Dividends off menu for years

Keith Cooper. Photo: ODT files

A dividend from the Dunedin City Council’s group of companies is unlikely for the next three financial years.

However, net profit after tax and cash flow are projected to improve in that time.

Dunedin City Holdings Ltd (DCHL) directors anticipate no dividends before 2024-25.

Chairman Keith Cooper said one of the companies in the group, Aurora Energy, was in a reinvestment phase and Covid-19 had made business conditions difficult for others.

The group’s focus remained on delivering a return to the council as soon as possible, Mr Cooper said.

He left open the possibility a dividend might be paid if the group of companies performed above expectations.

Mr Cooper said Delta Utility Services delivered a steady income and City Forests had a great year, but the forestry company’s prospects largely relied on commodity prices.

Aurora historically under-invested in its network and it was in catch-up mode to make its network safer and more reliable.

The lines company plans to invest more than $790 million in its Dunedin and Central Otago networks in the next decade.

This would be funded by increased revenue, increasing borrowing and reduced dividends.

The Dunedin City Council approved statements of intent this week for the group of companies.

Mr Cooper said the lack of forecast dividends reflected company budgets.

The Dunedin City Council has also effectively forced Dunedin Railways to run at a loss in 2021-22.

The council required DCHL to fund the running of Dunedin Railways up to $2.1 million without compensation.

That affected DCHL’s ability to deliver dividends, but Dunedin Railways was a small piece of the overall picture, Mr Cooper said.

Dunedin Railways is forecast to make a net loss after tax of almost $1.9 million in 2021-22.

Cr Lee Vandervis, who noted DCHL had not provided a dividend for four years, said the council had decided to keep rail running and then load the costs on to its companies.

It had done something similar when it produced arrangements that provided finance for building Forsyth Barr Stadium and ‘‘make our debt graph look less like the Himalayas’’.

‘‘For us to use our council companies essentially as a dumping ground for unprofitable, costly excursions or explorations into rail, stadiums or anything else and then expect the council companies to deal with the unspecified losses, I don’t think is fair on DCHL and certainly doesn’t help DCHL... do what they were set up to do ... and that is finally pay us a dividend again.’’

The council is the only shareholder of DCHL, which owns Aurora Energy, City Forests, Delta Utility Services, Dunedin City Treasury, Dunedin Railways, Dunedin Venues Management and Dunedin Stadium Property.

DCHL owns half of Dunedin International Airport.

Amid fallout from Covid-19, the directors of the airport decided not to forecast paying dividends to the group in 2020-21 and 2021-22, but expected to resume paying in 2022-23.

The fortunes of Dunedin Venues Management will be affected by whether New Zealand is able to remain at Alert Level 1 for Covid-19 and potential easing of border restrictions.

A rugby test against South Africa, women’s cricket World Cup matches and international concert acts are scheduled for 2021-22.

Forsyth Barr Stadium owner Dunedin Stadium Property is expected to make a net loss after tax of more than $5 million in each of the next three years.

Aurora Energy’s net profit after tax is expected to improve from $1.2 million in 2021-22 to about $8.4 million the next year and then $15.7 million.

The companies are expected to establish emissions reduction strategies for the 2022-23 year, as well as waste reduction or diversion strategies.