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The debt of Dunedin City Council and its companies is expected to pass $1 billion in 2023 while Aurora Energy makes a major investment in its ageing network.
Dunedin City Holdings Ltd chairman Keith Cooper said the combined group debt was $793 million at the end of June this year and was forecast to hit $1.017 billion by June 2023.
"It is three years out, it is a forecast, and it is based on a lot of assumptions," Mr Cooper said as he presented councillors with statements of intent for the council-owned companies.
The increasing debt was principally driven by the council’s capital expenditure programme and the spending required by Aurora.
This comes after Aurora has said it would spend $383 million on its dilapidated assets over the next three years.
The modelling showed the group debt would likely remain over $1 billion for two to three years before easing off, Mr Cooper said.
Long-term forecasts from Aurora showed the company would continue to increase spending before it plateaued in 10 years.
However, the company’s long-term forecasts were based on expected growth which had not been retested since the disruption of Covid-19.
Aurora was "a capital hungry business" that needed to be funded and if growth happened in the region, that growth needed to be funded.
Under questioning, he said the council had been the "biggest other driver" of debt and further increases would also depend on the council’s spending.
Councillors unanimously agreed to receive the statements with no comment.
Cr Steve Walker queried a typo and a figure in Dunedin Airport’s statement Mr Cooper could not immediately explain. Cr Christine Garey asked about a Dunedin Venues opinion as to when international acts would return to Dunedin, to which Mr Cooper responded the company had formed its own view on that timeline.
Aside from Cr Lee Vandervis, who led the questioning, including seeking a confirmation the company was not borrowing to finance operations, no other councillors commented.
The company borrowed to cover costs associated with mothballing Dunedin Railways. The railway company wrote off "impaired assets" making the total hit about $4 million.
In a statement to the Otago Daily Times before the meeting, Mr Cooper said group debt comprised $243.5 million of council core debt and $549.5 million of company debt.
The group asset base at June 30, 2019 was valued at $4.3 billion, including $93 million in the Waipori Fund and $93 million of investment property.
The council group remained in a strong financial position including its ability to service debt costs.
This was confirmed by Standard & Poor’s credit ratings of AA and A-1plus ratings of Dunedin City Council and Dunedin City Treasury Ltd in its most recent review last December.
There had only been a 2.6% increase in the group debt from the companies’ draft statements of intent released for a March 9 meeting this year, when it was forecast to reach $991 million by June 2023.
The group sought a one-month extension on the statements to account for the impacts of Covid-19.