Dunedin city councillors have again been reassured the days
of Dunedin City Holdings Ltd companies borrowing to help fund
dividend payments to the council are over.
Questions about future borrowing were raised when councillors
considered updated statements of intent for DCHL and its
subsidiaries at this week's full council meeting.
Councillor Richard Thomson queried DCHL's statement, which
forecast an annual dividend from it to the council of $4.29
million for the next three years. That was part of overall
cash payments totalling $15.7 million each year, including
interest and subvention payments, from DCHL and its
subsidiaries to the council in the years to 2015-16.
However, Cr Thomson wondered how DCHL could meet its dividend
payments without borrowing, when its overall operating
surplus for each of the next three years was below the
expected dividend payments for the same period.
Projected surpluses were all below the $4.29 million dividend
projected, at $4.188 million in 2013-14, $1.578 million in
2014-15 and $2.310 million in 2015-16.
At the same time, it appeared the holding company's
shareholders funds were expected to decrease by a
''suspiciously'' similar amount to the gap between the two
other figures, Cr Thomson observed.
Those funds were forecast to drop from $13.140 million in
2013-14 to $8.518 million in 2015-16.
Cr Thomson said councillors were assured by DCHL it would no
longer borrow to help fund dividends to the council.
The figures prompted him to question whether DCHL's
subsidiaries could borrow internally to enable them to boost
dividends to the required level.
DCHL director Graham Crombie said that would be an
''interesting'' strategy, but not one the companies were
pursuing, while DCHL chief executive Bevan Dodds went
Mr Dodds said the ''year to concentrate on'' was 2013-14,
where the difference between projected surpluses ($4.188
million) and dividend payments ($4.29 million) was ''very
He was confident that small gap could be bridged by the end
of the financial year on June 30, although it would still be
Projections for later years still contained ''a lack of
clarity'' and needed more work, and were ''reasonably
conservative'' at this stage, he said.
He expected dividends from ''at least two'' of the holding
company's subsidiaries would increase in the meantime, and
the projected numbers for later years would change ''quite
significantly'' when more detailed budgets were completed.
Cr Lee Vandervis welcomed the fresh assurance but wondered if
that left the door open to asset sales, including the sale of
some of the subsidiary companies, to bridge the projected
''Is this an alternative for meeting a dividend not out of
profit . . . and not out of borrowing?
Mr Crombie said the answer was no, as ''that's not what flows
through these numbers''.
Any decision to sell assets would be a ''totally different
piece of policy'', he said.
The review of DCHL by Warren Larsen, completed in 2011
following a shortfall in DCHL dividend payments to the
council, had suggested asset sales might be needed to address
rising council debt levels.
DCHL had also launched a review of its company assets last
year, results of which were yet to be made public.