S&P leaves DCC credit rating unchanged

At a media briefing last week  on the Auditor-general's critical report on Delta Utility land...
At a media briefing last week on the Auditor-general's critical report on Delta Utility land purchases, and subsequent losses in Central Otago are (from left) Dunedin Mayor Dave Cull, DCC chief executive Dr Sue Bidrose and DCHL chairman Graham Crombie...

International rating agency Standard and Poor's (S&P) has left the Dunedin City Council's credit rating unchanged in the wake of a critical report on council-controlled Delta Utility's unsuccessful foray into Central Otago property deals.

S&P said in a statement yesterday its rating on the DCC, of AA/Stable/A-1+, was unaffected following the Auditor-general's release of an inquiry into property investments by Delta Utility, at Luggate and Jacks Point, the latter near Queenstown.

An S&P downgrade rating means an organisation's risk profile increases and borrowing money becomes more expensive.

Delta spent $14.17 million on the properties in 2008-09, but now expected to book a loss of in a range of $6.4 million-$8.7 million; to be confirmed by the end of the year, Auditor-general Lyn Provost said in her report, which has taken a year to complete.

S&P said yesterday its unchanged DCC ratings reflected its view that there was a ''low likelihood'' that the Auditor-general's inquiry would report significant adverse findings on the council's current management structure.

In 2012, the DCC reviewed the governance arrangements of its council-controlled trading organisations and took steps to strengthen their management and oversight, S&P said.

Also, in 2013 the DCC appointed a group chief financial officer with an expanded role, including the provision of financial advice and support to the board of Dunedin City Holdings Ltd (DCHL).

''This new role should, in our view, help strengthen the organisation and improve the co-ordination of financial management between the council and DCHL,'' S&P said.

While the Auditor-general credited Delta for considering the investments cautiously and carefully, and avoiding conflicts of interest, it listed failings which contributed to the losses.

Delta had failed to adequately assess the investment risks, take appropriate advice, and there were breaches of the Local Government Act and the Companies Act.

Delta's directors were cleared of any conflict of interest or impropriety.

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