Investors want a stake in Gisborne's port business

By PAM GRAHAM

An infrastructure investor associated with Ariadne Australia and three New Zealand port companies are hoping for a piece of the action as Gisborne's port assets are sold.

International Infrastructure Management - set up a year ago by Ariadne (a 1980s sharemarket darling now investing in Queensland property), international investment company Babcock & Brown and former Wellington port chief Graham Mulligan - is interested in owning, leasing or managing the port, which it says needs $20 million of investment in the next 10 years to handle burgeoning forestry exports.

"Port of Gisborne is in a precarious position and if it does not take early action it is going to lose its cargo permanently to other ports," said Mulligan.

The port has its own plans. Owner Gisborne District Council is selling port-related assets to Eastland Energy Community Trust and a levy has been imposed on customers to fund development. Port operations are valued at $17.13 million in the 2002 accounts.

As one industry observer put it: "Control will not go out of Gisborne even if the ship goes down with the flag flying".

It is not known how the electricity trust, which has a deed that allows it to invest in anything that is of economic benefit to the region, will manage and develop the port. The port's four administrative staff were made redundant late last year and marine services are outsourced to Adsteam.

Talks have been held with neighbouring ports, although details are confidential.

"Prior to the sale process going through we have had discussions with Port Gisborne about whether there were ways to add value to what they were doing and that was ongoing," said Port of Tauranga chief executive Jon Mayson.

CentrePort chief executive Ken Harris said his port was providing operational support and "access to management experience" to Gisborne. It has expressed an interest in the future management of the port though "we are not being pushy".

Port of Napier chairman Peter Wilson declined to comment but the port is believed to have had talks with Gisborne. Freight already moves by rail from the region to Napier, which was chosen by P&O Nedlloyd last year for its new weekly fixed-day super-containership service to Europe. Still, John Clarke, Port Gisborne's chairman, said: "You can't assume that there will be outsiders managing the port after the sale date".

He expects the sale to the trust to settle on January 31 if conditions were met. Future development was for the trust to decide but it was likely to be funded by a mixture of borrowings, outside capital and revenue streams.

The port earned $1.998 million before interest and tax in 2002 on revenue of $8.636 million. Severe weather conditions that year damaged port infrastructure and silted its channel. The port charges maintenance dredging as an expense but capitalises other dredging, which is written off over 50 years.

It has earned income from farming assets and an earlier plan to sell the farms to pay for port development was abandoned when the council changed hands.

The saga showed that local governments should not own infrastructure assets, said Mulligan. Furthermore, an electricity community trust was not equipped to own or manage a port.

"In my view the port is in a sorry state. It has major issues with the safety of the navigation in its channel.

"We have made various approaches to the energy trust, who would not entertain us."

He said about $5 million needed to be spent on the breakwater and dredging. Only the port's assets and operations were being sold to the trust.

The existing port company would retain a contingent liability relating to the February 2002 grounding of the Jody F. Millennium ship in a storm and will use the proceeds from the sale to pay $17.25 million of loans to Bank of New Zealand.

The trust was believed to have met this week, but chairman Geoff Musgrave was not available for comment.