New chair must make sure Christchurch City Holdings Ltd meets profit targets

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Christchurch Deputy Mayor Pauline Cotter says the new chair of the city council's investment company will have to get its underperforming companies back on track.

Pauline Cotter.
Pauline Cotter.
It comes after Christchurch City Holdings Ltd board chair Abby Foote sent her letter of resignation to Mayor Phil Mauger on Wednesday. She was joined by fellow directors Chris Day, Martin Goldfinch and David Hunt.

CCHL manages $5.8 billion in assets for the council, across eight subsidiary companies.

In 2022/23 CCHL made a net profit of $99 million.

However, three of the eight companies managed by CCHL failed to meet net profit targets - Orion, Lyttelton Port Company, and Christchurch Civic Building Ltd. Collectively the three companies were $4.1 million short of their targets.

Cotter said on Friday CCHL must ensure the companies meet their targets.

"(CCHL) need more oversight and more regular engagement (with its subsidiaries).

"So you've got a subsidiary that might say we want a really nice flash new building, we want to get all new vehicles for everybody, we want to do this and put more pipes in so our dividend will be less this year ...  and CCHL might say, hang on, maybe just do one of those things, retain your dividend and push out your timeline of capital investment. I don't think that's been happening, and I don't think there has been enough pressure put on the subsidiaries to deliver profits in the form of dividends for the council."

Cotter said Foote's resignation "fast-tracked" a process the council was already undertaking.

The report from the public-excluded portion of Wednesday's council meeting. Image: Supplied
The report from the public-excluded portion of Wednesday's council meeting. Image: Supplied
She said Foote was struggling to meet the council's expectations when it came to paying dividends.

Foote resigned after councillors spent over an hour discussing the governance of CCHL and its future in a public-excluded meeting.

The council released a redacted report this afternoon from the public-excluded portion of the meeting.

One recommendation blacked out in the report is understood to be councillors' request that Foote resign.

Other recommendations include appointing a committee made up of Cotter, Mayor Phil Mauger, and an external commercial advisor to recommend a new chair. It also recommended the new chair provide advice on where the CCHL board has "an appropriate balance of skills, knowledge and experience required to implement the “Enhanced Status Quo”."

Foote cited a breakdown of the relationship between the board and the council, including its current management, as her reason for resigning.

"We respect and support the right of council to make decisions around the city's asset," Foote said.

"This includes its decision not to accept the CCHL board's recommendation in December 2023 to move to an active portfolio management model in order to invest in our region's assets, pay down debt and grow dividends," her letter said.

"However, the decisions council has subsequently taken over 2024 to maximise short-term dividends at the expense of paying down group debts and investing in the future of its companies has caused us to lose confidence in council's ability to responsibly own core strategic infrastructure.

"We do not believe we can meet our duties as directors to CCHL or the subsidiary companies in our care with the current demands that council is making of CCHL. We also cannot support the processes that have characterised the way this council increasingly operates as a business owner."

Harewood Ward city councillor Aaron Keown said CCHL's problems began after the council decided to turn down its plan to produce a business case on the potential of selling assets in December.

"This is just fallout from December, and some councillors just didn't understand it was never about selling assets, it was about getting the most out of your assets.

"(CCHL) did all that work to basically be able to return us an extra $450 million over 10 years and the councillors turned it down."

Aaron Keown.
Aaron Keown.
Keown said regardless of what the business case would have shown, councillors would still have had the final say in any asset sales.

The council appointed Foote as chair in April last year and five other independent directors to sit alongside councillors Sara Templeton and Sam MacDonald on the board.

Templeton and MacDonald both declined to comment due to their role on the CCHL board.

Mauger did not address Foote's claims in a statement he released yesterday and declined to be interviewed.

"I would like to thank chair Abby Foote and the departing directors for their contribution to CCHL. I wish them all well in their future endeavours," Mauger said in the statement.

"CCHL deputy chair Gill Cox will be the acting chair while the council moves to appoint a new chair.

"We look forward to continuing to work with the remaining members of the board and the new chair, who will move us forward in the direction set by the council."

Business Canterbury chief executive Leeann Watson said it "has become clear to businesses" that the council has not been effective in its oversight of CCHL.

"All of the CCHL subsidiary companies, including the Port of Lyttelton, Christchurch International Airport, Enable, and Orion are world-class and critical in supporting the sustainable growth of Christchurch and the wider Canterbury region."

Business Canterbury supported the move by CCHL in December to move to an active management model, which may have involved partial or full sale of assets.

Said Watson: "It proposed a forward-thinking strategy allowing capital flows for growth and significant longer-term dividend returns, reducing future pressures on rates".

"The irony here is that the council rejected a CCHL proposal in December which would allow it to increase dividend returns and reduce rates pressure significantly, then just months later sent a letter of expectation to substantially increase short-term dividend returns without any additional capital and at the same time as presenting 14 plus per cent rates rises - in my view an impossible situation for CCHL and Christchurch ratepayers."