A proposal by Napier Port to take over Wellington’s CentrePort container shipping business has been rejected by Greater Wellington Regional Council.
The decision was made during an August 25 council meeting and follows an independent report by PWC that found no compelling reason to accept the proposal, the council says. It also supports an earlier decision against the proposal by CentrePort’s board.
CentrePort is 77% owned by Greater Wellington with Horizons Regional Council owning the remaining 23%.
“They never looked promising and that’s the conclusion of a report from PWC, which found the benefits of the deal would accrue to Napier at the expense of CentrePort’s shareholders and the regional economy,” Greater Wellington chair Daran Ponter says.
Under the proposal, CentrePort would obtain a 4% holding in Napier Port in return for transferring its container shipping business to Napier. CentrePort would also get a share of the profits on additional container volumes.
“As a major shareholder in CentrePort, we support its plans for growth, including its container business. Shipping containers through Wellington makes sense, and that’s where our focus remains,” Ponter says.
In March, CentrePort completed the reinstatement of its Kaikoura earthquake-damaged Thorndon Container Wharf, improving efficiency and capacity.
In 2019 the port completed one of the largest insurance claims in New Zealand totalling more than half a billion dollars following the 2016 earthquake.
When the wharf was out of action for 10 months following the event, shippers experienced up to 400% freight cost increases through other ports.
CentrePort has also recently partnered with Port Marlborough to establish a logistics hub solution for Marlborough shippers to grow container volumes and enhance supply chain resilience.
Ponter added that CentrePort should continue to consider collaboration between ports and regions across a range of issues as it is well positioned to benefit from potential consolidation of shipping lines, services and port activity.
“Discussion will continue on future service configuration and commercial partnerships. But Napier Port’s proposal would effectively lock us out of those discussions,” he says.
Last year, the NZ Herald reported that Napier Port chief executive Todd Dawson sent a letter to Greater Wellington outlining the company’s position on CentrePort.
The correspondence was obtained under the Local Government Official Information and Meetings Act.
Dawson raised questions about CentrePort’s role as a container port, suggesting it was not up to the task due to its urban centre location and being off the main internal shipping route between the North and South islands.
“Ratepayers’ continued subsidisation of CentrePort’s container trade is a source of frustration for Napier Port as the commercial operator of a genuine container port that is focused on delivering acceptable shareholder returns and better customer services.
“We can currently easily handle all of our own cargo requirements, plus Wellington’s,” Dawson wrote.
He also raised concerns around the amount of money being spent through the insurance payout to build additional container services and said Napier Port’s proposal would reduce waste and inefficiency across New Zealand’s freight industry.
“I see only downside for all parties if we all simply keep doing what we’ve always done and make uneconomic investments,” he said.
Napier Port was listed on the NZX in 2019 with a 45% initial public offer of shares with Hawke’s Bay Regional Council owning the remaining 55%.
In June last year, the Auditor-General released a first of its kind report examining the trends, performance and challenges facing the 12 port companies throughout New Zealand.
In it, Controller and Auditor-General John Ryan warned port companies to watch their spending and pointed out some major challenges facing ports throughout the country.
“As port companies look to the future, many are considering significant new investments.
“These might be to remain sustainable given international shipping trends or to cater for anticipated growth.
“There is considerable risk in these investments. Port companies need robust and realistic business cases to ensure that these investments deliver the benefits expected of them,” Ryan says.
“I encourage port company boards – and, where appropriate, their shareholders – to robustly assess the merits of significant capital investments before approving those investments.”
*TransportTalk has contacted Napier Port for further comment on the proposal.
