UPDATE: MBIE officials grilled on terms of Westland Milk loan
(Updating with details of Westland's bank debt at end of story)
By Jenny Ruth
Dec. 13 (BusinessDesk) - Not knowing how much interest Westland Milk is paying on its $9.9 million loan from the government’s Provincial Development Fund leaves parliamentarians no means of assessing how much of a subsidy the dairy company is getting, said National MP Paul Goldsmith.
Goldsmith repeatedly grilled representatives from the Ministry of Business, Innovation and Employment, which administers the $3 billion fund, about details of the loan and the interest rate in particular.
“The interest rate hasn’t been released. Is that going to be made publicly available? If not, why not?” Goldsmith asked during a meeting of the Economic Development, Science and Innovation Select Committee.
MBIE chief executive Carolyn Tremaine says her ministry has been working during the past 12 months to put more information on its websites, including responses to Official Information Act inquiries and is “looking at how we can be more transparent.”
Nigel Bickle, who has headed the Provincial Development Unit since it was established in March this year, but who is about to leave to become the Hastings District Council’s chief executive, told the committee his unit is “working really hard to get to a level of transparency” and that a lot more information will be made available by the end of January.
His unit is working with the commercial banks, not competing with them, and is looking to de-risk or bring forward investment by firms such as Westland Milk “where there are clear demonstrable public benefits in doing so.”
But Goldsmith insisted that he needs to know the terms of Westland Milk’s loan in order to assess what benefit the public is getting.
“You can talk all you like about transparency” but the committee isn’t getting the information it needs, he said.
Another official explained that “we would prefer not to release those details because then it’s in the public domain” and the ministry doesn’t want to set a precedent.
Goldsmith insisted that there’s no way to assess the worth of the loan to the public without knowing how much of a subsidy the government is providing. “How can we make a judgment on the return on investment?”
An official said the fund wasn’t set up to crowd out the private sector but to distribute the money where there’s a public benefit beyond the worth of the loan to the individual company. He said MBIE tries to maximise the commercial return and that it also follows the advice of an advisory committee.
Goldsmith asked whether banks are abandoning the regions and was told that’s not the case. But banks are limited in how much they can lend to particular companies and sectors by their own internal rules.
“All the banks have been very supportive of what we do and they want to work with us.”
Tremaine said the government is keen to have a much more inclusive and sustainable development strategy with an emphasis on growth in the regions.
The framework for making decisions “is actually quite broad in terms of the factors or attributes that are to be considered.”
Bickle said the loan to Westland Milk met the broad objectives of the government, including enabling infrastructure and creating better-paid jobs.
Westland Milk plans to use the loan to fund a new $22 million manufacturing plant producing higher margin products.
Bickle said it’s the only dairy plant on the West Coast, the largest geographical region of the country but with a population of just 30,000, and is looking to “move from volume to value.”
Goldsmith said everybody has an interest in know what the amount of taxpayer support is being provided to an individual company and that MBIE’s failure to provide that information “to me, is the opposite of transparency.”
Bickle said that MBIE will be providing a cost-benefit analysis down the track but without releasing the details of specific deals.
“Nobody can make a judgment about the cost because you’re refusing to tell us. By not giving us that information, we can’t judge the effectiveness of the whole fund,” Goldsmith said. “I can’t understand why you think that’s acceptable."
Westland's accounts for the year ended July 31 show it paid interest rates of 2.57-3.49 percent of its $232.8 million of core debt. It also had seasonal finance of $21 million which it doesn't consider to be core debt.