Port of Tauranga’s major shareholder, the Bay of Plenty Regional Council, has started a process to consider a staged sell-down of its 54 per cent stake in the country’s biggest port.
The shareholding was valued at $2.045 billion at the close of trading on Friday. The port, New Zealand’s main export gateway, is listed on the NZX.
Council chairman Doug Leeder said the process is part of a regular ongoing review by the shareholding’s management entity Quayside Holdings (QHL) and the council of the Quayside portfolio, capital structures and the 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 per cent. The port is a key regional asset and has delivered good returns to the council over many years.
“We’re at the very beginning of a process and no decision has been made by the council or QHL in relation to staged sell-downs, and any decision to divest will be part of [the] council’s draft Long Term Plan, [which] will go through a rigorous community consultation process in early 2024.
The next step was for the council to make a formal decision at its meeting on Thursday regarding a draft consultation document which is to be the basis for community consultation next year.
Leeder said the timeline for selling down shares and the number of shares sold would depend on further analysis, market fluctuations and changing economic conditions to ensure the best possible results.
It was expected the proceeds from any staged sell-down would be reinvested by Quayside to ensure the future prosperity of the whole region. That included ongoing subsidisation of general rates for all ratepayers and investment in projects that support the environmental future of the Bay of Plenty.
Leeder said the consideration was part of the 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 the 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 said.
At present, Quayside was establishing a regional endowment fund 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 the 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,” Leeder said.
Port of Tauranga chief executive Leonard Sampson said Quayside had been a stable, supportive majority shareholder over the past 30 years of growth at the port.
“We’re pleased they intend to retain a significant cornerstone shareholding as the port enters the next phase of growth, which will include a new container berth and the introduction of automation,” he said.
“We’re very proud of the strong returns we have delivered to regional ratepayers and all our shareholders, over the past 30 years, on top of the employment and business opportunities we have facilitated for the region.”
Over the past decade, Port of Tauranga had returned dividends of more than $720 million to Quayside, which has in turn passed dividends on to the council, Sampson said.
The council has used the dividends to subsidise rates bills, at a current rate of around $350 per household per year.
Sampson said as a publicly listed entity, the company always acted in the best interests of all shareholders, so the proposed Quayside divestment would have no immediate impact.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.