Shane Jones convinced Cabinet to tip another $16.5 million into a mussel farm in Ōpōtiki despite it having made losses every year of its existence and being in breach of banking covenants for three years.
Whakatōhea Mussels Ōpōtiki (WMOL) is one of the largest claimants from the Provincial Growth Fund.
Since the open-ocean mussel farm and processer’s founding, it has received a total of $52m under the scheme championed by Jones’ New Zealand First party during its time on the 2017 and 2023 government benches.
In September, Cabinet approved another equity injection into WMOL, allocating $16.5m but requiring private-sector shareholders – including local businessmen and iwi – to make a parallel contribution.
The first Crown payment of $7m was made this month, and matched by shareholders converting $4.4m in related-party-owned loans and convertible notes into equity.
The investment will see the Crown remain the largest individual shareholder in WMOL. According to the Companies Office, the $7m injection now sees it own 42% of WMOL shares.
WMOLs most recent financial statements to June 2024 show annual losses – which have been ongoing since its founding in 2014 – had doubled to $12m, and the company had stretched its borrowing limits with BNZ. WMOL owed the bank $15.1m, and these loans had been in breach of covenants since 2022.
Auditors noted these developments posed “material uncertainty related to going concern”.
The Bay of Plenty company blamed the breaches on “factory breakdowns, adverse weather events, and mussel supply,” and said “BNZ [remains] supportive of the business”.
Jones, the Minister for Regional Development, told the Herald the investment would help the company “rearrange some of their internal finances”.
But support for WMOL has widened fissures around the Cabinet table, with minor coalition partners NZ First and Act diametrically opposed on the recent bailout.
“We take an extremely sceptical view of this use of taxpayer money and have made our thoughts clear to the other parties,” an Act Party spokesperson said.
A source familiar with the Cabinet meeting in September, where the latest investment was approved, said the proposal was contested and assurances were sought from Jones that no more funding was in the offing. WMOL was now, the source said, effectively in “Last-Chance Saloon”.
Jones himself acknowledged the Crown could not keep bailing out WMOL indefinitely.
“It’s not my expectation that there would be any more money flowing in from the Crown,” he said.
Jones defended the decision, and previous investments into WMOL.
“Trying to establish a large-scale employer enterprise in this part of New Zealand is not for the faint-hearted. But you know, you can do one of two things: You can step aside and let the animal spirits of capitalism do their thing; or you can take a stand and say, ‘We really do want to see the mussel industry prosper and – more importantly – create employment opportunities in an area that’s suffered 40 years of blight’,” Jones said.
WMOL was the centrepiece of a PGF-led jobs creation and development scheme in Ōpōtiki that has also seen $115.3m spent by various Government agencies extending breakwaters and dredging the harbour to allow more commercial activity.
WMOL chairman Fred Cookson told BusinessDesk last week while financial losses had been ongoing, the company had been a positive for the community, with 197 jobs keeping a significant portion of the current workforce off benefits.
“So we’ve looked at our own shareholders, and, you know, we’ve looked at the broad range of those potentially who want to participate, and the next step is to say, ‘Well, okay, you guys haven’t performed in terms of financial performance – you’ve ticked the boxes in a lot of other areas, but now we need to make money. Okay?’” Cookson said.
A review of WMOL financial statements filed to the Companies Office shows it has continually reported losses since its founding in 2014, with these widening as investment by the Crown and other shareholders saw activity ramp up to try and achieve economies of scale.
Since 2022, when banking covenants were first breached, the company first reported negative working capital, with the gap between current liabilities and assets since widening to $24.3m.
Since Jones signed off the first $19.8m Crown investment in 2018, the company has reported $30m in accumulated losses from just $38m in revenue. Disruptions caused by the Covid pandemic, Cyclone Gabrielle and poor North Island mussel harvests are blamed for the poor results.
Commercial seafood producer Sanford this year reported a recovery in their mussel business, citing prices for its product were at historic highs. Sanford said poor harvests in the North Island – where WMOL was based – limited their ability to fully exploit the current market conditions.
Ongoing losses have seen WMOL directors conduct regular capital-raising, with only one year (2019) of the past eight not seeing shareholders – of which the Crown is the largest, and most enthusiastic to date in making additional contributions – tapped to inject further finance.
The Crown has provided the vast bulk of new capital and, as a result, its stake in WMOL has risen to the point where the Takeovers Panel has been required to assess recent raises as the Government now verges on owning a majority of shares.
In June 2023, Simmons Corporate Finance were at a loss when asked by the panel to value shares in the business, given ongoing deficits and the need to burn fresh capital just to cover operating expenses.
“Given that the company has incurred trading losses since its incorporation in July 2014 and requires the 2023 capital raise to fund its business operations and the continued development of the business, we consider a valuation of the shares based on various forecast operating scenarios to be somewhat arbitrary,” Simmons said.
Crown Regional Holdings, the PGF holding company, notes in its annual report to June 2023 that its shareholding in WMOL – at that point the Crown’s stake stood at 38% of the company – needed to be further impaired due to ongoing losses and was now assessed as only worth $16.7m despite it having poured $24m of direct equity investment into it over the preceding five years. This impairment did not take into account the rise in red in ink in 2024.
Mark Clare, the founder of Clare Capital, said there were clearly non-commercial considerations at play in the Crown’s funding decisions.
“In isolation, the business is a dog. It’s a single site and clearly has a range of issues. It’s going to need financial support, in its current form, for a long time – probably forever,” he said.
“This isn’t good, and not what we want for the investments that Government makes. But again, what was the purpose of the PGF: Politics or economics?”
Clare said the only option the Government had to exit, outside of disruptive administration, was shopping the business to commercial operators. However, this would likely see haircuts all around.
Jones said ideally, the fresh $16.5m would help engineer a turnaround and allow the Crown to eventually exit.
“It’s best conceiving it as a public-private arrangement. And as the fortune grows, then the Crown’s ownership stake in this business will decline and be taken up by private shareholders,” he said.
Jones was unwilling to contemplate WMOL being unable to right itself.
“You’re talking to a politician whose glass is half-full,” he said.
From an outdoor podium on Ōpōtiki’s Wharf St on a damp and overcast morning in late September, Jones broke the news to locals that he had secured his hard-fought approval from Cabinet to invest up to $16.5m of Crown funds into WMOL’s latest capital raise.
“That will ensure that the Crown doesn’t run and hide when times get tough,” the minister said to applause.
During Jones’ remarks, he thanked WMOL managing director Peter Vitasovich by referring to him as “Peter V, my Tarara Dalmation relation”.
A spokesperson for the minister’s office later clarified that Jones and the mussel boss were not related, but “they are both descended from Dalmation immigrants”.
Jones said he was unable to recall specific details of prior meetings with Vitasovich. “In terms of attending events where a whole bunch of people from the aquaculture industry would have been present, I’ve no doubt that he’s been present at various events I’ve been to. But I just can’t remember off the top of my head when they were.”
Ministerial diaries show Jones, as minister, has met Vitasovich at least twice: In Tauranga in 2018, several months before the Provincial Growth Fund first bought into WMOL, and this September with a meeting over dinner the night before his Wharf St speech announcing the fresh funding decision.
Vitasovich did not respond to Herald emails, calls or text messages over the past week, but he has a long history in the mussel trade and is a former chairman of Aquaculture New Zealand.
He stood down from that industry body in July 2013, just a month after his Tauranga-based mussel farming business Greenshell was named Food and Beverage Exporter of the Year by industry group ExportNZ, and just months before Greenshell itself was placed into receivership.
Receivers KordaMentha, appointed to a cluster of four companies making up the Greenshell group, said in their reports Rabobank was owed $25.7m and unsecured creditors a further $2.2m. After four years of receivership, only $13.3m was recovered to satisfy creditors, leaving a shortfall of nearly $15m.
Matt Nippert is an Auckland-based investigations reporter covering white-collar and transnational crimes and the intersection of politics and business. He has won more than a dozen awards for his journalism – including twice being named Reporter of the Year – and joined the Herald in 2014 after having spent the decade prior reporting from business newspapers and national magazines.
