At the Napier Port it is planned to build a new wharf, which I have no problem with ($150+ million).
What does trouble me is the apparent need for a large amount of capital ($345 million) while already having an existing longer term debt of $85 million and paying out annual dividends to its owner.
Of that, $80 million has been owed for the last three years of port accounts – this tells one that the port is not making enough money to pay off this debt.
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The all-too common dilemma of Napier Port
How on earth will it pay off $300+ million? The banks have obviously said no – hence the need to raise capital some other way.
Somewhere I saw it stated that 290,000 TEU's pass through Napier Port per year.
Let us do some basic arithmetic. A TEU is a Twenty Foot Equivalent Container which is actually 19 Foot 10.5 inches long.
Most of the containers passing through Napier Port are 40 Foot long and the actual volume per Ministry of Transport is 172,792 in 2017.
These containers come into the port mostly empty and probably just about all leave full of exported product.
So, say 80,000 exported containers containing a higher value of produce.
To move a full 40 foot container from Napier to Tauranga would probably cost at least $3,000 so there is a real incentive for our local exporters to use the local port.
The $35 per TEU or $70 per container is peanuts. These containers go all over the world, not just to large ports in large container ships.
Larger, wider container ships have now become possible with the new locks in the Panama Canal.
The port's financial proposal appears set up to accommodate such larger, wider ships which would call a limited number of times per year – the biggest ships go to only Tauranga at present.
These ships would need more, bigger and longer cranes with deeper 14.5m berths and channels, more tug boats, faster loading and unloading, more trucks etc.
In the 2017 report, the port is proud to achieve processing of 53 containers per hour after pressure from the shipping companies.
With these big container ships there will be a need to reach right across the wider boats and probably do better than 53 containers per hour.
These very large ships are rather like having large jets passing through Napier Airport.
How much of this $345 million is the additional cost of processing these limited numbers of large ships ? $100-150 million ?
I was surprised to see reported that Napier Port has $85 million in existing borrowing considering that it did the wharf expansion and crane purchases several years ago.
Is the port making enough money? Is the port charging enough to repay $85 million or $345 million in debt?
What do the local exporters, processors and growers market have to say?
What is the exporter market prepared to pay? I think this market should be a major driver in the financial decisions.
Fancy Capital Funding with four options subject to a public referendum does not look like a business decision to me.
Why is the port paying annual dividends to the HBRIC and not paying off its debt considering there is so much future capital expenditure planned?
Their reports are high powered finance and forgetting the basics of making money, paying off debt and then the shareholders.
Why doesn't the HBRIC invest back into the port? Maybe the port is not making enough money?
As for cruise ships, I think we will never win.
There are going to be more and more – growth of 30 per cent + in a year.
The cruise industry has discovered the bottom of the world in the Northern Hemisphere off-season and the whole world wants to come here.
I doubt if more and more cruise ships will economically justify expanding the port.
Let them do a procession around New Zealand, in synchronisation with one another and if they must, treat Napier like Akaroa after the Canterbury Earthquake – they used lifeboats to come ashore – so be it.
I think Hawke's Bay needs to recognise that Napier is and will always be a smaller port and that hard business based decisions should be made – maybe Option D with a 50-year lease is the answer.
Let the leasee make the hard decisions.
■ Ross Hammond has an interest and experience in business analysis, and has been a Napier resident for 35 years.