Paying Eastland Group’s top earner $1.15 million last year despite making a $6m normalised operating loss was a bone of contention at the company’s owner’s annual public meeting on Thursday.
The energy generation business and Gisborne port and airport operator is owned by community trust Trust Tairāwhiti. Overall, Eastland Group’s wage bill for the financial year was $14.47m, up from $12.51m the previous year.
A total of eight staff were paid $500,000 or more in the year to March 31, 2023, the company’s annual report shows — up from one the previous year.
When the issue was raised at the meeting by Gisborne district councillor Colin Alder, Eastland Group chairman Matanuku Mahuika responded by saying the top rise of $400,000 was “cumulative” and involved a long-term incentive scheme.
The uplift in top salary bands also involved redundancy payments related to business restructuring, as well as payments starting three years into the company’s five-year incentive scheme.
There were no extra payments to staff related to the sale of Eastland Network, he said.
The network sale netted $257.7m and settled on March 31, 2023.
Speaking about the company’s operations, Mr Mahuika said it had been a “tough year”.
“We recorded a profit of just over $92m, really on the back of the sale of the Eastland Network. From an operating point of view we made a loss of $6.3m.”
That comprised $5m of one-off items (such as writing off the value of an exploratory well) and “$1m and a bit” of operating loss.
This was due mainly to the port being hit with post-Covid supply chain issues in China and the various severe weather events which flowed through to the port’s operations.
On top of that, electricity generation prices earned by its geothermal power plants were affected by full hydro dams.
“Things have improved in the current year. We are in the black numbers in terms of operations, but we can’t hide from the fact that there are still challenging operating conditions, especially around the port.”
Mr Mahuika was projecting a profitable year but not as much as he would like.
Responding to a question from Colin Sowerby, Mr Mahuika confirmed the company had sold its stake in electricity retailer Flick.
Eastland Group acquired a stake in Flick Electric Co in 2015 and has spent $12.5m on the investment, which had a book value of $4.1m.
The result on the sale was a “book profit” on the sale but an $8m loss over the lifetime of that investment, he said.
Cr Alder was also scathing about the Eastland Group board and Trust Tairawhiti trustees approving the sale of Eastland Network during the meeting’s question and answer session, saying “I told you so”.
He questioned the quality of information relied on to make decisions, calling it a “dangerous manoeuvre” as he referenced a photo of an acrobatic aircraft display in the annual report.
Responding, Mr Mahuika denied the company had sold its “cash cow”.
“Through the sale of the company we were able to pay $80m to the trust.”
The region also got the dual benefit of continued electricity distribution, plus new capital from the sale.
“We had all that money tied up in a business that wasn’t generating sufficient revenues to make dividend payments back to the trust . . . because that is a reglulated business, the buyer has to continue to provide the network services to the region but the region then gets the benefit of the capital that was locked up in that business to invest.”
Trust Tairāwhiti chairman John Clarke said he was confident in the Eastland Group board and pointed out it was the council’s responsibility to appoint trustees.
“If you haven’t got confidence in us, sack us.”
He also said Cr Alder should be more focused on council-owned Gisborne Holdings Ltd which was in a “pickle”.
Cr Andy Cranston asked how vulnerable the port was to the whim of China.
Mr Mahuika said this was a known issue and one that had been an issue for the lifetime of the port.
Investments made on Wharf 7 and the twin berth project (Wharf 8) would create a more diverse port structure to help shift more products across that port.
Cyclone Gabrielle also provided an opportunity to trial coastal shipping.
However, that “probably isn’t going to work” long-term because of the cost, he said.
Mr Mahuika said the company had a $500m pipeline of renewable energy projects lined up, which would be co-funded by a capital raise.
The company intends to raise funds by offering a 50 percent ownership stake in Eastland Generation.
In the near term that included the planned 50MW TOPP2 geothermal plant, two new solar farms and possibly a wind farm.
Mr Mahuika said the solar farms would be located in Tolaga Bay and Wairoa with a wind farm possible in the Turihaua area.
Over the past financial year, Trust Tairawhiti distributed over $4.39 million to 68 community groups for projects and initiatives supporting regional wellbeing.
Questioned by Tina Karaitiana on whether the trust could invest in cyclone recovery efforts, Mr Clarke said the trust was unable to help as that was the role of central and local government.
The money needed was “way beyond” the trust’s ability to fund.
“The numbers there are eye-watering.”
However, it would continue to support community initiatives and work on economic development opportunities.
See also today's editorial:
Emergency services found him unresponsive on March 5 in Wairoa.