Part 1: Introduction

Results of our 2019/20 audits of port companies.

1.1
In this Part, we outline:

Why we prepared this report

1.2
This is the first formal report we have prepared about port companies. In previous years, we reported our findings in other reports, such as our local government reports, or in letters to chief executives and chairpersons of port companies. However, we consider that the port sector had enough significant matters in 2019/20 for its own report.

1.3
We discuss several common trends that our audits of port companies identified. We hope this report will prompt Parliament, the port companies, and the port companies' shareholders and other stakeholders to further discuss these trends.

The port companies covered in this report

Port Companies Act 1988

1.4
This report covers port companies incorporated under the Port Companies Act 1988 (the Act). The purpose of the Act is to promote and improve efficiency, economy, and performance in the management and operation of the commercial aspects of ports.

1.5
Currently, 12 port companies are incorporated under the Act. We show their location and give an overview of each of them in "Port company information for 2019/20" (pages 6-7), and the Appendix provides a summary of their financial and other information for 2019/20.

1.6
Section 19 of the Act defines all port companies as "public entities". As public entities, they are audited by the Auditor-General.

1.7
Most coastal centres in New Zealand will have some port infrastructure (such as wharfs). This infrastructure will generally be regarded as community assets and is owned by a council or a community organisation.1 This report does not cover these assets.

Every port company needs to operate as a successful business

1.8
Section 5 of the Act states that the principal objective of every port company is to operate as a successful business. The Act does not define what a successful business is.

1.9
In practice, port companies have worked with their owners to set out what it means to be a successful business. For some port companies, success depends on their ability to maximise returns for their shareholders. For others, their shareholders expect them to have a range of objectives instead of just maximising returns.

1.10
For example, Port Taranaki's mission is to "provide a safe harbour, services and facilities that [its] customers can rely on to make trade easy and enable [the] region to prosper" (emphasis in original quote).2 Lyttelton Port Company's purpose is to "sustainably facilitate trade for Canterbury".3

There are significant differences between the port companies

1.11
Although the 12 port companies all operate ports, they have some significant differences. This is partly because of their shareholders' views of what being a successful business means. There are also three important structural differences between port companies: ownership, size and scale, and operations.

1.12
All the port companies are either majority or wholly owned by councils. However, there are important ownership differences:

  • Three port companies have publicly listed shares traded on New Zealand's Exchange (the NZX),4 although they are majority-owned by a council.5
  • One port company is owned by a listed company, which is majority owned by a council.6
  • One port company is partly owned by other port companies.7
  • The other seven port companies are partly or wholly owned by one or two councils.

1.13
The port companies are also of different size and scale. The two largest port companies are Port of Tauranga and Ports of Auckland. Based on their results for 2019/20, these two companies own 51% of all of the assets (by value) that are owned by port companies in New Zealand and generate 38% of the revenue.

1.14
Tauranga is New Zealand's largest export port (48% of total exports by value in 2020 went through that port). Auckland is the largest import port (receiving 51% of total imports by value). By comparison, the five smallest port companies own 11% of assets, generate 13% of revenue, and process less than 15% of the exports and imports that go through New Zealand ports.8

1.15
Some of the port companies have operations that are not part of their core port operations. Generally, these operations complement their core port operations. For example:

  • Port of Tauranga and Ports of Auckland have investments in freight logistics businesses.
  • Six ports9 have invested in inland ports or freight hubs10 that help transfer freight to or from the port.
  • Many port companies own properties that are leased to third parties. Port Otago, in particular, has an investment property portfolio in Dunedin, Auckland, and Hamilton, with some commercial property development.

1.16
By comparison, Marsden Maritime Holdings Limited port operations are incorporated into a joint venture company, Northport Limited. Marsden Maritime Holdings also owns property in the area adjacent to the port operations and operates the Marsden Cove Marina complex. Port of Tauranga owns the remainder of Northport.

1.17 
These differences in ownership, size and scale, and operations make it more difficult to directly compare the performance of port companies.

Structure of this report

1.18 
Part 2 examines the recent financial results of port companies and the profitability trends apparent from their results.

1.19 
Part 3 discusses the capital expenditure trends of port companies.

1.20 
Part 4 summarises the impact of Covid-19 on port companies during 2019/20.

1.21 
Part 5 sets out other matters that we have considered in our 2019/20 audits of port companies.

1: For example, Grey District Council owns the port assets based in Greymouth, and Trust Tairāwhiti owns Eastland Group Limited, which operates the Eastland port based in Gisborne.

2: See Port Taranaki's website at porttaranaki.co.nz.

3: Lyttelton Port Company (2020), Statement of intent: A sustainable port, page 5.

4: Commonly, these types of organisations are referred to as "listed companies".

5: The listed port companies are Marsden Maritime Holdings (majority owned by Northland Regional Council), Port of Tauranga (majority owned by Bay of Plenty Regional Council through its company Quayside Securities Limited), and South Port (majority owned by Environment Southland). Ports of Auckland also owns 19.99% of Marsden Maritime Holdings.

6: Port of Napier is owned by Napier Port Holdings Limited, which was listed on the NZX in August 2019. Napier Port Holdings is majority-owned by Hawke's Bay Regional Council through its holding company Hawke's Bay Regional Investment Company Limited. Before listing, Port of Napier was 100% owned by Hawke's Bay Regional Investment Company Limited.

7: PrimePort is 50% owned by Port of Tauranga and 50% by Timaru District Council through its holding company Timaru District Holdings Limited.

8: We note that a key driver of port company revenue is the volume of imports and exports going through a port. Port of Tauranga Limited processed 15.8 million tonnes of exports and 9.0 million tonnes of imports.

9: These ports are CentrePort, Lyttelton Port Company, Ports of Auckland, Port of Napier, Port of Tauranga, and South Port.

10: We discuss the differences between freight hubs and inland ports in paragraphs 5.12-5.15.