Notice of the Ordinary meeting of

Nelson City Council

Te Kaunihera o Whakatū

 

Date:                      Tuesday 14 June 2022

Time:                      9.00a.m.

Location:                 via Zoom

Supplementary Agenda (Updated)

Rārangi take

Chairperson                    Her Worship the Mayor Rachel Reese

Deputy Mayor                 Cr Judene Edgar

Members                        Cr Yvonne Bowater

        Cr Trudie Brand

        Cr Mel Courtney

        Cr Kate Fulton

        Cr Matt Lawrey

        Cr Rohan O'Neill-Stevens

        Cr Brian McGurk

        Cr Gaile Noonan

        Cr Pete Rainey

        Cr Rachel Sanson

        Cr Tim Skinner

Quorum    7                                                                                 Pat Dougherty

Chief Executive

Nelson City Council Disclaimer

Please note that the contents of these Council and Committee agendas have yet to be considered by Council and officer recommendations may be altered or changed by the Council in the process of making the formal Council decision. For enquiries call (03) 5460436.

 


 


Nelson City Council

14 June 2022

 

 

Page No.

 

9.       Central Library Development - Communications Strategy 5 - 30

Document R26933

 

 

Recommendation

That the Council

1.    Receives the report Central Library Development - Communications Strategy (R26933) and its attachment (A2903525); and

2.    Approves the Central Library Development Communications Strategy as set out in report (R26933) and  its attachment (A2903525).

 

LATE ITEM AGENDA

1.       Late Item: Supplementary information - Holding Company decision                                                                  31 - 101

Document R26950

A report titled Supplementary information - Holding Company decision is attached and to be considered as a major late item at this meeting. 

Section 46A(1)-(6) of the Local Government Official Information and Meetings Act 1987 and Standing Order 9.8 require that agendas are distributed with the associated reports.  As this report was not distributed with the agenda for this meeting, it must be treated as a major late item to be considered at this meeting.

In accordance with section 46A(7) of the Local Government Official Information and Meetings Act 1987 and Standing Order 9.12, a procedural resolution is required before a major item that is not on the agenda for the meeting may be dealt with.

In accordance with section 46A(7)(b)(i) the reason why the item was not on the agenda is because it came to hand after the agenda had been distributed.

In accordance with section 46A(7)(b)(ii) the reason why discussion of this item cannot be delayed until a subsequent meeting is because a resolution on the matter is required before the next scheduled meeting of the Council to enable a timely decision to be made.

Recommendation

That the Council

1.    Considers the item regarding Supplementary information - Holding Company decision at this meeting as a major item not on the agenda, pursuant to Section 46A(7)(a) of the Local Government Official Information and Meetings Act 1987, to enable a timely decision to be made.

 

 

2.       Late Item: Confidential Attachment to Report R26950: Supplementary information - Holding Company decision

Document R26954

A confidential report titled Confidential Attachment to Report R26950: Confidential Attachment to Report R26950: Supplementary information - Holding Company decision is to be considered as a major late item at this meeting. 

Section 46A(1)-(6) of the Local Government Official Information and Meetings Act 1987 and Standing Order 9.8 require that agendas are distributed with the associated reports.  As this report was not distributed with the agenda for this meeting, it must be treated as a major late item to be considered at this meeting.

In accordance with section 46A(7) of the Local Government Official Information and Meetings Act 1987 and Standing Order 9.12, a procedural resolution is required before a major item that is not on the agenda for the meeting may be dealt with.

In accordance with section 46A(7)(b)(i) the reason why the item was not on the agenda is because it came to hand after the agenda had been distributed.

In accordance with section 46A(7)(b)(ii) the reason why discussion of this item cannot be delayed until a subsequent meeting is because a resolution on the matter is required before the next scheduled meeting of the Council to enable a timely decision to be made.

Recommendation

That the Council

1.    Considers the confidential item regarding Confidential Attachment to Report R26950: Confidential Attachment to Report R26950: Supplementary information - Holding Company decision at this meeting as a major item not on the agenda, pursuant to Section 46A(7)(a) of the Local Government Official Information and Meetings Act 1987, to enable a timely decision to be made.

 

 

 Confidential Business

1.       Exclusion of the Public

Recommendation

That the Council

1.        Excludes the public from the following parts of the proceedings of this meeting.

2.        The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows: 

 

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

1

Confidential Attachment to Report R26950: Supplementary information - Holding Company decision

Section 48(1)(a)

The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7

The withholding of the information is necessary:

·    Section 7(2)(h)

     To enable the local authority to carry out, without prejudice or disadvantage, commercial activities

 

 

 


 

Item 1: Central Library Development - Communications Strategy

 

Council

14 June 2022

 

 

REPORT R26933

Central Library Development - Communications Strategy

 

 

1.       Purpose of Report

1.1      To approve the communications strategy for the Central Library Development Project.

2.       Summary

2.1      At the 18 May 2021 Long Term Plan (LTP) 2021-31 meeting, Council directed officers to develop a community engagement process, including a communication strategy, to be approved by Council.

2.2      Officers have developed a communications strategy (Attachment 1) to provide the overarching communications approach for the project. The strategy has been developed by a working group made up of internal and external communications and engagement specialists.

3.       Recommendation

 

That the Council

1.    Receives the report Central Library Development - Communications Strategy (R26933) and its attachment (A2903525); and

2.    Approves the Central Library Development Communications Strategy as set out in report (R26933) and  its attachment (A2903525).

 

4.       Background

4.1      During the LTP deliberations on 18 May 2021, Council reconfirmed that   its preferred option is to build a new library building on the corner of Halifax Street and Trafalgar Street, within the Riverside Precinct.

4.2      At its 18 May 2021 Long Term Plan (LTP) 2021-31 meeting, Council resolved the following:

(3)     Confirms that on completion of negotiations:

·    Council will approve the community engagement process (including a communication strategy), project management and governance approach, procurement process, financial management, and reporting and approvals processes for the proposed new library building and landscaping; and

4.3      Subsequently at its 23 September 2021 meeting, Council made the following resolutions:

1. Amends clause 4 of resolution CL/2021/090 made during the 18-20 May 2021 Council meeting, to:

2. Confirms that, on completion of negotiations:

Council will approve the community engagement process (including a communication strategy and engagement plan), project management and governance approach, procurement process, financial management, and reporting and approvals processes for the proposed new library building and landscaping, noting that this work will run in parallel with land exchange negotiations; and

4.4      The community engagement strategy was approved by Council at its 23 March 2022 meeting. The underpinning communication strategy has subsequently been developed by a working group led by Publik Agency.

5.       Discussion

5.1      Publik Agency has been contracted by Council to lead the development of the communications strategy with input from a working group. The working group is made up of internal and external communications and engagement specialists. The communications strategy is attached for Council’s consideration (Attachment 1).

5.2      The strategy establishes four strategic pillars to:

·    reframe the project’s context and narrative – building community understanding, engagement and excitement for the project;

·    align with and support the community engagement process;

·    support the iwi engagement process; and

·    proactively manage current and emerging issues.

5.3      The key objectives of the strategy are to shift the conversations amongst and with the community to positive discussions about how the development can enrich Nelson and the lives of its people, ensuring the community understands the vision and potential of the project. 

5.4      To improve the engagement of non-library users and make clear the expansive and enriching potential of the project the strategy proposes changing the project’s descriptor to “a multi-purpose development with a library at its heart”. This is intended to reduce the distraction from the project’s potential and make clearer its broader possibilities.

5.5      The core theme for the project is identified as enrichment, given key drivers for the project such as transformation, reimaging and building a sense of belonging. Three story arcs support the development of this theme and will help to target the messages for different audiences. The story arcs are:

·    The broader context – fulfilling Nelson’s potential

·    The direct context – the parts that make up Nelson’s story

·    The opportunity – spaces for all.

5.6      The strategy establishes clear and measurable objectives for evaluating success. These include an increase in positive public engagement, measured by the take up of information tools, and an increase in external thought leaders talking about the project with their own audiences in an informed way.

5.7      Council has been fortunate to tap into a wealth of local communications expertise in developing the draft communications strategy. Officers therefore recommend that Council endorse the strategic communication approach proposed and adopt the communication strategy.

6.       Options

6.1      Option 1: Approve the proposed communication strategy – officers recommend this option; or

6.2      Option 2: Does not approve the proposed communication strategy and refers it back to officers for changes.

 

Option 1: Approve the proposed communications strategy (recommended)

Advantages

·   Allows implementation of the communication strategy to proceed and the project overall to progress.

Risks and Disadvantages

·   The engagement process for the project is currently paused until the context setting/awareness raising first phase of the communication strategy has occurred. 

·   Further delays in recommencing the communication and engagement process extend the project timeline. In the current inflationary market this may increase the cost of delivering the project. 

Option 2: Not approve the proposed communications strategy

Advantages

·    Allows any concerns identified by Councillors to be fully explored and addressed.

Risks and Disadvantages

·    Delays the overall project timeline and may contribute to project cost increases.

 

7.       Next Steps

7.1      The tactical communication planning for delivering the first phase of the communication strategy will be finalised. Implementation of the strategy will commence 1 July 2022. 

 

Author:          Alice Heather, Central Library Development Project Director

Attachments

Attachment 1:   A2903525 - Draft Communications Strategy  

 

Important considerations for decision making

1.      Fit with Purpose of Local Government

Libraries are a core function of Council and contribute to the social, economic, environmental and cultural wellbeing of the Nelson community in the present and for the future.

2.      Consistency with Community Outcomes and Council Policy

The recommendation is consistent with the LTP and supports the community outcome that our communities have access to a range of social, educational and recreational facilities and activities.

3.      Risk

 The risk in approving the communications strategy is low.

4.      Financial impact

Budget for the recommended option is included in the LTP.

5.      Degree of significance and level of engagement

The library development project is of high significance. The communications  process is one of the key tools in minimising associated risks.

6.      Climate Impact

There is no climate impact from this decision.

7.      Inclusion of Māori in the decision making process

No engagement with Māori has been undertaken in preparing this report.

8.      Delegations

Council retains all responsibilities, powers, functions and duties in relation to governance matters for the following items:

·    Elma Turner Library redevelopment, and Riverside precinct

 


Item 1: Central Library Development - Communications Strategy: Attachment 1

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Item 2: Supplementary information - Holding Company decision

 

Council

14 June 2022

 

 

REPORT R26950

Supplementary information - Holding Company decision

 

1.       Purpose of Report

1.1      To consider recommendations from the 7 June 2022 Joint Shareholders Committee.

1.2      To provide additional information to the Joint Shareholders Committee report and attachments to assist with decision making.

1.3      To provide updated constitution, shareholders agreement and summary of constitution as requested at the Joint Shareholders Committee.

2.       Recommendation

 

That the Council

1.    Receives the report Supplementary information - Holding Company decision (R26950) and its attachments (A2904599 IHL constitution changes incl 7 June JSC, A2904600 IHL SHA changes incl 7 June JSC and A2904604 Summary of constitution - changes incl 7 Jun JSC).

Recommendation from the Joint Shareholders Committee

The Council notes that:

Purpose

A.    The purpose of these resolutions is to seek the Council’s approval of the documents and transactions necessary to approve the:

a)    Restructuring Proposals (including the Initial Share Issue); and

b)    Financing Proposals (including the New Share Issue). 

B.    The Restructuring Proposals, Initial Share Issue, Financing Proposals and New Share Issue are explained below.

A new holding company for Port Nelson Limited and Nelson Airport Limited

C.    Nelson City Council and Tasman District Council (together, the Shareholders) have together been investigating the incorporation of a holding company which they will own in equal shares. The holding company will hold and administer investments in entities in which the Shareholders have a substantial interest for the benefit of the Nelson and Tasman regions, being Port Nelson Limited (PNL) and Nelson Airport Limited (NAL). 

D.    Nelson City Council and Tasman District Council through their Long Term Plan process and Joint Shareholders Committee (JSC), have each received and reviewed advice from Deloitte about operational synergies of holding investments, being PNL and NAL, in a holding company, and tax structure options.

E.    The name agreed for the holding company is Infrastructure Holdings Limited (IHL).

F.    The initial directors approved for IHL are Catherine Taylor, Paul Steere, Gerrard Wilson and Paul Zealand and an independent chairperson is being recruited.

Restructuring Proposals

G.    As part of the proposal to incorporate IHL, it is proposed that each of the Shareholders transfer all their shares in PNL and NAL to IHL (Share Sale) for $8,446,000 in total (Purchase Price). The Purchase Price will be owed to the Shareholders in equal portions (being $4,223,000 each). The Crown holds, and will continue to hold, one special “Kiwi Share” in NAL.

H.    The Purchase Price allocation is:

a)    $2,400,000 for the shares in NAL; and

b)    $6,046,000 for the shares in PNL.

I.     Nelson City Council and Tasman District Council will each subscribe for 42,230 ordinary shares in IHL (being 84,460 ordinary shares in total) (Initial Shares), at an issue price of $100.00 per share (Initial Share Issue). The total subscription amount for the Initial Shares is therefore $8,446,000 (Initial Subscription Amount), which is equal to the Purchase Price. 

J.     Accordingly, the Purchase Price will be satisfied on a cashless basis by set-off against the Initial Subscription Amount.

K.    The sale of shares in PNL and NAL and the subscription for the Initial Shares will be referred to in these resolutions as the “Restructuring Proposals”.

Financing Proposals

L.    The New Zealand Local Government Funding Agency Limited (LGFA) is a limited liability company owned by central government and local authorities. It was established to borrow funds and then on-lend those funds to local authorities and (now) council-controlled trading organisations (CCTOs) at lower margins than those local authorities and council-controlled organisations would otherwise pay. 

M.    Currently, PNL and NAL service their debt requirements through ordinary bank borrowing from Westpac New Zealand Limited (Westpac). However, it is projected that PNL’s and NAL’s debt requirements and financing costs may increase over the next 10+ years to meet infrastructure-upgrade demands.

N.    Given the projected increase in PNL’s and NAL’s debt requirements and financing costs, IHL’s primary purpose is to operate as a treasury vehicle for PNL and NAL. To achieve this purpose, it is further proposed that (Financing Proposals) IHL will:

a)    join the LGFA borrowing programme (LGFA Accession) as a CCTO, following which, IHL will be able to borrow funds directly from LGFA by issuing securities to LGFA;

b)    enter into borrowing and risk hedging facilities with Westpac, which is PNL’s and NAL’s current bank; and

c)    on-lend amounts borrowed from the LGFA borrowing programme and Westpac to PNL and NAL under intra-group funding arrangements.

O.    Joining the LGFA borrowing programme will enable IHL to access cheaper core debt on behalf of PNL and NAL. As a “port company” under the Port Companies Act 1988, PNL is not permitted to join LGFA and NAL does not have the scale to make joining LGFA economical.  It is considered that, once implemented, the Financing Proposals will deliver considerable financial benefits, including savings in financing costs for PNL and NAL and, consequently, increased dividend return to Nelson City Council and Tasman District Council (as the ultimate owners of PNL and NAL). Nelson City Council and Tasman District Council through their Long Term Plan process and the JSC have each received and reviewed advice from Deloitte about LGFA funding benefits.

P.    PNL and NAL will continue to require the flexibility offered by Westpac’s transactional banking products. IHL will also enter into borrowing and risk hedging facilities with Westpac for working capital requirements and risk-management (such as interest-rate hedging).

The LGFA Accession and Westpac facilities

Q.    LGFA and Westpac will require certain credit support as conditions to the LGFA Accession and the availability of the Westpac facilities. Such credit support will include:

a)    a subscription from the Shareholders for an agreed amount of uncalled and unpaid equity capital in IHL (further details are described below);

b)    IHL, PNL and NAL will each cross-guarantee each other’s obligations to LGFA, Westpac as lender under borrowing facilities and Westpac as counter-party to risk-management facilities (together, the Finance Parties); and

c)    IHL, PNL and NAL will each grant general security over all of their personal property in favour of the Finance Parties.  In the case of IHL, this will include security over its right to call for uncalled and unpaid equity capital.

R.    As mentioned above, it will be a condition to the LGFA Accession and the availability of the Westpac facilities that the Shareholders subscribe for, and IHL issues to the Shareholders (New Share Issue), a further 1,165,000 ordinary shares each (totalling 2,330,000 ordinary shares) in IHL (New Shares) for an issue price of $100.00 per share. The total amount payable for the New Shares will therefore be $233,000,000 (Issue Amount). The Issue Amount will remain uncalled and unpaid until such time as the directors of IHL make a call on the New Shares for the Issue Amount. 

Shareholder approvals

S.    The Restructuring Proposals and the Financing Proposals will require the approval of the Shareholders as:

a)    the proposals are, or may be, “major transactions” (as defined in section 129 of the Companies Act 1993 (Act));

b)    the Initial Share Issue and the New Share Issue require the agreement of IHL’s entitled persons (as that term is defined in the Act) for the purposes of section 107(2) of the Act. The only entitled persons of IHL will be the Shareholders; and

c)    Nelson City Council and Tasman District Council (as the shareholders of IHL) must consent, for the purposes of section 50 of the Act and for all other purposes, to becoming the holder of the Initial Shares and the New Shares.

T.    Accordingly, IHL’s board of directors will, at the relevant times, separately request that Tasman District Council and Nelson City Council (as shareholders and entitled persons of IHL) confirm and approve IHL’s entry into, execution and performance, of the:

a)    Restructuring Proposals (including the Initial Share Issue); and

b)    Financing Proposals (including the New Share Issue),

by separate unanimous resolutions and entitled persons’ agreements.  The unanimous resolutions and entitled persons’ agreements for the Restructuring Proposals and the Financing Proposals are together referred to as the “Unanimous Shareholder Resolutions and Entitled Persons’ Agreements”.

Next steps

U.    In order to incorporate IHL and give effect to the Restructuring Proposals, the Shareholders will need to:

a)      register IHL as a limited liability company on the New Zealand Companies Office and each complete the Companies Office requirements in relation to the incorporation of IHL (such as shareholder consent forms) (Companies Office Forms);

b)      appoint directors to the board of IHL (including an independent chairperson);

c)      cause IHL to adopt the constitution in the form attached (the Constitution);

d)      enter into a shareholders’ agreement (which will include the subscription provisions for the Initial Shares) with IHL, in the form attached (the Shareholders’ Agreement);

e)      enter into a sale and purchase agreement with IHL relating to the transfer of shares in PNL and NAL in the form attached (the Sale and Purchase Agreement);

f)      execute and deliver the share transfer forms (in the form attached) in relation to the Sale and Purchase Agreement (the Share Transfer Forms); and

g)      any other documents necessary or desirable in connection with the Restructuring Proposals.

The Companies Office Forms, Shareholders’ Agreement, Sale and Purchase Agreement, Share Transfer Forms and any other documents captured by paragraph U.g) above, are together referred to as the “Restructuring Documents”, and the transactions contemplated by the Restructuring Documents are referred to as the “Restructuring Transactions”.

V.    In order to give effect to the Financing Proposals, each of the Shareholders will need to enter into:

a)      a subscription agreement (in the form attached) with IHL, under which the Shareholders will subscribe for the New Shares (Subscription Agreement);

b)      (as part of the LGFA Accession) accession deeds to the multi-issuer deed and notes subscription agreement (which Tasman District Council and Nelson City Council are each already a party to) (Accession Deeds); and

c)      any other documents necessary or desirable in connection with the Financing Proposals.

The Subscription Agreement, the Accession Deeds and any other documents captured by paragraph 0 are together referred to as the “Financing Documents” and the transactions contemplated by the Financing Documents are referred to as the “Financing Transactions”.

Documents

W.   The Council tables the most recent drafts of the Restructuring Documents, the Subscription Agreement and the Unanimous Shareholder Resolutions and Entitled Persons’ Agreements.

X.    The Council has not tabled copies of the Accession Deeds because they are not yet available for the Council to review and approve.  However, the Accession Deeds will be based on the standard form for accession deeds scheduled to the LGFA Multi-Issuer Deed and Notes Subscription Agreement respectively.

That the Council resolves:

1.    the Council consents, for the purposes of section 50 of the Act and for all other purposes, to being the joint owner in equal shares of the Initial Shares and the New Shares;

2.    the form of the Constitution be approved, and the Shareholders will cause IHL to adopt the Constitution;

3.    the Restructuring Documents and the Restructuring Transactions (including, specifically, the Initial Share Issue) are approved, and any pre-emptive rights available to the Shareholders in relation to the Share Sale are to be waived in the Sale and Purchase Agreement;

4.    the Financing Documents and the Financing Transactions (including, specifically, the New Share Issue) are approved;

5.    the forms of the Unanimous Shareholder Resolutions and Entitled Persons’ Agreements are approved;

6.    the Council enters into and, following execution, delivers and performs its obligations under, each of the Restructuring Documents and the Financing Documents and that these documents may be executed by:

a)    (in the case of agreements) the Chief Executive; and

b)    (in the case of deeds) two elected members,

on behalf of the Council, subject to any minor amendments cleared by both Tasman District Council’s and Nelson City Council’s legal advisors;

7.    when requested to do so by the board of IHL, the Chief Executive is authorised to sign the Unanimous Shareholder Resolutions and Entitled Persons’ Agreements on behalf of the Council, subject to any minor amendments cleared by both TDC’s and NCC’s legal advisors;

8.    the Chief Executive is authorised on behalf of the Council to, subject to clearance by both Tasman District Council’s and Nelson City Council’s legal advisors:

a)    approve any further minor amendments to the Restructuring Documents, the Financing Documents and the Unanimous Shareholder Resolutions and Entitled Persons’ Agreements prior to their execution; ands

b)    enter into, execute, and deliver such other agreements, instruments, notices, communications, and other documents; and

c)    do such other things, in connection with the Restructuring Documents and the Restructuring Transactions, the Financing Documents and the Financing Transactions, and the Unanimous Shareholder Resolutions and Entitled Persons’ Agreements, as the Chief Executive may consider necessary.

 

3.       Background

3.1      The Tasman District Council and the Nelson City Council resolved to form a holding company for their investment in Port Nelson Limited and Nelson Airport Limited.  This was consulted on and agreed as part of their respective 2021-2031 Long Term Plans.  The role of the holding company is primarily as a funding vehicle for the port and airport companies. 

3.2      This matter has been considered at the Joint Shareholders Committee meetings on 15 February 2022 (Principles document), 5 April 2022 (Constitution and Shareholders Agreement) and 7 June 2022 (Constitution, Shareholders Agreement, restructuring and financing arrangements documentation).  It has also been considered at a Joint Confidential briefing on 2 May 2022 (restructuring and financing arrangements) and a NCC Confidential briefing on 12 May 2022 (constitution and Shareholders Agreement).

3.3      There were a number of questions raised both prior and at the 7 June 2022 JSC and it is useful to include some of the matters to assist with decision making.

4.       Additional information

Constitution and Shareholders Agreement

4.1      The updated documents are attached to this report with only mark-ups from the versions presented to the 7 June Joint Shareholders Committee (Attachment 1 and 2). These include:

4.1.1   the removal of reference to the Joint Shareholders Committee from the constitution due to this creating confusion with reference to unanimous agreement of the shareholders;

4.1.2   adding the following Principle to the Infrastructure Holdings Limited constitution: “The primary objective of the Holding Company is to provide a funding vehicle to enable the reduction in finance costs and increase shareholder returns from Port Nelson Ltd and Nelson Airport Ltd”; and

4.1.3   formatting/tidy ups/consistency of timeframes

4.2      Section 5 of the constitution provides for the first right of refusal for the purchase of shares and approval of the other shareholder is required to transfer the shares to a third party. These clauses strengthen the current situation, where one shareholder could sell their shareholding in either the Port or Airport without reference to the other shareholder.

4.3      DLA Piper are reviewing these changes and will provide signoff including that the constitution and shareholders agreement are consistent with what was consulted on through the Long Term Plan 2021-31 and the updated advice will be tabled at the meeting.

Financial benefits

4.4      The Infrastructure Holdings Limited ongoing costs are estimated at $158,000 in 2022/23 and has been assumed to increase by the Consumer Price Index (CPI).  The setup costs, estimated to be up to $350,000 will likely be funded from the dividend stream, either in year 1 or spread forward to year 1 and 2 but this is a decision for the Infrastructure Holdings Limited.

4.5      The total uninflated savings (over and above any additional costs) range from $822,000 per annum in the first year through to just under $2 million per annum in 2032. 

4.6      The increase in savings reflects the projected increase in debt within the Group from $115 million to $200 million in year 10.  Material projects include the Science and Technology Precinct, crane and wharf replacements for Port Nelson Limited. Also apron resurfacing/reconfiguration and a placeholder in year 5-8 for the Nelson Airport Limited runway extension. 

           LGFA borrowings

4.7      The ability to access funding through the Local Government Funding Agency allows the Port and Airport to diversify funding sources by accessing not just short term bank funding. It allows the Group to spread and smooth the funding risk and borrow for longer periods of up to 10 years compared with relatively short-term bank facilities. Lengthening the funding profile is more appropriate for these infrastructure businesses which are investing in long term strategic assets

4.8      The borrowings from the LGFA will be managed by the IHL treasury function by participating in the LGFA six-weekly tenders and will primarily be for new and refinancing core debt while day to day working capital needs will be provided by Westpac. This borrowing is not on a project by project basis (similar to most bank lending) and therefore there are no specific climate change financial risk analysis on the borrowing. 

4.9             LGFA have recently launched a Green, Social and Sustainable Lending Programme for councils to borrow at a discounted margin for eligible projects – to date they have approved two projects with an aggregate value of more than $430 million.

           Uncalled capital

4.10    The uncalled capital facility (UCF) in Infrastructure Holdings Ltd is treated as a contingent liability in both Councils’ notes to the accounts in the Annual Reports. It is not recorded on the Council’s balance sheets and does not impact the ability of either Council to borrow.  Because the Port and Airport are considered strategic assets for both Councils’ (and the region), the debt levels are already considered when Standard and Poors’ arrive at the councils’ credit rating (because the Councils’ would not let either entity fail to meet their financial obligations), therefore this proposal should not impact the councils’ credit rating. 

4.11    It needs to be clarified that if there was an event of default the creditors would only be able to recover via the UCF the amount of debt in default – not the whole facility.  Given the debt tranches are likely to be spread over a range of maturity dates (likely out to 10 years) the amount at risk is considered low (and only liable for a 50% share) and the shareholders would have had plenty of notice via the IHL Board and the Board would have been able to take action.

           Other Statement of Intent improvements

4.12    Joint Shareholders Committee members suggested improvements to the Statements of Intent for IHL going forward.  These would need to be signalled and agreed through the Statement of Expectation process considered in November each year via the Joint Committee of both councils.

4.12.1 Strengthen the no surprises expectations and materiality/ significance thresholds;

4.12.2 Consider an interest coverage ratio as one of the performance measures although the financial covenants with the lenders have not yet been agreed and would be key monitoring measures for the shareholder to include;

4.12.3 Inclusion of projected capital programs for the Group for up to 10 years;

4.12.4 Inclusion of the Pitt and Moore table as part of the SOI of IHL.

           Other matters

4.13    Questions were raised at the Joint Shareholders Committee meeting in relation to Port Nelson Limited banking arrangements and the Marlborough Inland Port. A letter has been received from the Port Nelson Limited CEO and this will be considered in Confidential session.

4.14    Directors remuneration – for IHL this will require modifications to the Joint NCC/TDC directors remuneration policy.  It is likely that the roles on the IHL fulfilled by Board Chairs of the subsidiaries would not be remunerated by IHL.

4.15    Changes to the subsidiaries constitution – would be generally approved by the IHL board but any changes impacting the shares would need to be approved by the shareholding Councils.

4.16    Interested directors can vote – the constitution allows interested directors to vote. The Board won’t be involved with day to day treasury management, ie drawing down funds required to meet the agreed capital programs of the Port and Airport – the drawdowns from the bank (for working capital) or LGFA will be for both entities together as that is the most efficient way to undertake the borrowings. The Boards key oversight is in forming up the consolidated SOI for the Group and accepting the underlying capital programs of the subsidiaries (as a prudent lender they will need to be satisfied that the funding of the capital program does not put the shadow credit rating at risk or any of the bank/LGFA covenants).  The directors have to act in the best interests of the shareholders. Quarterly treasury reporting to the Board will also form part of the oversight -  monitoring the treasury positions both from a debt perspective and interest rate risk management (swaps).

4.17    Below is an updated table of the Board appointment process.

 

 

 

Author:          Nikki Harrison, Group Manager Corporate Services

Attachments

Attachment 1:   A2904599 - IHL constitution changes incl 7 June JSC

Attachment 2:   A2904600 - IHL SHA changes incl 7 June JSC

Attachment 3:   A2904604 - Summary of constitution - changes incl 7 Jun JSC   


Item 2: Supplementary information - Holding Company decision: Attachment 1

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Item 2: Supplementary information - Holding Company decision: Attachment 2

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Item 2: Supplementary information - Holding Company decision: Attachment 3

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