I had not been able to understand the rationale behind the funding proposals for the Napier Port expansion as put forward by the Hawke's Bay Regional Council until I studied the Port of Tauranga's annual accounts.
The Port of Tauranga is 54 per cent owned by the Bay of Plenty Regional Council, with the balance on the NZX. This company in turn owns 50 per cent interests in other ports in Northland and Timaru plus other "inland ports and businesses" in Lyttleton, Auckland and Waikato to name a few.
It appears to me that the council's A to D finance options are about merging our Napier Port with this Port of Tauranga corporate one way or another in the longer term.
All the people in the Hawke's Bay Regional Council area (165,900) effectively own the Port of Napier at present.
Napier Port had $3.958 billion of exports and $1.046 billion of imports pass through in the 2017 calendar year.
In other words, a total of $5.004 billion of goods or $30,162 per every man, woman and child. It is a big business in terms of the value of produce, food, minerals, timber, wool, meat etc that passes over its wharves.
In my opinion, the financing of the new wharf and assets can be funded from cash flow.
Say an extra profit of $80 million per year before tax, which equates to about 1.6 per cent of the value of goods passing across those wharves.
Our farmers, growers, forest owners, manufacturers, exporters and processors are going to squeal in horror at an additional charge and how much more expensive Napier is than other ports, but compared with foreign currency movements it is not much.
We, the 165,900 citizens of the Hawke's Bay Regional Council area, are standing at a "unison formation" moment. Do we continue to own the Napier Port or effectively give away 49 per cent ownership to the corporate/financial world?
It seems to me the regional council should have a simple relationship with the Napier Port Company.
On an annual basis they should set the required profitability of the port and HBRC annual dividend from the port and leave the 95 people at the port earning more than $100,000 per year to achieve that goal.
If the port executive cannot achieve this, new staff should be employed who know how to "charge like a wounded bull" and "milk a cash cow" – perhaps people from Fonterra would do.
As far as starting the new wharf, why not lend the $60-$80 million from the HBRC to get it started? The new "profitability" will repay this amount in a few years.
Interestingly, 23 per cent of container traffic at Tauranga is transhipments to other ports.
Tauranga is the hub the big ships are coming to. This should be considered when equipping Napier Port for larger ships. Also Tauranga has eight container cranes (versus our six) which can achieve 35.5 container moves per hour (versus our 53) .
*Ross Allan is a Napier business analyst.