How Lyttelton will fund cruise ship jetty

Tuesday, 2 May 2017

Lyttelton Port Company profits may be affected by its commitment to building a new cruise ship berth.

Lyttelton Port Company borrowings to pay for a new $56 million cruise ship berth may affect dividends paid to the Christchurch City Council.

The cruise ship berth is due to open in late 2019 and is a new addition to the forecasts and projects set out in the port company's 2017 statement of intent (SOI).

Council-owned LPC reports to parent company Christchurch City Holdings Ltd whose chief executive Paul Munro confirmed the berth would be funded from the port's own balance sheet.

This marks a departure from previous statements by LPC chief executive Peter Davie.

Cruise ships will eventually tie up to the left of the cranes, and the berth will require piles as deep as the height of the cranes.

* Lyttelton Port supports construction of cruise ship terminal**

As recently as December he advocated that the port partly fund the cruise berth with supporting investment from the council and Government, or by way of a passenger levy.

Munro said on Tuesday he did not think the port company would have to defer other earthquake-repair work or new developments to fund the cruise berth.

But it would take on more debt which would affect profitability, and dividends paid to the council might 'potentially be affected', he said.

That appears to contradict Monday's council media release which said it would continue to receive 'the current level of dividend' from LPC.

The company's current SOI predicts it will pay the council a $2m dividend this year, reducing to $1m next year and $1.4m in 2019.

The decision to go ahead with the $56m cruise berth followed a council directive after lobbying from the tourism sector and a working party convened by Innes Community Board member and then city councillor Ali Jones.

A cost benefit analysis on the project is being kept under wraps by the council, but a 2014 Christchurch and Canterbury Tourism report estimated port earnings would grow from $2.1m to $4.1m per year as cruise visits increased.

Munro agreed that the cruise berth was expected to be a profitable investment.

'It's crystal ball gazing in some respects. Like any sort of project you work out what you think will happen and it will be better or worse and not necessarily what you think.

'There are ups and downs in different years which makes it difficult to forecast, but the port has a diversified portfolio of customers coming through the port.'

Under the terms of its SOI the port company may, at the request of shareholders, undertake activities that are not consistent with normal commercial objectives.

And where necessary, a specific subsidy could be sought to cover the cost ofsuch activities.

'This may be the case in relation to the development of a dedicated Cruise Terminal at the Port,' the SOI said.

Revenue was expected to be $109m in 2017, $126m in 2018 and $128m in 2019. There were no profit after tax forecasts included in the SOI.

The next Lyttelton Port SOI is due to be finalised by the end of June in partnership with Christchurch City Holdings.