GHL asset decisions harder to make now

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

News this week that Gisborne Holdings Ltd is not able to pay a $2.5m dividend it had previously declared for owner Gisborne District Council — following its $4.1m sale of most of the former St Mary’s site in Childers Road — was telegraphed in a media release on cyclone damage at Tauwhareparae Farms in early April, after we asked how it had fared and for an update on a strategic review of GHL’s assets.

“The two cyclones, Hale and Gabrielle, have caused damage to some areas at the farm, including dangerous slips, washed-out fencing and eroded tracks. In addition, power is still being supplied via generators and access remains very limited,” GHL board chair John Rae said then, seven weeks after Cyclone Gabrielle hit.

“Many of the badly affected areas, also identified by GDC as highly erodible, had already been earmarked and were in the process of retirement by management. Recent events have confirmed this strategy and have accelerated the retirement of poor and/or non-effective hectares.”

Mr Rae said cyclone impacts had delayed the asset review, signalled at its annual meeting last September, as the board took additional time to reflect on a post-cyclone Tairāwhiti.

Another factor in considering any potential sale of GHL’s dominant asset is that the farms would likely attract a much lower price now due to the slump in carbon credit prices since December — a market that will continue to recover now the Government has backtracked and heeded advice from the Climate Change Commission on Emissions Trading Scheme (ETS) settings.

Uncertainty will remain, though, until the consequences for forestry and farming from the ministerial response to the land-use inquiry, and the outcome of a review into the ETS, are clear . . . along with potential different regulatory approaches after the election in October.

Access issues will also figure large until Tauwhareparae Road is repaired.

Only 5700 hectares of the 11,250ha hill-country farm inland from Tolaga Bay has been being actively farmed. Last year Tauwhareparae Farms accounted for 68 percent of GHL’s total assets of $174.4m — with 18 percent of farm value (12 percent of total assets) related to forestry on the farms.

At the meeting last September Mr Rae said modelling had shown it was possible to lock up some areas of the farms in trees and then farm a smaller, more intensive business. He also said they had been advised the farms needed at least $10m in capital expenditure to keep them operating at an “appropriate standard”, and the best return they could expect from the farming aspect was 1 to 2 percent.

This conflicted with the council’s desire for a growing dividend stream from GHL. ($10.1m had been returned in the past five years.)