Marlborough Electric Power Trust meeting focuses on Yealands Wine Group acquisition

Marlborough Electric Power Trust trustees at the 2017 AGM, from left, John Cuddon, chairman Ross Inder, Ian Martella, ...
SCOTT HAMMOND/FAIRFAX NZ

Marlborough Electric Power Trust trustees at the 2017 AGM, from left, John Cuddon, chairman Ross Inder, Ian Martella, and Clive Ballett.

Marlborough Electric Power Trust trustees faced a barrage of hard questions from members of the public at a standing-room only meeting on Friday.

The trust, which owns lines company Marlborough Lines on behalf of electricity consumers, has previously struggled to draw an audience to its annual public meetings.

But this was the first meeting since the acquisition of Yealands Wine Group in July 2015, something chairman Ross Inder thought played a part in attracting a larger crowd.

People gathered for the Marlborough Electric Power Trust AGM at the St John rooms, in Blenheim.
SCOTT HAMMOND/FAIRFAX NZ

People gathered for the Marlborough Electric Power Trust AGM at the St John rooms, in Blenheim.

Marlborough Lines paid $89 million for a majority 80 per cent shareholding in the wine company, which was controversial at the time because of rumoured high levels of debt.

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Time and time again the subject of the meeting, held to discuss the annual report for the trust, returned to the deal, with audience members questioning the profitability of the wine company.

Inder frequently referred questions to Marlborough Lines chairman David Dew, who acknowledged more than once the complexity of the accounting work in explaining the finances.

The Marlborough Lines annual report said the total group surplus for the 15-month period ending June last year was $36.6m, including $30.4m on the acquisition of Yealands Wine Group.

Dew said Marlborough Lines acquired the wine company for around $50m less than what it was valued, so stock prices had to be written down to reflect that when they took over.

"As soon as we got to the end of the financial year the auditors made us write it all back up again and recognise that as profit," he said.

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"On the basis of IFRS (international financial reporting standards), we're reporting a profit from Yealands of $30m plus.

"But the real profit if you like, in terms of how you and I would understand that, is about $10 million."

Kaikoura Labour candidate Janette Walker questioned how much Marlborough Lines had left to invest following further capital injections into Yealands Wine Group.

In August last year, the lines company increased its shareholding to 85 per cent after purchasing around $5.5m in shares from departing chief executive Jason Judkins.

They also injected another $4.35 million into the wine company in July last year to purchase an adjoining property for vineyard expansion, which would be converted into shares sometime this year.

Dew said that left around $28m for further investments, noting in his presentation about the Marlborough Lines annual report that the company was considering investing in the aged-care sector.

Walker also questioned whether Yealands Wine Group would be able to service its debts, of around $84m, considering the nature of the Flaxbourne Community Irrigation Scheme had changed.

"Will Yealands be able to meet those maturity dates considering the growth predicted for Yealands Wine Group and the justification for the investment into the group was based on the Flaxbourne scheme?" she asked. 

"The scheme now looks like it's dead in the water, excuse the pun, so do you have confidence that Yealands Wine Group will be able to meet its maturity dates?"

Dew said the debts could be rolled-over and the company had assurances from its bankers there was no issue, however he reminded the audience Marlborough Lines was secure, as it had not shouldered any debt in the deal.

The lines company paid out a record $4.285m in dividends to the power trust last year, which would be distributed to electricity consumers in February, with each network connection set to receive $150.

However, businessman David Taylor, who unsuccessfully stood for the power trust last year, noted the Marlborough Lines annual report said a total of $7.285m in dividends had been paid, leading him to question where the remaining $3 million had gone.

Dew said dividends from Marlborough Lines would only ever be paid to the power trust, however neither he nor Inder could provide concrete answers about where the money had ended up.

Another trustee, Clive Ballett, suggested the extended 15-month reporting period, which was done to bring the accounts in line with Yealands Wine Group, might have meant dividends were paid out twice.

Inder described the comment by Taylor as a red herring, saying the accounts had been audited and there would be a perfectly reasonable explanation.

Gender balance and corporate responsibility also came up at the meeting, with one audience member saying the trust should look for female candidates outside Marlborough if they could not find suitable applicants in the region.

There were no women on the board of directors for Marlborough Lines, however power trust trustee Ian Martella defended their hiring practices, saying the trust looked for the best candidate, regardless of gender.

"We can't go out and target females, it's not legal," he said.

"Focusing forward, we're going to employ the best person for the job to represent our beneficiaries, female or male."

The $28,000 paid for scholarships paled in comparison to what was spent on directors fees, and others connected to Yealands Wine Group and Marlborough Lines, Walker said.

"I'm just saying that maybe you need to revisit the number of scholarships and where the funding actually goes to support young people in this community," she said.

Dew said he was confident no-one in the group was being paid excessively, pointing out if Marlborough Lines made frequent, large donations Inland Revenue would potentially tax them.

"I think we're the only corporate in Marlborough actually doing anything in those areas," he said.

"Whether it can be more, that's something we can debate."

 - The Marlborough Express

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