Bay of Plenty Regional Council (Council) has begun the process to consider a staged sell down of its current 54.14 percent shareholding ($2.045 billion as at close of trading, Friday 8 December) in Port of Tauranga Limited (POTL).
Council’s shareholding is managed through Quayside Holdings Limited (Quayside), a Council Controlled Trading Organisation.
Regional Council Chair, Doug Leeder says the consideration is part of a regular and ongoing review by Quayside and Council of Quayside’s portfolio and capital structures and Council’s financial strategy.
“It’s important to note the Council intends to remain a significant and strategic stakeholder in the Port of Tauranga through retaining a minimum floor shareholding of 28 percent. The Port is a key regional asset and has delivered good returns to the Council over many years.”
Mr Leeder says the consideration is part of Council’s ongoing approach to prudent stewardship of its investment in the Port and how Quayside’s portfolio can be optimised to benefit the whole region.
“Quayside has been successfully delivering returns to reduce general rates since 2012 following its formation in 1991. However, advice from independent financial experts has identified Quayside’s dividend to Council is limited by not being able to realise capital gains on the Port shareholding because of legislative constraints around strategic assets.
“Additionally, diversification of investments is a key tool to reduce the riskiness of returns and is regarded as best practice for good financial portfolio management.
“The current large concentration of investment in the Port shareholding presents risks which could be reduced through having a more diversified portfolio,” he says.
At present, a regional endowment fund is being established by Quayside for the benefit of current and future ratepayers. The high concentration of POTL shares is limiting capacity to fund a higher dividend over time.
“Ultimately, the careful and sensible financial management of Council has a flow on effect to every household and resident in our region. It’s critical we continue to deliver our important work and keep rates affordable,” Mr Leeder says.
“We’re at the very beginning of a process and no decision has been made by Council or QHL in relation to staged sell downs and any decision to divest will be part of Council’s Draft Long Term Plan that will go through a rigorous community consultation process in early 2024.
“The immediate next step is for Council to make a formal decision at its meeting on Thursday, 14 December on a draft consultation document that will be the basis for community consultation next year.”
The timeline for selling down shares and the number of shares sold will be dependent on further analysis, market fluctuations and changing economic conditions to ensure the best possible results.
It is expected the proceeds from any staged sell down will be re-invested by Quayside to ensure the future prosperity of the whole region. This includes ongoing subsidisation of general rates for all ratepayers and investment in projects that support the environmental future of the Bay of Plenty.
Quayside has made an announcement to the New Zealand Stock Exchange in relation to the staged sell down.
The full agenda report can be viewed at www.boprc.govt.nz/agenda