A long-term lease of Ports of Auckland's business is on the cards for councillors to consider this month.
A long-term lease of Ports of Auckland's business is on the cards for councillors to consider this month.
A financial case has not been made for a long-term lease to run Port of Auckland, according to a report leaked to the Herald.
Auckland Mayor Wayne Brown is counting on the lease as a cornerstone for a $3-4 billion regional wealth fund to secure the council’s financial position andrespond to natural disasters, like last year’s storms.
The “Auckland Future Fund”, as it is called, would also comprise the council’s remaining airport shares, worth about $1b.
Brown has proposed the fund in this year’s Long-Term Plan (LTP) to absorb the costly risk of future shocks by diversifying the council’s asset base.
Auckland Mayor Wayne Brown plans a long-term lease for Port of Auckland as a cornerstone for the Auckland Future Fund. Photo / Jay Farnworth, Michael Craig
A fund manager would be appointed to invest the proceeds from the port lease sale and the airport shares into a diversified package of shares and less risky income assets to give the council a projected annual return of 7.5 per cent.
The controversial plan is due to go to a vote on May 16, at which a narrow majority of councillors are believed to be opposed to the port lease - likely going to a foreign operator for 35 years, with the land staying in public ownership.
The council-commissioned report by economist Craig Renney says the case for a port lease appears to be finely balanced but the financial case has not been made.
“The truth is that currently, no one knows the real value of the port lease,” he said.
Renney said a figure of $2.2b was put on the lease in the LTP, but no mention of that figure was in a report for the council by Flagstaff Partners.
Renney set out several reasons why the port lease could be worth less than $2b, including terms and conditions set by the council, such as protections for workers, the need for investment on the site, and releasing land for public use.
In 2021, global port operator DP World made an unsolicited $1b bid for a long-term lease.
Port of Auckland could be run by a foreign-owned port company. Photo / Michael Craig
A mayoral spokeswoman said independent advice was provided by Flagstaff Partners and PwC and, following requests from councillors, Brown agreed to commission further independent advice from Renney, an economist and director of policy at the Council of Trade Unions.
He did this to hear from different perspectives, knowing Renney was likely to apply a critical eye to the port lease proposal “rather than just listen to people who agreed with the council”, the spokeswoman said.
“The mayor has also always said that the protection of the rights of workers was a bottom line. Seeking advice from Mr Renney also reflected that commitment to ensure that the port workers were properly considered,” said the spokeswoman, saying “all of the advice will be released”.
Economist Craig Renney. Photo / Mark Mitchell
Renney said the true value of the lease can only be known once a proper market exercise is undertaken and made two suggestions.
Consider financial investment by a third party, such as a wealth or pension fund, to keep the operations and ownership as is.
He said the status quo of holding on to Port of Auckland and the airport shares should not be considered a risk-free approach, citing the sharp fall in profitability at the port from the impact of Covid-19.
