PAUL MCBETH: Port of Tauranga’s Quayside question

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years.

Port of Tauranga is the closest New Zealand’s got to a maritime hub with a national plan.

Over the years, the shining star in the Bay of Plenty has navigated the petty squabbles between the council-owned operators to claim the nation’s top billing as the biggest and most profitable port.

It secured long-term routes with Maersk, helped establish the Kotahi logistics joint venture with Fonterra and Silver Fern Farms, bought a half-stake of Timaru’s PrimePort, was a foundational shareholder of the Ruakura inland port near Hamilton, and was part of the consortium that bought Northport’s parent.

The $5.51 billion company has some big aspirations.

So it’s probably worth noting the port operator’s annual report acknowledged the times are a-changing at the port’s council-owned controlling shareholder, Quayside Holdings.

If you’re not a regular reader of the Bay of Plenty Times or perhaps the Rotorua Daily Post, the last time you probably turned your mind to Quayside was when the Bay of Plenty Regional Council gave thumbs up to selling down its 54% stake of the port operator to reduce the concentration risk of its investment portfolio.

For I felt I was rich

That’s understandable. What started as a $53 million stake back in 1991 now forms the cornerstone of Quayside’s $3.14 billion portfolio. The council went to ratepayers with the proposal in its 2024-2034 long-term plan, and last year set a floor of 28% that it was willing to sell down to.

And Quayside’s in no rush to sell. The port’s Stella Passage could very well unlock more value in the hub once it gets final approval in the government’s fast-track and wraps up the arm-wrestling with local hapū Ngāti Kuku.

So, where’s the smoke?

Well, that’s in the boardroom shuffle at the council’s investment arm, which will see one-termers Mark Wynne – who took over the chair after the untimely death of his predecessor Warren Parker at the end of 2023 – and Fraser Whineray join their fellow independent director Keiran Horne out the door at the end of September.

The departure of the three independents was initially couched as a result of council’s new plans for the investment arm shrinking the board to five from seven, although a clarification was needed a couple of days later for the stock exchange to make clear that Whineray chose not to seek reappointment.

Needing to set the record straight is never a good sign, although incoming independent Mike Allen is a safe pair of hands.

But they didn’t understand it

For an outsider looking in, it’s hard to wrap your head around the strain that’s obviously emerged between elected members and arguably the best-run council-owned investment arm in the country.

Last year’s local body elections ushered in nine fresh faces to the 14-strong regional council, with Matemoana McDonald succeeding the retiring chair Doug Leeder, who racked up 12 years on the regional body after 12 years as an Ōpōtiki district councillor.

Against the backdrop of central government pushing for amalgamating local authorities, the new councillors immediately turned their minds to the next steps for Quayside in their first round of workshops, and setting in motion an out-of-cycle amendment to the long-term plan in a closed session of their third official meeting.

The council’s goal was to protect those intergenerational assets and cap dividend income to an inflation adjusted $50 million for environment work, council functions and keeping rates in check, with the surplus tagged for special infrastructure projects.

That special purpose kitty would be roughly $25 million by 2036, based on Cameron Partners’ projections of how much extra income Quayside could reap by selling down the Port of Tauranga stake.

Quayside strongly encouraged councillors to ask Wellington for local legislation to lock in the investment arm’s position along the lines of Auckland’s $1.3 billion future fund or New Plymouth’s $427 million perpetual investment fund.

With patches on my britches

However, the regional council preferred separating Quayside’s assets to house the purely commercial assets in one entity and spinning out the more community-minded assets such as the Rangiuru business park into its own arm, all housed under the umbrella of a trust. The theory being that it would create a further separation from council and potentially insulate it from any changes brought about by the Beehive’s local government reform.

That stuck in the craw of the region’s local mayors who collectively wrote to local government minister Simon Watts asking for a hand in reining in what they saw as the regional council putting the cart before the horse.

Depending on your point of view, the regional council’s timing is either very astute or highly cynical.

It’s a natural progression to think about how to preserve a broader array of assets if and when the Port of Tauranga stake is reduced to one of leverage rather than control.

But it’s hard to fathom what was so urgent as to warrant an amendment to the long-term plan outside the three-year cycle beyond potentially handcuffing whatever successor organisation emerges from the local body reform with a set of principles held by a group of elected members at a single point in time.

Some councillors might well have claimed that there was plenty of support in the consultation and that the process was robust – Ken Shirley and Tim Maltby were notable opponents – but former chair Doug Leeder’s submission on the amendment was telling.

She made my coat of many colours

He prefaced his oral submission by saying he firmly believed once you’ve done your dash in politics you leave it to the next generation, but he still felt compelled to tell councillors the amendment to the long-term plan would probably be their most important decision in the current term.

Leeder preferred sticking with the status quo and to only go down the path of a trust model if legislative protection wasn’t available.

And he opposed siphoning dividend income for a regional benefit fund, telling councillors a governing body’s role wasn’t to borrow on behalf of ratepayers and pick winners, and that there would always be more calls on the special pot of money.

Former port chief Mark Cairns had a similarly allergic reaction to the council’s proposal, saying the options wouldn’t improve Quayside’s governance – which had developed rigorous procedures in picking top-quality port directors – and would only add complexity and cost. Not to mention it was getting ahead of itself over the local government reform.

Even the port expressed reservations, telling council to thoroughly consider the implications of structural reform to a model that had provided significant benefits over the past three decades, and paying tribute to value created by Quayside’s mandate in insulating the maritime hub from local body politics.

Work on the planned Quayside restructuring has stopped for now – albeit with an already-amended long-term plan – and perhaps the jostling for supremacy in the local body shake-up shows just what’s been driving the regional power plays.

There were rags of every colour

Unsurprisingly, the regional council favoured a single unitary body, rather than three smaller entities carved up along eastern, western and central geographic lines pitched by the various mayors.

And to be fair, the regional council could still be the winner, with just the eastern bloc of Kawerau, Ōpōtiki and Whakatāne councils getting their pitch to the government in time, with Western Bay and Rotorua backing away from local-led plans and inevitably leaving the future in the Beehive’s hands.

None of which provides much succour for those pondering what it ultimately means for Quayside and the future governance and ownership arrangements for the Port of Tauranga.

Because while these might all seem like local issues for local people, any derailment of the Port of Tauranga would end up being a national tragedy.

Image from Port of Tauranga.