Lyttelton Port still talking with insurers

01:21, Nov 02 2012

Lyttelton Port is making progress on getting insurance payments for repairs but the amount paid out so far remains stalled at $35.7 million.

Last year, payouts stalled over arguments about whether a temporary repair plan was pushing into permanent repair territory. At one point the port started winding back its repair programme, which had run to $10m to $20m, putting a new cruise ship facility on hold.

In the 12 months to June 30 the port spent $15.2m on urgent repairs related to the earthquakes, LPC chairman Rodger Fisher told shareholders at the company’s annual meeting in Christchurch today.

In total, in the period since the earthquakes began until June 30, the port had spent $52m as a result of the earthquakes, he added. The port has been formulating a working repair plan for more than 500 quake-damaged port assets.

The total cost of insurance damage has been put in the order of $500m. In August the port had submitted a claim to insurers for $10m for a further payout, Fisher said.

Loss adjustors for both the port and the insurers were now negotiating around that claim figure. The port's insurers include Vero, NZI and QBE.

The company had also booked in its accounts that it should receive around $29m for earthquake payouts due from insurers, but none of this had been received so far, Fisher said.

''An additional insurance accrual of $18.4m has been recognised, taking the total carry value of insurance receivables as at 30 June, 2012 to $29m.''

Approximately $52m of business interruption losses and preliminary material damage losses have been incurred to June 30, 2012 as a result of the earthquakes since September 2012.

''Progress payments of $35.7m have been received from our insurers to date. We are currently working with insurers on the adjustment of a $10m claim of losses and costs which were lodged in late August 2012.

''As costs and losses crystallise the process of lodging progress payment claims and their adjustments will continue."

Insurers had confirmed that reinstatement insurance for the assets the company had insured prior to the quakes, he added.

''They have also agreed a number of our key harbour structures have been so extensively damaged they will need to be replaced."

In terms of existing insurance cover, LPC had increased its limited insurance cover to included business interruption insurance.

"Buildings and plant are insured. But earthquake damaged assets, that is more that is more than 50 per cent, and infrastructure assets remain uninsured,'' Fisher said.

''All cover excludes damage from natural disasters including earthquakes.''

LPC was committed to the reinstatement of its assets as quickly as practicably possible.

''It is clear the reinstatement of key harbour structures will take a number of years to complete.''

One estimated was for the bulk of the work to be done in the next five to seven years.

Fisher said in the first quarter to September 30, 2012 the port had achieved an earthquake adjusted net profit of $3.5m, $600,000 below last year's first quarter result, with total revenues for the quarter 3 per cent higher than the previous year and container volumes consistent with last year's first quarter record number.

For the full year LPC was expecting an earthquake-adjusted net profit of between $13m to $15m, down from from $17.2m reported in the year to June 30, 2012.

The lower figure was a result of business interruption on LPC's cruise ship facility running out, and an expected reduction in Solid Energy coal volumes.

Christchurch City Holdings Ltd, the investment arm of the Christchurch City Council, holds a 79.53 per cent stake which it has increased over the last year while the Port of Otago owns 15.48 per cent.

Both representatives of the council and the Port of Otago talked about the lack of dividend payments from LPC.

The directors of the port have put dividends on hold while insurance issues are sorted out.