KEY POINTS:
Auckland City Council's call for public submissions on whether it should sell its $500 million-plus share of Auckland Airport points to only modest financial returns from keeping it.
But the council is telling ratepayers nothing about several approaches from would-be investors, except that it has yet to receive
a firm proposal.
Prominent in material issued by the council late on Friday in a request for submissions by August 17 is an assertion that an annual dividend of $11.5 million until 2016 from the airport would amount to an after-tax return to the city of just 2.3 per cent of the value of its shares.
"This is significantly below council's projected borrowing costs of between 7 and 8 per cent," ratepayers are told in background to a proposal to amend the city's 10-year budget to allow for a sell-down or some other financial arrangement.
Other possible arrangements offered for public comment include joining a consortium to take over the airport, in which case the council says it could still either maintain its 12.75 per cent shareholding or reduce or even increase that stake.
An introduction to the consultation material calls the airport an integral part of the regional and national transport system and economy and says there has been considerable interest from investors and others in a potential to achieve significant benefits by improving the efficiency of its financing structure.
"Since the council's current shareholding allows us to block any full takeover attempt, several parties have recently approached us to talk about our stake in the airport," it says.
Finance committee chairman Vern Walsh said the council had not yet received any firm proposals or made any decisions, but needed "to be able to respond quickly to opportunities if doing so is in the best long-term interests of residents and ratepayers".
Interest in the airport has driven up its share price to $3.30c from the $3.18c reached on June 28, on which the council based its calculations.
The value of its holding has risen from $495 million to $514 million, making the $11.5 million annual return assumed in the 10-year budget even less in proportional terms.
But Herald business commentator Brian Gaynor does not believe the public is hearing the full story about the value of such a strategic and bankable asset.
"What's missing in a big way is the ability for the [airport] company to make substantial capital repayments," he said last night.
Neither does the consultation material refer to big surges in the value of the city's remaining stake, since the previous council sold half its original airport holding for $190.8 million in 2002.
Mr Gaynor said that although he believed the present value was "in the ballpark" of a fair price, with less potential for more rises on such a scale, the city would still be crazy on both financial and strategic grounds to sell its holding in the main gateway to New Zealand.
But he acknowledged there may be benefit to the city from backing some new ownership structure which meant it could keep a substantial stake in the airport while extracting cash from it.
Mr Walsh said the council's City Vision political majority - of which he is co-leader - remained opposed to selling the city's shares but he defended the way the consultation material was presented.
He said the statement about the proportional value of the dividend was factual, and it was difficult to make predictions about the future worth of shares.
But councillor Cathy Casey believed the public would find the material hard to comprehend, and she feared the way it was set out would draw responses increasing pressure on the council to sell the shares to pay for politically worrying cost overruns elsewhere.
* Submission forms can be obtained from the council on 379-2020 or by visiting www.aucklandcity.govt.nz/airportshares