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Canterbury University sinks into deficit as student fees drop, costs soar post quake

Thursday 1st December 2011

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New Zealand’s University of Canterbury is forecasting a 2012 budget deficit in the aftermath of the region’s devastating earthquakes, which sapped student enrollments and drove up insurance costs.

The nation’s second-oldest university expects a loss of $11.4 million next year, once it has received an insurance payout of $6 million for loss of revenue because of the earthquakes. It is forecasting a ‘business-as-usual’ surplus of $3 million for the current year.

“UC will face a challenge with enrollments in 2012,” vice-chancellor Rod Carr said in a statement. “We are working hard to attract students back to Christchurch and are determined to continue to find ways of living within our means, without adversely impacting the quality of teaching and research we offer.”

The university is required to disclose its results to the NZX, where its $50 million of December 2014 bonds are traded, paying a coupon of 7.25 percent.

The forecast deficit means the university won’t be in compliance with the guidelines of the Tertiary Education Commission, which manages the government’s $3 billion annual funding for tertiary education and requires institutions to aim for a 3 percent surplus.

As a result, Canterbury is in talks with the commission about amending its covenants “as we work through our recovery plan,” Carr said.

The university relied on government funding for 43 percent of its $164 million operating income in the first half, including research funding. Student fees made up only 26 percent, according to its first-half accounts.

Student tuition fees are $5 million below its 2011 forecast while operating costs are $12 million more than projected, partly reflecting a more than doubling of insurance costs to $6.2million from $2.5 million and a $1.8 million increase in energy costs.

The university wrote down the value of its property by $25 million following the Sept. 4, 2010, earthquake. The full financial impact of the Christchurch quakes on the university is estimated to be between $15 and $58 million.

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