Napier Port shares up for sale?

LOOKING FORWARD: With cargo volumes expected to increase 50 per cent by 2028, funding Napier Port's development is crucial. PHOTO/Paul Taylor.

Selling part of Napier Port has been touted in a report released by the Hawke's Bay Regional Council, which outlines ways to protect investments, and get more bang for the Hawke's Bay ratepayer's buck.

This report was created by a council-led panel to explore options to best secure the regions "economic and environmental future". It follows the findings of the council's capital structure review, released in December.

No decisions have been made yet, however, the report recommends council further investigate options which include the funding the development of Napier Port and intergenerational environmental projects, while reducing investment risk to ratepayers.

Council chair Rex Graham said this report highlighted the opportunities and choices Hawke's Bay faced to ensure sustainable growth.

"How we enable our region's and Napier Port's growth while bringing diversity to Council's investments are critical decisions for our future," he said. "Council is united that doing nothing is not an option."

The report's main recommendations include that council investigate the possibility of selling a minority stake in the Port to a cornerstone partner, and the potential of a long-term operating lease arrangement.

The port is currently HBRC's largest income-generating asset, providing an annual dividend of about $10 million which subsidises rates for the region.

Selling a minority stake would see Council retain at least 51 per cent of the port shares, and the majority of directors. Under a long term lease, the operator would pay a fee to operate the port and undertake all required capital investment.

This upfront fee would enable rates to be maintained. The assets would return to council at the end of the lease period, which is typically about 50 years.

Mr Graham said he expected there would be some concern from residents, but assured "the Port is not for sale".

These options would diversify the council's investment portfolio - currently 74 per cent of council's investments are in the Port, and the recent Canterbury and Kaikoura earthquakes had highlighted the risk of "having all investment eggs in one basket".

"As it currently stands, a natural disaster impacting Napier Port would have a significant and immediate impact on rates and reduce our ability to do the important work of the Council in enhancing the Hawke's Bay environment," Mr Graham said.

It would also free up funding for the Port's growth, with $275million needed in the next decade - including an additional $125million wharf - with cargo volumes expected to increase by about 50 per cent in this time.

Napier Port's debt is about $83m, and even with the forecast growth the port had signalled it could not "prudently" fund major infrastructure development on its own without dividend relief from council or some form of capital investment.

Mr Graham said one of the reasons behind commissioning this report was to understand how the port could be enabled to grow without placing undue pressure on ratepayers and port users, or reducing council's ability to protect the environment.

It's other recommendations are that council use its balance sheet to fund intergenerational environmental initiatives through prudent borrowing, and that council use any funds released from any changes in the Port's capital structure to set up a future investment fund.

Returns from this fund would continue to offset rates, as Port dividends currently do, and potentially provide funding for more environmental initiatives.

This is a separate process to the Long Term Plan 2018-2028 council is currently consulting on.

While the report has identified options council would form its own view later this year and then consult the community.