Lyttelton Port Company will take on more debt that may affect dividends paid to the city council when it funds a $56 million cruise ship berth announced this week.
The cruise ship berth will operate from early 2019 and is a new addition to the forecasts and projects set out in the company’s 2017 statement of intent.
Lyttelton Port Company is owned by Christchurch City and reports to Christchurch City Holdings, whose chief executive Paul Munro confirmed the cruise ship would be funded from the port’s own balance sheet.
This marks a departure from previous statements by Lyttelton Port chief executive Peter Davie who as recently as December 2016 advocated that the port partly fund the cruise berth with supporting investment from the council and government, or a passenger levy.
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Munro said he did not think the port company would have to defer other earthquake-repair work or new developments for the cruise ship berth.
The decision to go ahead was the result of a council directive after lobbying from the tourism sector and a working party whose convenor was Innes Community Board member and former city councillor Ali Jones.
But a cost benefit analysis is being kept under wraps by the city council
Munro said the port company would taken on “incrementally more debt”.
“There will be an interest cost to service that debt and that will in some way have an effect on their profitability going forward.”
Munro said dividends from the port company might “potentially be affected”, although a media release from the city council said the council would continue to receive “the current level of dividend”.
“That’s a decision the port has to work through and that’s a lever the board and company will have to use to manage it,” Munro said.
“At the same time the cruise berth is expected to be a profitable investment.
“It’s crystal ball gazing in some respects. Like any sort of project you work out what you think will happen and it will be better or worse and not necessarily what you think.
“There are ups and downs in different years which makes it difficult to forecast but the port has a diversified portfolio of customers coming through the port.”
The 2017 statement of intent predicted a dividend to the council this year of $2m, $1m in 2018 and $1.4m in 2019.
“At the request of shareholders, the company may undertake activities that are not consistent with normal commercial objectives,” the SOI said.
“Where necessary, a specific subsidy will be sought to meet the full commercial cost of providing such activities.
“This may be the case in relation to the development of a dedicated Cruise Terminal at the Port,” the SOI said.
Revenue was expected to be $109m in 2017, $126m in 2018 and $128m in 2019. There were no profit after tax forecasts included in the SOI.
The next Lyttelton Port SOI is due to be finalised by the end of June in partnership with Christchurch City Holdings.
The 2017 SOI reiterates commitment to reinstating earthquake damaged assets and seeking feedback from Christchurch City Holdings on major capital development expenditure.