Port unrest

The Container Terminals at Fergusson and Bledisloe will strike this Friday, this story has been percolating along largely behind the scenes. That is all set to change this week.

Behind the pressures is the desire of the Port Company to make labour reforms, and alter work practices at the behest of the left controlled ARC. What has not been reported on is the weak financial position Ports of Auckland is in.

When the company was privatised, and taken within the Auckland Regional Council (Auckland Regional Holdings) the balance sheet was healthy. Since then the company has “purchased” the Maersk business, and been viewed as a prime funding source for the Regional Council’s social agenda in order to position favourably Mike Lee’s personal crusade to be the first Super City Mayor. These two factors have combined to put the Port Company into a difficult position. Add a recession, and the outlook is not very good. Be prepared for the Port Company to try and slug its customers in every way for anything that they do. This may come in the form of increased charges or decreased service levels, both of which are currently being experienced by Port users this blog has spoken to.

The Port Company have been very hard nosed with their trading terms and conditions, and it is obvious that they will seek to “tax” business to replace the funds sucked out to satisfy the Regional Council’s social agenda. I do not know exactly where the money has gone, but I would hazard a guess that the Regional Council has effectively been prepared to sacrifice the Port Company to build some train lines and some other “empires”.

The Port response to “tax” business by increasing charges is effectively a tax on the productive sector to fund a social agenda.

The proposed merger between Tauranga and Auckland was dismissed by the Regional Council as they considered that the Auckland Port was a much better business than Tauranga, and they wanted a dominant position (presumably so that they could suck more money out?). Now the situation is visibly turned, and Tauranga (who report publicly) will show a profit of around $40,000,000 while Auckland is looking to be around $8,000,000 if they are lucky. There will have to be some rearranging of numbers to achieve that! Four years ago the position was reversed and Tauranga was lucky to break ten million. Tauranga now probably has the money to bail Auckland out of the mire.

This doesn’t even consider the debt mountain referred to in yesterdays Sunday Star:

A $105.5 million debt time bomb is putting pressure on Ports of Auckland owner Auckland Regional Holdings to inject cash into the company for the first time.

The money must be repaid by December 18, and Ports of Auckland chief financial officer Wayne Thompson told the Sunday Star-Times he is “highly confident” the debt will be refinanced in time.

Analysts and industry sources have welcomed those assurances, given the fact that the $105.5m debt has blown the Port’s current liabilities out to $131.3m, more than four times its current assets of $28.3m and, according to the textbooks at least, a position of significant technical insolvency.

There is speculation the balance sheet crisis was a factor in the departure of Ports chairman Gary Judd, forcibly dumped by ARH just over a week ago.

In the four years since it bought the Ports shares it did not already own, ARH has stripped out more than half a billion dollars from the former listed ports company, earning the investment arm of the Auckland Regional Council the sobriquets of “corporate raider” and “asset stripper”.

It could be a long cold hard winter on the Port. Watch for extreme conditions, with some cold winds and a lot of hail, not to mention wailing from the unions. One thing certain is that there will not be a lot of warm weather for industrial settlements for some time (unless they merge with Tauranga!!)

There is a real case to release the Port from its political handcuffs, and get out in the market again, and perform like a business, not a social service.

Auckland Regional Holdings has effectively neutered a very efficient organisation, and left no money for the Unions to get in wage settlements.

I wouldn’t hold much hope for the Unions in obtaining any concessions. The irony is that the left wing policies of the ARC and ARH have effectively destroyed the left wing aspirations of the Union in this case and ultimately Mike Lee’s asporations to become the Super City Mayor.

Merging with Tauranga would make so much more sense now. It could even free up a goodly portion of Auckland’s waterfront for meaningful development allowing cash to be released to build better infrastructure between Tauranga and Auckland.