LPC NZX Release - Insurance Update 31 May 2013
31 May 2013
The Directors of Lyttelton Port Company Limited (LPC) wish to provide the following market update.
LPC’s material damage policy entitles LPC to receive indemnity progress payments on earthquake damaged and destroyed assets that are covered for reinstatement. An indemnity valuation report for six key harbour structures has been provided to insurers, which has been peer reviewed by their valuer.
Insurers have agreed to pay, as a non specific progress payment under the material damage section of LPC’s policy, a further amount of $17.4 million plus GST towards the physical loss and damage suffered as a result of the earthquakes. This will bring the total progress payments to date to approximately $53.0 million plus GST.
Reinstatement Plan Progress
LPC has received feedback from it’s insurers on the draft Reinstatement and Development Plan overview. Insurers have agreed that a number of key assets are destroyed for insurance purposes, which has enabled LPC to proceed with greater confidence in progressing design work on rebuilding those assets. Reinstatement designs are underway for the container terminal wharves, with construction planned to commence towards the end of 2013. The insurance policy requires LPC to reinstate it’s assets with reasonable despatch. LPC remains confident that it is taking all necessary steps to put the plan into action as fast as reasonably possible; this being in the interest of LPC, its stakeholders and also it’s insurers.
Insurers have confirmed that they are proceeding on the basis that LPC’s assets are covered for reinstatement. Insurers will be reimbursing LPC as it incurs reinstatement costs, under the “Pay As You Go” (PAYG) policy. As LPC reinstates it’s infrastructure, funds are expected to flow as the costs are incurred in line with the PAYG process.
LPC is developing cost estimates on that basis; however there is uncertainty over the extent to which this programme of works will be fully funded from insurance proceeds. Insurers have a view that there is a limit on their liability per asset, albeit in certain circumstances they reserve the right to contend that cover is on an indemnity basis; LPC does not accept either position. The full extent of this matter will not be known until the designs are fully developed and costed.
Throughout the course of the reinstatement of assets, it is anticipated that there will be many complex issues. However, LPC is committed to working constructively with it’s insurers to resolve matters expeditiously as they arise.
LPC will be reviewing the payment of dividends at the 2013 year end; it is anticipated that the payment of dividends will resume in the first half of 2014.
LPC will be making no further comment on this release.