; board member of the National Provident Fund and chairman of the Business Conduct Committee of the NZ Futures & Options Exchange.