Port Otago may be privatised

The 100% ORC-owned company is one of five fully council-owned ports in the country. Photo: ODT...
The 100% ORC-owned company is one of five fully council-owned ports in the country. Photo: ODT files
The potential privatisation of port operations of the $534 million Port Otago will be up for discussion in Dunedin today.

The 100% Otago Regional Council-owned company is one of five fully council-owned ports in New Zealand.

Marian Hobbs
Marian Hobbs
But, as the council looks to get more back from its biggest asset, it could soon consider a free float of up to 49% of its shares on the stock exchange; a private sale of the same; or a long-term operating lease following a PricewaterhouseCoopers’ strategic asset review of Port Otago.

The independent review of ownership options and Port Otago’s returns to the council said Port Otago had delivered more than $173 million in dividends to the council since 1990 - but called increases in the dividends paid over the last decade ‘‘modest’’.

‘‘Mixed ownership allows the release of capital through an upfront share sale and can drive improved returns due to market expectations of dividends,’’ the report said.

Council Corporate Services General Manager Nick Donnelly said the decision to get an independent review was made ‘‘a couple of years ago’’ when the council’s last long-term plan was put in place.

The timing of any possible changes to the status quo would be up to councillors.

Mr Donnelly did not offer his view of the options before the council yesterday.

‘‘The recommendation is that we [council staff] will go away after tomorrow’s meeting and we’ll have a look and then going forward we’ll report back to council,’’ he said.

‘‘It was council that had specifically asked for that report. So, the report has been put to them rather than put to staff for staff to report to them on it.’’

His report notes ‘‘any proposed change’’ to the council’s shareholding would require consultation with the community.

He advised councillors discussions were under way with the board of Port Otago about increasing the level of dividends the council received.

Of the four ownership models proposed in the review, only keeping the status quo would likely result in Port Otago’s property arm being kept under the same umbrella company.

Chalmers Properties Ltd now makes up more than half of the company’s earnings, and all ‘‘change’’ options included in the review considered separating the property business and the port business.

While the review notes the possibility of a full sale of council shares, it does not offer any detail on that option.

Rather, only the long-term operating lease model considered would result in the council’s loss in operating control of the port, it said.

With the long-term lease option, the council would lose the benefit of ongoing dividends, but that option would be ‘‘likely to release the most capital’’ to the council.

An initial public offering of shares would allow the council to retain control of Port Otago and ‘‘a priority pool could be established for local residents’’, but the timing of the listing would be ‘‘crucial’’ for the council to get a top dollar return.

Under a private sale, overseas investors would be the most likely interested in a stake in the company.

Port Otago chief executive Kevin Winders said, when contacted yesterday, ‘‘it’s not my report’’ and referred questions to Mr Donnelly.

Council chairwoman Marian Hobbs said the decision to get an independent review was before her time on the council and declined to comment before today’s meeting.

Port Otago represents more than 75% of the council’s total assets of $694 million.

hamish.maclean@odt.co.nz

Comments

Discuss yes but wait a couple of years before taking action, this isn't a good time to be making any decision on disposal of large assets.

No!. One does not sell a strategic asset nor a performing asset to support an enterprise which is neither of these.

Sounds to me like the ORC are under some financial strain of their own doing. Is it any wonder when they are expanding staffing levels to such high numbers and the CEO is on a massive salary.
Quote- "Port Otago had delivered more than $173 million in dividends to the council since 1990 - but called increases in the dividends paid over the last decade ‘‘modest’’.
It's just never enough is it Sue? .....and it never will be.

"Sue"?
I think you have your councils mixed up.
Port Otago is owned by ORC, not DCC.
The CEO of ORC is Sarah Gardner, not Sue Bidrose.

Yes, sorry, you are quite correct Dunners, however, I would have to say it applies to both the ORC and DCC, "it's never enough". Neither are their salaries.....

 

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