Lack of port dividend upheld
The decision by PrimePort Timaru not to pay a dividend is normal commercial practice for a business that is being sold, Timaru mayor Janie Annear says.
On Thursday, PrimePort released its annual report, with the port company recording an after-tax profit of $1.68 million for the year ending in June, compared with the previous financial year's $7.4m loss.
In a proposed deal, New Zealand's largest port will buy 21.43 per cent of PrimePort's shares from TDHL, the council's holding company, and the 28.57 per cent stake that Port Industry Holdings Ltd, a group of local investors, holds in the port. The deal would give Port of Tauranga a 50 per cent shareholding in PrimePort.
Chairman Roger Gower announced the port would not pay a dividend this year, partly because it was awaiting the outcome of the Port of Tauranga's attempt to buy a 50 per cent stake.
A dividend could have been used to offset Timaru District rates, but Mrs Annear, TDHL chair, said normal business practices applied.
"Under normal circumstances we would expect a dividend, but we are going through a sale and purchase agreement.
"You don't start giving away profits, especially when we have discussed an agreed price.
"It is like if you were buying a house, you agreed on a price then when you got into the house the previous owner has taken a wall."
As part of the deal TDHL will buy about 30 hectares of land owned by PrimePort outside the container terminal and operational port area.
"We expect to receive $1m annually in rent and also the value of the future dividend should go up," Mrs Annear said.
Before Port of Tauranga acquires the shares, PrimePort will make a distribution to TDHL of $15.9m. TDHL will also receive a further $8.4m from Port of Tauranga for the 21.43 per cent of the shareholding it will sell the company.
The holding company expects to end up with a surplus of $2m after buying the land and then receiving income from the sale of the shares which will be used to write off TDHL debt.
Any future dividend would be shared with Tauranga.
- © Fairfax NZ News