The Otago Regional Council has rejected a suggestion Port Otago sell its 15.5% stake in rival Lyttelton Port Company, worth about $35 million, in preferance to borrowing $37.5 million to fund Dunedin’s proposed stadium.

Financial research by brokerage ABN Amro Craigs had suggested Port Otago, 100%-owned by the regional council, could sell its stake to fund the council’s share of the Awatea St stadium funding.

Regional council chairman Stephen Cairns rejected the suggestion when contacted yesterday, saying it “was never an option”.

He reiterated that Port Otago maintained a long-term view to holding the stake, which it bought in 2006.

Port Otago last year received $977,000 in LPC dividends, based on a 6.3c per share payout.

In the past year, the dividend had fallen to 4.2c per share, equating to a $664,000 dividend.

Based on yesterday’s share price, the Port Otago stake in LPC is worth $34.9 million.

The expected return of income through dividends compared with investment is 2.8% - negative, because inflation is almost at 4%, at a time when New Zealand has the highest interest rates in the developed world.

Mr Cairns agreed the investment was “not flash on that basis” but suggested any further comment on the holding should come from the port company.

Port Otago chairman John Gilks was unavailable for comment, but has always maintained the LPC stake was taken with a long-term view.

The Government moved late on Monday to effectively block the sale of Auckland International Airport to the Canadian Pension Plan Investment Board (CPPIB) by instituting a new national interest clause in legislation governing foreign ownership of major assets on sensitive land.

The move sent Auckland airport’s share price tumbling 48c yesterday, before recovering slightly to close 30c down.

CPPIB vowed to press ahead with its bid for a stake, saying it was not interested in a controlling interest in the airport.

However, Finance Minister Michael Cullen said a controlling stake could still be possible with less than majority ownership.

The pension fund wants about 40 per cent of the airport. Foreign shareholdings above 24.9%, or $100 million, already require approval from the Government.

Monday’s rule change is the first time effective “control” of an asset has been added as a consideration.

It follows tightening of overseas investment last year after an outcry over the sale of large tracts of South Island high-country land to foreign investors.

Cullen said nothing in the change ruled out the acceptance of any overseas investment application.

However, Forsyth Barr head of research Rob Mercer said the change made major foreign shareholdings in strategic assets more difficult.

Asked whether the rule change was likely to impact on South Island infrastructure, Cullen quipped: “The whole of the South Island is a strategic asset.”

He named major ports “and other significant assets” among infrastructure that could be included in the new test.

That could include Lyttelton, which has been the target of overseas ownership speculation on several occasions.

Last year, Danish shipping giant A. P. Moller-Maersk Group said it was interested in buying port terminals in New Zealand.

And in 2006, the Christchurch City Council attempted to tie up the port with Hong Kong operator Hutchison Port Holdings. The deal failed when Port Otago took a blocking stake in the company.

The city council also owns 75% of Christchurch International Airport, the country’s second-largest airport. The balance is owned by the Crown, which has previously attempted to sell its stake.

National leader John Key said Labour was changing foreign investment rules for political purposes and the move would impact on inflows of foreign capital.

“I would have thought the international community would be a little bit nervous.”

However, Key struggled to answer if National would block the sale of Auckland airport or other significant infrastructure assets if it was the government.

“If National is the government, majority control won’t be going to foreigners for strategic assets,” he said.

Key would not say what “majority control” meant, however, or whether that meant National would allow up to 49% foreign ownership.

He said the Canadian plan was not for a majority stake in any case and he was not opposed to the fund’s plan to take a stake in the airport.

Cullen said the decision was in response to overwhelming public opposition to New Zealand assets falling under foreign control.

Cullen rejected suggestions other strategic assets such as Telecom could be subjected to foreign ownership restriction, saying the move was not nationalisation.

“It only applies to those areas which involves sensitive land.”

New Zealand First and the Greens welcomed the change, although New Zealand First leader and Foreign Minister Winston Peters said more could be done to protect the country’s other important assets.

Green MP Sue Kedgley labelled the rule change a victory for the Green Party, and said she hoped it would have the effect of blocking the sale of other key assets as well.

However, Bruce Sheppard of the Shareholders’ Association, slammed the move as asset theft by the Government.

“What this does is undermine the effectiveness of our capital markets and it also increases the risk of investing in New Zealand if you are a foreigner.”

And for those “experts” who endlessly lecture that NZ must become more like Australia to “be competitive”, we’re pleased that the Government has listened and partially adopted the Australian prohibition of foreign ownership of airports. Except that Australia prohibits foreign ownership of all airports, not just international ones or “strategic” ones. So CAFCA is happy to join the “experts” in urging the Government to become more like Australia and ban foreign ownership of any airport.

But don’t stop now. We’re delighted that the Government, which rammed through the 2005 Overseas Investment Act, is finally starting to see sense about the whole foreign “investment” scam. It’s never too late to admit your mistakes and make good the damage done by decades of slavish adherence to this fundamentalist cult which has reduced us to tenants in our own home.

There’s plenty more stolen property to be reclaimed. The Government is dropping hints that it might be about to resume ownership of the nation’s railways system (it had the chance only a few years ago when TranzRail finally fell to bits, but got cold feet and let Toll buy the trains and ferries while it bought back the track network). Good, and the sooner the better we say. The sticking point with Toll is about money. Why? The country has just waxed indignant about the very likely possibility of the thieves of the Waiouru Army Museum medals being paid all or part of the reward money, thus profiting from their crime. The suggestion of having to buy back what belongs to the people of New Zealand, namely former public assets, raises the same question. Why should those who are in possession of stolen property be allowed to profit from that fact? Take them back.

For those who wring their hands saying “where will we find the money now that all the foreign investors have been frightened off”? (not that we’ve noticed any sudden stampede to the first class departure lounges), how about using the billions accumulating in the Super Fund to actually be invested in this country rather than playing, and currently losing, on foreign stockmarkets. Now there’s a radical thought – using New Zealanders’ money to develop New Zealand.

Murray Horton
Secretary/Organiser

CAFCA
Campaign Against Foreign Control of Aotearoa
Box 2258, Christchurch, New Zealand
cafca@chch.planet.org.nz
www.cafca.org.nz

Murray Horton, Spokesperson
Keep Our Port Public
Box 2258, Christchurch, New Zealand

International trade union website Labour Start are promoting this email campaign at their website - send a message here!

Lyttelton Port is 75 per cent owned by Christchurch City Council.

Port Otago - which holds a 15 per cent stake, worth almost $40 million, in listed rival Lyttelton Port - is tipped to lead changes which could see a merger between the South Island operators.

Port Otago chairman John Gilks has rejected reports this week there had been working committee talks between the ports.

He said Port Otago’s board members had not had talks with LPC counterparts. Port Otago’s management was not authorised to enter into merger discussions, but they had held meetings with their Lyttelton counterparts.

When pressed about initiating any preliminary talks, Gilks would only say Port Otago remained comfortable with its LPC stake and would maybe make the first move.

The environment was right for talks to start, he said.

Port Otago has repeatedly fought off Lyttelton to retain its ship calls, scoring a coup in October 2002 by securing the P&O east round-the-world service ahead of LPC.

In December 2005, it secured the preferred South Island port status for the replacement pendulum service to Europe and the US via the Panama Canal and return, following the $4.1 billion Maersk and P&O merger.

A report by broker ABN Amro Craig said it expected Port Otago to be at the forefront of change, given the strength of its operations and strategic stake in LPC.

Port Otago’s blocking stake was taken at a time when LPC, owned by the Christchurch City Council, wanted to promote a takeover and delist, so a sale could be made to a Hong Kong port management company, a plan widely criticised in Christchurch at the time.

The raid has since netted it more than $1 million in LPC dividends.

ABN investment adviser Peter McIntyre said the respective ports’ return on capital had not been high and the companies could achieve better value for their assets.

Port Otago is 100 per cent owned by the Otago Regional Council and has delivered $44.5 million in dividends since 1988.

LPC is a listed company, owned 75 per cent by the Christchurch City Council, via a subsidiary, 15.5 per cent is held by Port Otago and about 10 per is in public hands.

The concept of port rationalisation around the country has been simmering for more than three years.

The ports of Auckland and Tauranga have considered and then rejected a merger scenario which could have given some guidance to other port companies.

LPC shares yesterday closed 8c higher at 248c, a new peak in their 12-month range which saw them as low as 190c. Shares in South Port, based in Bluff, closed 10c higher at 250c, equalling this month’s record peak.

Port of Tauranga rose 14c to 699c, just off the top of its 12-month peak of 700c.

Read full story here.

Watchdog 112 (August 2006) ran a very detailed cover story on the successful campaign to stop the Christchurch City Council from selling off the Lyttelton Port Company (LPC) to Hutchison Port Holdings of Hong Kong – “Lyttelton Port Company Sale Dead In The Water: We’ve Won The Battle, But Not Yet The War To Keep Our Port Public”, by Murray Horton, which can be read online at http://www.converge.org.nz/watchdog/12/01.htm

I’m pleased to report that the proposed sell off is dead in the water, with even its most gungho proponents having finally faced that reality.

But that doesn’t mean that either the Council or Christchurch City Holdings Limited (CCHL, the holding company for the Council’s assets) are prepared to admit that they were wrong, let alone abandon plans (dreams?) of selling the Port Company. In July 2006, the Keep Our Port Public coalition (KOPP, of which CAFCA was a founder and key member) presented the Council with a 2,888* signature petition calling upon it not to allow any sales of any shares it owns directly or indirectly in LPC to Hutchison or any other overseas or NZ company, and calling upon the Council to commit to keeping LPC in 100% public ownership. (*A few more signatures came in after the petition had been presented. )

The Mayor, Garry Moore, refused KOPP permission to present it to a full Council meeting, so it was handed over in a committee room to two sympathetic Councillors, one of whom presented it to a full Council meeting. The Mayor also refused her permission to speak to the petition when she presented it.

To demonstrate its contempt for democracy, the Council then sent our petition to CCHL (the Mayor had originally suggested that we present it to LPC). It was addressed to the elected Council, not to the unelected CCHL (or to the equally unelected LPC, for that matter). Nonetheless, CCHL rejected it, recommending that the Council take no further action. The reasons given were:

“The Council has never owned 100% of LPC so it cannot commit to keeping something it does not have; the Council should not commit itself to a course of action that could work against the public good in the long run; further circumstances might make a change of ownership for LPC an imperative to ensuring that Lyttelton can continue to be an active port serving the local economy; it is difficult to anticipate what the future might bring in a rapidly changing port and shipping industry and it would be unwise to make a philosophical commitment to an ownership regime which could work against the main reason that the Council is involved with the port ownership – to ensure that there is a viable and effective port facility for the region; there are safeguards in the Council’s list of strategic assets which prevent loss of control of LPC without public consultation; any future proposals for changed ownership of LPC should be judged on their merits” (Christchurch City Holdings Ltd, Christchurch City Council agenda, 7/9/06). These grounds are palpable nonsense and in the case of the one about public consultation, an outright lie (see the Watchdog 112 cover story for details of how the Council and CCHL oh so cleverly and very deliberately structured the sell off deal so as to avoid the need for any public consultation. That was good enough for the Auditor-General who, in December 2006, pronounced himself satisfied with the Council’s behaviour in the entire matter, including public “consultation’, and rejected KOPP’s very detailed complaint).

Christchurch was stymied in its attempt to flog off the LPC, thanks to the Port of Otago which bought a blocking stake of shares to prevent the sale. This meant that, after months of publicly badmouthing Otago, Christchurch had to go behind closed doors to talk to Otago about the future of the port company whose ownership they now share, with a merger being one possibility. Hopefully, sense will prevail and Christchurch’s born again privatisation zealots will actually decide that the best future of the LPC lies in cooperating with its fellow South Island ports, not being used as pawns by giant port and shipping transnationals to play off one against the other.

But we have no reason to trust either the Council or CCHL - in March 2007 the Council approved CCHL’s proposal to create five new shelf companies. Why? Because that is the quick and easy way to flog something off. Transfer its ownership to the shelf company and wave it goodbye. A 2006 paper, aimed at potential foreign investors, entitled “Doing Business In New Zealand” by major law firm Simpson Grierson puts it most succinctly: “Where speed is of the essence, a shelf company will normally be acquired”. Exactly.

Kowtowing To The Shipping Companies

The original justification for this whole tragic-comic exercise was that the shipping companies hold too much power and that LPC needed to be flogged off in order to put it on a better footing with them (there is an obvious contradiction that the Council doesn’t seem to grasp – how can selling your publicly owned asset to one huge transnational make it any better off in its dealings with other huge transnationals?). The power of the shipping companies is very real and not to be sneezed at. All port companies held their breath in mid 2006 when Maersk of Denmark, the world’s biggest container shipping line, announced that it would review its relationship with every NZ port. It was widely predicted that this would lead to hubbing i.e. that Maersk would announce that it would deal with only one port in each island and that all cargo would have to be transported to and from that hub, with the rejected ports withering and dying.

In November 2006 Maersk announced that it wasn’t adopting hubbing as such but it did decree that Auckland would henceforth be its main North Island port, to the great chagrin of Tauranga (whose sharemarket value immediately slumped $65 million). Lyttelton becomes part of a feeder service to and from Auckland, Tauranga, Nelson and Wellington. In April 2007 Maersk went further and announced that it is interested in buying port terminals in NZ.

This is a reminder that, due to stupid past political decisions such as killing off NZ’s own shipping line and allowing foreign shippers to work NZ’s domestic waters, the transnational shipping companies have been allowed to amass huge power over the vital trade lines of an isolated island nation, the power to decree commercial life or death to each and every port in the country. Port companies, local councils and the Government need to work together in the national interest to keep New Zealand’s ports alive and thriving, serving the best interests of their local communities and the nation.

As far as Christchurch is concerned, this issue and the previously undisclosed privatisation agenda need to feature prominently at the 2007 local body elections. We need a Mayor and Council that are committed to public ownership of vital local assets. Two key figures behind that agenda have already announced their resignations – the Council’s Chief Executive Officer, Lesley McTurk, has “moved forward” (to use the current business cliché) to Wellington to bring her particular brand of restructuring to central government, having left a pile of human wreckage behind at the local government level, and Mayor Garry Moore has announced that he won’t be running again. That leaves the race for the Mayoralty wide open for the first time since Moore was first elected, in 1998. Christchurch voters need to ensure that the city and region gets elected representatives that actually serve their interests, not those of a transnational corporate agenda of privatisation and flogging off our assets.