THOMAS CRANMER: Wayne Brown lays down the challenge to Ardern and Mahuta

The Mayors of Auckland, Christchurch and Waimakariri deftly proposed an alternative plan for Three Waters on Monday and despite the Government’s initial response, the ball remains in its court. THOMAS CRANMER writes –

The press conference was held in Auckland and although it was led by Brown he made only the briefest of opening remarks before handing over to Waimakariri Council Mayor Dan Gordon, who announced “the path forward” with what he described as the “new consensus plan”.

Christchurch Mayor Phil Mauger then spoke in support of the proposal.

A fourth Mayor, Helen Worboys of Manawatu, was also scheduled to attend but was unable to do so due to family circumstances. Thus, whilst the press conference had all the optics of an Auckland proposal, it was clear that the impetus was coming from further south.

Indeed, despite the claim from Dan Gordon that this was a “new” plan, it was also clear that this proposal was based on a significant amount of the C4LD analysis and was broadly in line with the opposition to Three Waters that had been voiced in the recent local government elections.

That in itself is not a bad thing. The fact that this proposal leverages off the C4LD and Castalia work gives it more weight and counters any arguments that this is a half-baked plan concocted by novice mayors.

Continue reading “THOMAS CRANMER: Wayne Brown lays down the challenge to Ardern and Mahuta”

Thomas Cranmer: It’s Stop Work on Three Waters!

Newly elected Auckland Mayor Wayne Brown has declared Three Waters ‘doomed’ as Watercare is ordered to stop work and S&P announces it will take no new credit-rating decisions until after the 2023 general election, which it calls ‘vital’.  This article continues a series by THOMAS CRANMER, the pseudonym adopted by a legal analyst who has been carefully dissecting the Three Waters legislation. He writes

The local government elections have been widely viewed as a referendum on Three Waters but in reality they also appear to have triggered a series of announcements which dramatically call into question the viability of the controversial project.

It was no coincidence that, in the aftermath of those elections, with anti-Three Waters councillors in the ascendancy, Standard & Poor’s made its announcement that it would not be making any adjustments to the New Zealand Government or local authority credit ratings until after the 2023 general election. At first glance that may not appear significant but if you look at the detail of the message it becomes eye-opening.

 By way of background, Standard & Poor’s is the global ratings agency which reviewed the proposed Three Waters structure last year in order to issue an indicative credit rating for the water services entities. Then earlier this year it issued another report setting out indicative credit rating implications to Auckland Council and Wellington City Council of implementing the proposed reforms. This is normal practice for these types of financings.

The government pays S&P a fee and it provides them with indicative ratings based on various hypothetical scenarios. Those ratings then form part of the marketing material which is provided to potential lenders.

During this marketing phase it’s important to generate positive momentum behind the lending opportunity in order to attract a sufficient number of influential lending institutions for the financing to be a success. Any negative ‘noise’ around a potential deal coming to market can severely jeopardise its chances of success.

Continue reading “Thomas Cranmer: It’s Stop Work on Three Waters!”

Sapere report says there’s no need for haste on Auckland port freight decision

By Barrie Saunders (who chaired the Port CEO Group from 2002-2015, and has his own blogsite

The most interesting thing about the Ministry of Transport-commissioned Sapere report on the future of POAL’s freight operations is that, compared with the status quo, all options will add costs to the economy.

However Sapere’s terms of reference required it to assume POAL’s freight operations would have to move sometime, so the question was when does this have to happen and where is best?

A new port at Manukau is assessed as the least expensive option, producing net benefits of -$1,982 million net present value, and the Firth of Thames is the most expensive at -$7,294 million.  Moving the entire freight operation to Northport was estimated to be a net -$6,252 million, Port of Tauranga (POT) a net -$3,703 million and a shared Northport – POT a net -$6,847 million.

Sapere helpfully provides an explanation as to why its conclusions materially differ from those of the Wayne Brown-led Working Group.   A key point is that they took a 60-year perspective rather than Brown’s 30-year.   (See page 15 of the executive summary – Sapere “Analysis of the Upper North island Supply Chain Strategy Working Group Options for moving freight from the Ports of Auckland”. Continue reading “Sapere report says there’s no need for haste on Auckland port freight decision”

Economic health of NZ’s port sector is being brought into question

Significant questions are being raised about the economic efficiency and competitiveness of the port sector.

Reports this week of the  Commerce Commission receiving complaints  about  anti-competitive conduct   by  NZ   port companies  follow the  Office of the Auditor-General   writing to port company chairs and  CEOs to raise a raft of issues identified  in its annual audit of the  sector.

The  OAG  had  found  considerable  variation in port companies’ approach to valuations.

Others  involved in the industry are convinced  many ports  are  making  uneconomic  investment  decisions,  some  companies earning  less  than  2%   return on  equity.  They  back  the OAG   who  advised  port companies  to use   fair value, based on expected  cash flows to be  generated.

The  complaints to the Commerce  Commission have spurred  it to start a preliminary assessment of the conduct that is being questioned but it hasn’t embarked on a formal investigation. The  report  said a number of these complaints raised potential issues about various ports taking advantage of their market power in markets for the supply of services.

The national port network is also under review from legislators with the upper North Island supply chain study underpinning the government’s desire to integrate port, rail and road transport infrastructure.

Continue reading “Economic health of NZ’s port sector is being brought into question”