The Capital Structure Review Committee is looking at a number of options for how to better utilise its limited resources and fund interdependent objectives, while retaining a control of Napier Port.
The Capital Structure Review Committee is looking at a number of options for how to better utilise its limited resources and fund interdependent objectives, while retaining a control of Napier Port. Please go here if you want information on 'Our Port - Have your Say'.
Hawke’s Bay Regional Council has three clear responsibilities: restoring and enhancing our environment, supporting Hawke’s Bay’s economy and building community resilience. Council needs to ‘raise the bar’ in all three of these interdependent areas but that will require significant investment.
Both the increasing financial demands on council and the risks of having ‘all its eggs in one basket’ have necessitated a re-think on how Council attracts external capital investment to fund its three responsibilities.
In the environmental area, Council faces increased public demand and legislative requirements for better protection of the region’s water - the aquifer, our rivers, lakes and coastal environment - and strengthening the region’s biodiversity. As well as increasing demands on ‘business-as-usual’ operations, Council, in partnership with Central Government, has committed to a series of inter-generational environment enhancements.
Preparing for and protecting our region from potentially damaging natural events, such as earthquakes, flooding and coastal erosion, is equally important.
Through Hawke’s Bay Regional Investment Company, HBRC owns Napier Port – the region’s largest economic enabler. It enables 51% of the region’s Gross Regional Product and is associated with 27,000 full and part-time jobs.
The Port is facing significant growth in cargo volumes and needs to develop its facilities to handle that growth on behalf of the region. Those developments, including a new container wharf and the replacement of the existing container wharf and supporting infrastructure, will likely cost around $275M over the next 10 years.
Currently, Council’s largest income generating asset is Napier Port. Napier Port provides Council an annual dividend ($10M planned for 2017/18), which significantly subsidises rates for the region.
Due to steady growth and the need for investment in recent years, Napier Port’s debt for the year ending FY2017 will be approximately $83M. Even with the forecasted growth, Napier Port cannot fund future development on its own without capital investment or dividend relief from Council.
In addition to this, the Kaikoura and Christchurch earthquakes have highlighted the risks for Council having all its capital investment in one physical asset, most notably a port.
Wednesday 29 March: Capital Structure Review Panel established
Hawke’s Bay Regional Council appointed the panel, which includes representatives from Council, Hawke’s Bay Regional Investment Company (HBRIC), Napier Port and independent advisors.
Members of the panel are:
Wednesday 13 December 2017: HBRC Council Meeting
The Capital Structure Review Panel presented a report to Council, outlining how to make Council’s commercial investments work harder and spread its investment risk. This includes nine options (see below) to support Napier Port’s growth. The report investigates a range of options but shows that some of the options to fund the port development would result in less than optimal outcomes.
The Council also resolved not to sell strategic assets to fund business as usual operating costs.
Council requested that the Capital Structure Review Panel undertake further work with Napier Port and HBRIC on:
Nine options have been identified by the Review Panel and explored in the Capital Structure Review report.
Yes. Ensuring the community is consulted on the future of Napier Port is a top priority for Hawke’s Bay Regional Council.
The options were consulted on during Hawke’s Bay Regional Council’s 2018-2028 Long Term Plan process in March – May 2018. The community were given information about the benefits and challenges of the options and get a chance to give their views on each.
Council has taken all that feedback on board, and decided on a preferred option. The community is now being consulted again, through a Special Consultative Process which closes Thursday 15 November, so that option can be refined further.
The Review Panel is speaking to Central Government ministers about the options, and any other opportunities to fund Council activities and the Port’s development.
However, even if Central Government was to invest, through the Regional Development Fund or another mechanism, that still doesn’t address the risks around Council having a single-asset portfolio, as outlined in the report.
No. All the options being considered further for Napier Port retain control and protections for the Hawke’s Bay community to varying degrees.
For example, if Council listed shares (Option 8) or sought investment for one or two external parties (Option 7), it would retain majority ownership.
Or, if the lease (Option 9) was chosen, the land the port sits on would be retained, while the operation of the port would be leased for a fixed period, with conditions, and then returned to Council to either retain or re-lease.
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