Auckland Airport shares are back trading again after the company responded to comments this morning from Auckland Mayor Wayne Brown, who suggested a capital raise could be on the cards.
The halt - which lasted about an hour - was put in place by NZ RegCo, the New Zealand Stock Exchange’s regulatory division.
“NZ RegCo is aware of reported comments made by Mayor Brown in a public meeting,” NZ RegCo chief executive Joost van Amelsfort said about noon.
The halt followed comments by Brown this morning at a council meeting.
Brown told the council that its shares in Auckland International Airport would be reducing in value soon.
He said the airport company planned to seek a capital injection to fund a new domestic terminal.
The council currently owns 18 per cent of the airport company but would not be participating in the airport’s capital expansion, so those shares would reduce in value to about 11 per cent.
Brown is proposing to sell the shares.
Shortly before 1pm, Auckland Airport said in a statement to the NZX that it had “no plans to carry out an equity raise and we have made no announcements to the market in this regard”.
‘’We continue to consult with airlines about our future infrastructure programme, which includes our priority project – the creation of a combined domestic and international terminal as part of an expansion to the existing international terminal,” the company said.
Auckland Airport is planning to fund its new domestic terminal with borrowings, it added. The airport shares last traded at $8.05, up 3.5c on yesterday’s close.
The mayor’s office also issued a statement about Brown’s comments.
“Like everyone in the investment community, the mayor was speculating about how the airport company might finance its ambitious capital expenditure programme.”
The statement listed a number of planned expenditure programmes, including $75 million for upgrades to the existing domestic terminal and a new international arrivals area.
“The mayor’s point is that these are all good news for Auckland, but if the airport decides it needs to raise capital for any of them, this would require the council to either to participate in the capital raise with ratepayers’ or borrowed money, or see its shareholding fall below the current 18 per cent. The mayor is not in possession of any information not available to the market.”
One analyst has said any capital spending would be funded out of debt.
In August last year, the airport announced plans to replace its ageing domestic terminal, outlining a $1 billion plan to merge it with the international building.
It is not expected to be opened until early next decade.
The new domestic hub merged into the eastern end of the current international terminal. The new domestic operation will be around three times the size of the current domestic terminal when accounting for shared check-in (kiosk-based) for both international and domestic travellers.
It will include large, light-filled dwell spaces with views across the airfield to the Manukau Harbour and expanded contiguous security screening.
Shares dipped from yesterday’s close of $8.10 and are currently trading at $8.06.
Analysts Jarden have forecast the company’s net debt to increase from $1.5b to $4.3b at the end of 2027 and up to $7.3b at the end of 2032.
’’Importantly, we believe this capex can be fully funded out of debt.’’
At this morning’s meeting, councillor Chris Darby asked both Brown and council officials if any announcement had been made.
Brown’s response was that it shouldn’t be a surprise. “It’s easy enough to see it’s coming,” he said.
The full governing body of council is today debating Brown’s new budget for the 2023/24 financial year.
The meeting is expected to last much of the day, with the morning having been taken up almost entirely with the mayor’s introductory statement and councillors’ questions to officials.
Several other matters have come to light.
To save money, grass will be allowed to grow 25mm higher than at present and public rubbish bins will be emptied less often, but not, said official Claudia Wyss, “the ones that fill up quickly, such as those in front of restaurants or at beaches”.
Although the council has owned shares in the airport since it was formed in 2010, there is no agreed strategic purpose for the shareholding. They are, said the council’s chief financial officer Peter Gudsell, “simply a financial investment”.
As the council meeting moved into general debate on the budget, a common theme emerged.
Most councillors had concerns about some elements of the mayor’s proposals, but saluted his skill in putting together a wide-ranging and “courageous” package.
It seems likely they will all support the budget going to public consultation.
Heading for a potential lunchbreak at 1.30pm, not a single amendment had been tabled but several councillors had put their concerns on record.
Councillor John Watson questioned if it was “advisable to put up public transport fares when the Government subsidy is coming off”.
This refers to Auckland Transport’s decision this month to raise fares by 6.5 per cent, and the Government’s decision to remove the half-price subsidy in March next year.
Councillor Mike Lee asked if “long-suffering public transport passengers” could have a say on this, as part of the public consultation on the council’s proposed budget.
Officials told him no.
Lee is a member of the AT board.
“AT doesn’t always get it right,” he said, “as you would know, Mr Mayor. Nor does it always listen to good advice.”
The proposal to cut funding for the council’s 10 early childhood centres, known as Kauri Kids, will go to public consultation.
This proposal was to be implemented without consultation, but worried councillors succeeded in getting that changed before the meeting began.
Officials revealed that about 300 children, costing council about $3000 each a year, would be affected. No evaluation of the impact on staff, the children or their families has been done.
Councillor Christine Fletcher said she “applauded” the mayor’s “courage” in making tough decisions, but was “very worried” about some of the proposals, including selling the airport shares and possible cuts to arts funding.
Lee was also strongly opposed to selling the airport shares.
Councillor Kerrin Leoni asked, “Has everything been looked at, including the golf courses?”
Officials said the question of golf courses was complicated and better suited to debate over the long-term plan, which will begin next year.
Councillor Wayne Walker said the data currently available on golf courses was misleading and wondered if council was wasting money keeping so many buses running.
Councillor Josephine Bartley was the only one fully to break ranks.
”This budget is too much about money and not enough about people,” she said.
“You look at what is proposed to be cut and it is always communities. Why is that? This budget shows that we undervalue the arts, we undervalue culture, and what is going on there? I look at schools during Covid and it was arts that people relied on to help get them through.
”I understand what you mean when you say put up alternatives. But that’s unrealistic. It’s not easy, we don’t have the information, I don’t think any of us have the expertise.”
She said she was especially upset to hear the advice of Tātaki Auckland Unlimited, which told council the cuts will result in “significantly heightened inequity of access for Aucklanders”.
She had a list of events that might now be under threat, including Taiwan Day, Japan Day and Polyfest.
“All of these things are the diversity of this city, the thing that makes this city great.”
And, she added, “Why should our communities have to come and defend what they’re doing. They put me in this job to do that. On their behalf I cannot support this budget so I will be voting against it going out to consultation.”
Deputy mayor Desley Simpson rounded out the debate with a strong speech in support of the mayor.
“Just to give you an idea, $295 million is more than the cost of all our parks and services. It’s more than the residential rates they pay on the Shore.”
She added that the savings element, $130 million, was “the highest figure this council has ever aimed to save”.
In relation to the airport, she said, “I don’t think some councillors understand what officials are saying. Even if [the company] resumes paying dividends, and that’s not guaranteed anytime soon, there is still not likely to be any net benefit.”
Simpson said the rates income will remain at 37 per cent of total income. And “despite constraints, this proposal still keeps a capital investment programme as high as ever. In fact higher than ever: $2.8 billion.”
All councillors except Bartley voted in favour.
Councillor Shane Henderson queried the proposal to reduce the stormwater maintenance budget, given that “we now get a one-in-a-hundred-year flood every year”. Officers said the budget’s contingency funds would cover that.
Councillor Lotu Fuli has pointed out that because the airport is owned by institutions, none of whom have more than about 7 per cent, the Auckland Council is the largest shareholder.
The meeting is trying to bridge a $295m gap in the existing budget for the next financial year.
Brown told the meeting there were four levers he wanted to pull: cost-cutting, moderate rates rises, selling the airport shares and getting a better return from the port.
Gudsell said there were four pillars in the officials’ analysis and advice to councillors. They had looked at all proposals by asking if they were “credible, sustainable, affordable and implementable”.
Councillor Richard Hills said if they were voting to adopt the budget today, “I would vote against”.
But he gave credit to the mayor for the work done so far, and hoped for a vigorous consultation process.
He was “concerned about reducing the targeted rates” on water and the environment, and he did have “real concerns about cuts to the Southern Initiative and the Western Initiative, which support economic initiatives in poor communities. “I want to hear from the community on that.”
Hills also reminded his colleagues that council had increased debt to pay for an increase in capital works, from $1.3 billion not so long ago, to nearly $3 billion now.
Councillor Lotu Fuli said, “For me it was always important that the document that goes out has options in it.”
She was referring to the four levers mentioned by Brown, but the budget going to public consultation will not contain options as such. It will be a set of proposals council will adopt, or not, in June next year, depending on the public input.
Fuli and Shane Henderson both mentioned how “flooded” their email inboxes have been.
Henderson was less supportive than his colleagues.
He called the mayor’s proposal the “Death by a Thousand Cuts Budget”.
He said it was wrong for AT to cut $21 million from its bus network.
“That will turn the buses into a basket case and people will just get back in their cars.”
Councillor Fairey had earlier pointed out that Auckland Council rates were low compared with others, and he supported that.
“We need a tough conversation about it.”
Mayor Brown responded that this was “a passionate outburst and well done”.