KEY POINTS:
Ports of Auckland's rather dismal financial result should be up for debate amongst all candidates standing for election to the Auckland Regional Council (ARC) - not just those aligned with the striking wharfies.
At issue is how Ports of Auckland - which posted excellent returns in its time as a publicly listed blue chip - has posted a fall in ebit (earnings before interest and tax) to $52.2 million for the June 30 year compared with $62.3 million in the 2006 year when container volumes were up 12 per cent.
Grant Morgan - an ARC candidate in the Manukau constituency - has asked whether the company's new boss, Jens Madsen, may have undermined the port's profits through the terms of a "sweetheart deal" with his previous employer, the giant shipping firm Maersk.
Morgan's "analysis" is shared by several ports industry competitors who privately argue that Ports of Auckland dropped its charges too far to gain new business after it "rolled over" to secure Maersk's services when the shipping firm decided it would no longer call in at both Auckland and Tauranga.
Ports of Auckland (naturally) doesn't go along with this charge. The Maersk deal was signed when Geoff Vasey was still chief executive of the Ports company and was ticked off at board level.
The 2007 result is also affected by property revaluations and other one-offs.
But the bottom-line matters.
The fall in reported profit has meant lower dividends for Auckland Regional Holdings - the ARC's investment arm that owns 100 per cent of Ports of Auckland's shares - which should be an issue for all ARC election candidates.
ARH's Ports of Auckland investment is supposed to generate returns of equivalent to 8 per cent a year, which ARH says is returned to it by way of dividend streams and capital-value appreciation of its Ports shares based on the most recent recognised equity value.
This year Ports of Auckland returned only $19.9 million by way of dividend (less than the $21.7 million forecast in ARH's own statements). This is just a 2.5 per cent return on investment - meaning most value must come from capital appreciation.
As ARH borrows against the Ports of Auckland "asset" to fund other regional infrastructure investments outlined in its long-term funding plan, a fall in cash flows from the company will have an impact regionally.
There is also a business aspect to Ports of Auckland's performance.
Business lobbies are now putting pressure on ARH to say exactly why it scuttled a proposed merger between Ports of Auckland and Port of Tauranga.
The EMA Northern has sought a copy of the "Cameron Report" - done by Wellington investment banker Rob Cameron - which is supposed to point to widespread efficiency gains from bringing the two ports together. The business lobbies argue those efficiency gains would have resulted in more streamlined ports operations with resultant gains for customers .
ARH chair - and ARC councillor - Judith Bassett has so far declined to release the report. But with industry insiders saying the predicted gains were more than $50 million a year, Bassett will come under increasing pressure to indicate whether ARH's refusal to countenance the deal was purely ideological or based on good business sense.
The business-linked candidates for ARC posts seem to be taking a hands-off approach at this stage.
Michael Barnett - who is an ARC councillor and also heads the Auckland Regional Economic Forum - said the merger was panned as the ARC/ARH saw Port of Tauranga was stronger than the Auckland company (at that stage).
Ports of Auckland needed to improve its productivity and become more efficient so the merger could be undertaken on equal terms, he suggests. Barnett - who is also chief executive for the Auckland Regional Chamber of Commerce - has previously argued that the merger made good business sense.
The other issue that troubles business is the cleanout of the Ports of Auckland board since ARH acquired the 20 per cent that had previously been listed.
Former chairman Neville Darrow - who was a strong proponent of the merger - has been replaced by Auckland QC Gary Judd.
Hugh Fletcher has gone, joining a long list of highly experienced commercial directors like Kerry McDonald, Peter Coote, Rob Challinor, Rosanne Meo and Ross Johns who served on the board when Ports of Auckland was a listed company.
The only surviving director from the listed-company days is John Lindsay. Apart from Judd and Lindsay, there are just two other directors: Susan Paterson and Peter Hubscher. The latter pair are also directors of Auckland Regional Holdings.
All four are experienced directors - but the board is simply too small for what it is tasked to do.
The incoming ARC councillors need to put ARH on the spot here.
Under ARH's statement of intent it has to ensure that, through its ownership and governance of Ports of Auckland, the company continues to operate as a successful business contributing to the region's economic well-being.
It is also supposed to monitor the external and internal environment and identify, evaluate and mitigate controllable risk factors, establish performance targets and measures and monitor directors on a regular basis.
With Ports of Auckland falling somewhat wide of the mark - on ARH's own forecasts - some explanations are needed. Don't look for anything before the elections.
