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Napier wharf cost increase reinforces case for IPO - council

Wednesday 10th April 2019

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Hawke’s Bay Regional Council says an increased cost estimate for a new wharf at Napier Port reinforces its decision to seek outside capital for the business.

The port, wholly-owned by the council, has approved the business case for the wharf extension which is now expected to cost $170-$190 million. That is up from the $142 million expected last year.

Council chair Rex Graham says the new figure reflects further design work since then. The business case has been tested against detailed trade and revenue forecasts, design and engineering standards and resource consent requirements.

“What this does reinforce is the need for external capital for port development as funding 6 Wharf would now be an even bigger hurdle for ratepayers,” Graham said in a statement.

“We are fully committed to our original objectives: supporting the port to invest in its growth, de-risking the council’s investment portfolio, retaining majority ownership and control of the port and protecting ratepayers from port development costs.”

The new wharf is about 350 metres long and 34 metres wide and will be built on piles alongside the existing container terminal. With separate mooring bollards and additional dredging, it will enable the port to handle vessels up to 360 metres in length and also help ease vessel congestion.

Approval of the business case was a condition of the council’s plan to sell up to 49 percent of the port through a public share sale. The project is part of about $350 million of refurbishment and upgrade investment expected to be needed during the next decade to cater for the region’s growing log, timber and apple exports.

The council last month approved the creation of a new holding company to advance the share sale.

A final decision on whether to proceed is expected next month. The investment case then will include the latest wharf costs as well as updated valuations and financial forecasts.

In October, the council expected the sale could raise $181 million – leaving the council with $83 million after settlement of almost $87 million of port-related debt and sale costs of about $11 million.

(BusinessDesk)

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