Photo: RNZ / Nate McKinnon
Dunedin City Council has voted to keep its indebted council-owned lines company Aurora Energy following public pleas not to sell the "family's silver".
The company owns and operates the network that delivers power across Dunedin, Central Otago, and Queenstown Lakes.
The sale proposal was aimed to reduce debt and create an investment fund that could produce millions each year - Aurora Energy has a forecast debt of $581 million by mid next year.
But the majority of public submissions wanted to keep the company, saying it was a strategic asset and it should not be privatised.
Mayor Jules Radich put the motion forward at a meeting on Wednesday, telling councillors that they did not have the mandate to sell the community's asset after such strong opposition.
"At this point in time, Aurora is a cash hungry beast. Yes, it is profitable but it has capital requirements," he said.
"It will be some time before it can pay a proper dividend, as we've heard, 10 to 15 years. But it will and it will grow in value because the cash that it is consuming is building value in the company. It's building infrastructure and it's funding growth so it is a good investment - no question."
Mayor Jules Radich. Photo: RNZ / Tim Brown
Most ratepayers he had spoken with told him they would rather pay higher rates and deal with the discomfort but keep the strategic asset than sell it and reduce rates, he said.
The decision was not unanimous with councillors Lee Vandervis and Cherry Lucas voting against retaining Aurora Energy.
Vandervis said keeping the company was the wrong decision that would increase debt, increase rates and diminish their opportunities in the future.
"Because we can't afford to fund it, Aurora is actually liability for the short and medium term and who knows for the long term," he said.
"Aurora is a Rolls Royce, high cost, high maintenance vehicle when the DCC can only afford to run a Toyota."
He believed they would revisit their decision in a few short years as they could not afford rate rises to keep funding Aurora's debt and need for investment.
Councillor Christine Garey said it was heartening to see such strong and informed engagement during the consultation process.
"The people have spoken loud and clear that you want us to retain Aurora and this is democracy at work," she said.
Councillor Carmen Houlihan called the decision a "no brainer", saying the council would regret selling the asset.
Councillor Brent Weatherall voted to support the community's call to retain, but said the family's silver was riddled in debt and he was concerned about the current and forecast debt of Aurora and the impact that would have on ratepayers into the future.
"My vote today is going to be under sufferance as I believe the best option for the city financially is to sell Aurora. Yet it is my duty to act for the majority whom I have had the pleasure of engaging with throughout the process," he said.
"The people have spoken and I will support their view to vote not to sell simply because the numbers are overwhelming."
Councillor David Benson-Pope said there was no doubt what the community wanted from the council.
"I think, especially for those of you in the room today, that you will already have realised that had that public voice not been so clearly articulated, the decision would have been very, very different," he said.
Councillor Steve Walker believed this would be one of the council's biggest decisions as it would have ramifications for years.
It was in the best long-term, financial interest to retain this strategic asset, he said.
"So that future generations can benefit from its commercial success. The future is never easy to predict but history will undoubtedly judge us around the decision ... I firmly believe history will identify (our) decision here today not to sell Aurora as a wise and inspired one."
Councillor Bill Acklin voted in support, but said it would not mean smooth financial sailing and he was worried about the impact it would have on rates.
Deputy mayor Cherry Lucas said Aurora Energy was a profitable company but questioned whether the council could cope with funding the investment it needed into the future and with the lack of dividends it would provide in the short to medium term.
"Next year we have to produce a nine year (Long Term Plan) that without the sale of Aurora will show rate increases that will be untenable to the people of Dunedin," she said.
Dunedin City Holdings Limited - which owns Aurora and is owned by the council - recommended the sale back in March, saying it would mean more consistent income, less debt, reduced risk by diversifying its portfolio, and attracting a premium price.
Aurora had not delivered a dividend to the Dunedin City Holdings since 2017.
The council consulted the public between March and May, receiving 760 submissions with the majority wanting to keep Aurora and 22 percent of submissions wanting to sell the lines company.
In the meeting agenda, staff said Aurora was increasing in value and generating a profit but it would need a lot of investment in the coming years and was in debt.
"That expenditure will consume operating cash flows and require more debt, and any dividend in the short to medium term would need to be funded by debt," council staff said.
The report listed the potential reasons to keep Aurora, saying it aligned with the majority of public submissions, that Aurora was a profitable company and that value was expected to increase over time if investments were made, the potential for future dividends, and the company as a strategic asset.
But council staff did not recommend either option, saying it was a challenging decision given the public sentiment and the financial challenges ahead.
"One option sees council retain a profitable company that requires ongoing capital investment in at least the medium term, but is then likely to be in a position to provide council with a cash dividend," the report said.
"On the other hand, the independent advice from DCHL directors is that a premium price is likely if Aurora is sold now and the council would receive a higher income in the short to medium term through having a diversified investment fund."