Aurora Energy made an $11 million profit last financial year, which was returned into network. File photo. Photo: RNZ / Russell Palmer
A Dunedin City Council proposal to sell lines company Aurora Energy is one of the most significant decisions it's likely to make this term, says a councillor.
Aurora Energy supplies electricity to more than 200,000 residents across Otago and has more than $800 million in assets.
It also has a forecast debt of $570 million by mid-2025.
The council said the proposal aimed to cover that debt and use the expected hundreds of millions of dollars leftover to create an investment fund for more sustainable income.
Councillors voted on Wednesday to adopt a consultation document and a communication plan before going out to the public next week.
Submissions will close in early May, before hearings are held later that month, with councillors expected to debate and decide on the future of Aurora Energy by early June.
If approved, Aurora Energy will be up for sale in the second half of the year.
Councillor Andrew Whiley wanted the councillors to focus on the importance of engaging with the public, saying they should not overstep and try to decide which direction the eventual vote should go.
"It is about the consultation. It is about engaging the community and getting their feedback. Yes, we can add their slant to it, add your angles to it and your personal views," Whiley said.
"But at the end of the day, the facts are going to be put in front of the community."
Councillor Sophie Barker encouraged the public to read the documents and have their say.
"This is a huge step for us as a community. Probably one of the most significant that we make in our term in office, so we need to look at the possibility of sale through a large number of lens and that's why I urge the community to come out and have their say," Barker said.
The council-owned Dunedin City Holdings Limited - which owns Aurora Energy - had told them that there was a compelling case for selling the company, she said.
Photo: Aurora
She had already heard both sides from concerns about the council "selling the family silver and frittering away the proceeds" and their power prices and foreign ownership to ratepayers being upset about rates rises, the debt burden and the costs of interest rates.
"None of these decisions are easy and it's unfortunate councillors can't share all of the information we're privy to."
Councillors voted 13-1 last week to consult the public about the proposal during a public-excluded part of a council meeting.
Chief executive Sandy Graham said councillors had received independent, professional advice to aid last week's decision and a heavily redacted document from the meeting would be made available to the public.
The key reasons for the proposal were to provide a more consistent and sustainable source of income to council as Aurora Energy had not paid dividends since 2017, to reduce council debt and lower the risk by diversifying its investments in the new fund, the consultation document said.
How to use the income from the fund would be decided through annual and long term plan process, but it could include offsetting rates or repay council debt.
Councillor Jim O'Malley questioned why the public could not have a clearer picture of the potential income the new fund could earn.
Graham said it was a fine balance, as giving a more precise amount could show their hand to potential buyers about possible prices.
In the consultation document, the council acknowledged that Aurora Energy was likely to increase in value over time, but said it was uncertain if the company would provide a regular income to the council unless it was funded by debt and it was expected to take on more debt over the next decade, increasing the council's debt at a time.
"Aurora Energy is delivering reasonable capital growth, but, as an infrastructure business with growing demand, it is likely to require more debt to fund renewals and improvements in its network," the document said.
Aurora Energy was fined close to $5 million in 2020 after historic under-investment and maintenance of its network resulted in excessive power cuts.
It made an $11m profit last financial year, which was returned into network.
The consultation document said the company was expected to be in high demand with the council likely to set a confidential minimum price.
Wednesday's vote was 14-0, with councillor Marie Laufiso choosing to abstain.
She was the sole councillor present who voted against the council's decision last week to consult the public and have selling Aurora Energy as their preferred option.