Port Taranaki has key role in regional economy
Today's Business View contributor is Basil Chamberlain , chief executive of the Taranaki Regional Council, which is the sole shareholder of Port Taranaki.
Column: Business view
The Taranaki Regional Council owns all of the shares of Port Taranaki Limited (PTL) on behalf of the Taranaki community.
Periodically the council reviews its ownership position to consider whether it should retain all, a majority, or a minority of the shareholding. Such reviews form a necessary component of the council's fiduciary responsibilities to the Taranaki public.
The council last considered its ownership policy a couple of years ago when working with PTL to look at options for future capital requirements for the business. The council's existing policy to retain full ownership on behalf of our community was confirmed at that time.
Apart from specific business- related issues, such as potential capital requirements that arise from time to time, there are other factors that form the mix of considerations around retention of public ownership.
As for any business owner, public or private, the quality of the financial investment is key. Port Taranaki generates reasonably good dividend returns to the council. These dividends are used to reduce the council's general rates and in that sense they go directly into ratepayers' pockets.
In the past decade dividend returns have totalled $36.3 million. This compares to a council general rate income of $39.4m over the same period.
Over the last 10 years, annual dividends have averaged returns of more than 13 per cent against the book value of the business, or perhaps to use a more appropriate measure, more than 6 per cent against net assets. Last year the business returned 15 per cent against book value and 4.3 per cent against net assets.
Many people, like me, would have been very grateful for a like result from our private investments last year.
Apart from the quite narrow but nonetheless important lens of direct financial returns, there are other matters that weigh significantly in the council's ownership considerations.
One of these is recognition of the critical and strategic importance of the port in Taranaki's transport infrastructure and by extension to our regional economy.
Business and Economic Research Ltd (Berl) reported extensively on this in 2007.
In summary they found the port has a massive role. It directly contributes 4.6 per cent of regional gross domestic product (GDP) rising to 6.6 per cent if certain indirect contributions are included.
Berl further identified that PTL is a key participant in industries/activities that account for 43 per cent of Taranaki's GDP and a third of our employment.
Of course some suggest with arguable validity, that all of these GDP inputs would still occur regardless of who owned the port. New Zealand's recent history of public asset privatisation would, however, suggest that to be an uncertain outcome with significant risk to the Taranaki economy.
As owner, the council has provided the PTL board with a very clear directive to invest as necessary and to grow the business with a view to the medium and long-term as well as the now.
The council aims for balance sheet growth, not the balance sheet stripping that can potentially occur associated with the short-term revenue objectives that different owners could bring to bear.
The Port Companies Act, which directed the corporatisation of Port Taranaki, requires the company to operate at arms' length from the council and to act in a fully commercial way.
The council endorses and supports those requirements and it has elected a very competent board to direct the business accordingly in a competitive and challenging port environment.
The New Zealand ports' environment is dynamic and changing rapidly.
Rationalisation of major ports servicing international markets needs to occur in our national interest. Market forces, mainly in the form of shipping companies, major port users and land transport providers, are driving significant changes.
It is important that Port Taranaki aligns itself and is constructive in being part of the solution to better port services in New Zealand where we are so dependent on exports compared to many countries.
As owner, the Taranaki Regional Council is committed to that task, as is the PTL Board, both working appropriately together with a clear focus on the interests of our Taranaki community.
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