Hawke’s Bay Regional Council is looking at options for how to make its commercial investments work harder, in preparation for its Long Term Plan (LTP) public consultation starting in March next year.
Council’s three priorities are enhancing our environment, building community resilience, and supporting Hawke’s Bay’s economy. Council wants to ‘raise the bar’ in all three of these interdependent areas but that will take significant investment.
To the support LTP consultation, Council has been looking into:
At Napier Port’s AGM on Monday, the company announced it had lodged a resource consent application that, if approved, would allow it to build an additional wharf when it’s needed. The $125M wharf is just part of the $275M the Port requires over the next 10 years to underpin Hawke’s Bay’s economy.
Due to Hawke’s Bay’s steady economic growth and the subsequent need for development at the port to cater for that growth, Napier Port’s debt is about $83M. Even with the forecasted growth, Napier Port has signalled it cannot prudently fund major infrastructure development on its own without dividend relief from Council or some form of capital investment.
HBRC Chair, Rex Graham, says the Council has some big funding challenges ahead if it wants to address pressing regional environmental needs and a growing export economy.
“To achieve both, we need to think differently about how we make our investments work for our community,” says Mr Graham.
To support this, Council appointed a Capital Structure Review Panel, which includes representatives from Council, Hawke’s Bay Regional Investment Company (HBRIC), Napier Port and independent advisors. This week they presented a report that outlines options for making Council’s commercial investments work harder and spreading its investment risk. This includes nine options to support Napier Port’s growth.
“The report lays out quite clearly some of our challenges and options. We are releasing the report to the public well in advance of the Long Term Plan consultation so people can thoroughly consider the options. It is important we have an informed and public discussion,” says Mr Graham.
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. Council has resolved a preference:
The Council also resolved not to sell strategic assets to fund business as usual operating costs.
Council has requested that the Capital Structure Review Panel undertake further work with Napier Port and HBRIC on:
HBRIC chair, Chris Tremain, says, even without funding pressures between the Port and Council the Capital Structure Review has highlighted that there are risks and lost income opportunities around Council having all its eggs in one basket with Napier Port.
“Like all businesses, the Port faces a number of commercial risks and, as the Canterbury and Kaikoura earthquakes have demonstrated, there are natural disaster risks too. Diversifying our investment portfolio to reduce risk and try to make more money for the community makes sense.”
Mr Graham says Council has a series of significant decisions to make as part of the Long Term Plan and hearing the views of the community on the options is a top priority.
“We know there will be a lot of public interest. The community should be confident that we will be talking to them more and we will be listening to what they tell us. This is just the start of an important conversation about the future of our great region, says Mr Graham.
For more information, visit the Capital Structure Review webpage.
13 December 2017
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