Review a $40m pain for Infratil

Infratil directors are worried that Commerce Commission recommendations could knock $40 million to $50 million off the value of Wellington International Airport.

This would reduce the level of aeronautical fees the airport company could charge, based on the commission's views of an appropriate return on assets.

Price controls should not be imposed lightly, and the commission had reached its conclusions with only the most marginal justification, Infratil chairman Kevin O'Connor told the annual meeting in Christchurch on Friday.

Wellington Airport, 66 per cent-owned by the listed investment group, has aeronautical assets worth about $214 million under the standard valuation formula.

Infratil manager (and new director) Lloyd Morrison said the commission's valuation was based on "pulling up the runway and selling it in one lot to a retail subdivision".

He said the sea wall at the Cook Strait end of the airport was built to prevent erosion from the sea.

"The commission says the wall has no value, but we say if it wasn't there, we wouldn't have a runway."

O'Connor said the commission's value would strip more than $40 million from the worth of the airport, which had been part of its value when Infratil bought its shareholding from the Crown in 1998.

He referred to a commission remark saying that Infratil was aware of the review at the time and should have been aware of the threat.

"When Infratil made its investment, it was anticipating a reasonable, commonsense-based approach from the commission." Only two of the five commissioners had lived up to expectations, he said.

The commission's recommendation now goes to new Minister of Commerce Lianne Dalziel.

O'Connor said Wellington Airport had underperformed on expectations held when Infratil bought its stake, but this was being offset by the 67 per cent-owned Glasgow Prestwick airport doing better than expected, despite September 11 and recession in the United Kingdom.

Mr Morrison said one factor in this was the high cost of airline travel in New Zealand, against the low-fare competitive structure boosting air travel in Europe.

Shareholders had some questions on the new higher management fee structure, allowing the group to focus more on overseas investments, and in technology and venture capital.

These concerned the targeted rate of return, and the level of debt and risk involved in venture capital, but they voted unanimously in favour.

Morrison said the best opportunities in New Zealand would be in developing small businesses.

- NZPA