Received from Christchurch Driver [CD]
Fri, 16 Dec 2016 at 1:04 a.m.
Your correspondent has been spending some time in airport bookstores recently, and it is hard to escape the plethora of get-a-plan-and-get-your-life-in-order books that seem to breed like unwanted spawn in such places.
While your correspondent has no truck with such boilerplate muck, he will admit to a quiet sense of satisfaction this week of some goals achieved. It is a good thing to have a goal, and a plan to get there. This year, your correspondent was disgusted by the arrogant lawlessness and simply fantastic level of self interest and waste of public funds by DCC and DCHL directors at the Noble subdivision, Yaldhurst. He made it a goal to put his shoulder to directorial posteriors and assist in the push of the dismal Delta directors into the Delta wood chipper (leased of course). Aided by some insider knowledge (what? – reveal my sources – never !) and plenty of tangential side trips, your correspondent is proud to think he has helped (in some small way) What if? and the majestic Richard Healey achieve a clean out at Aurora and Delta.
This week’s dismissal of Parton and McLauchlan is the start, and more will follow.
Mr McLauchlan’s risible statements in the ODT yesterday show your correspondent was 100% correct when he predicted that blame would be sheeted home to That Bad Man, John Walsh.
Mr McLauchlan’s arrogance was in full view with his claims that his decision to step down was unrelated to the billion dollar problem he has co-authored. Mr McLauchlan cannot admit what all of Dunedin knows – he troughed literally while lines exploded, and failed as a director. To do so would jeopardise his other sinecures, and Mr McLauchlan is nothing but self interest. Mr McLauchlan had absolutely nothing to offer the DCC, Delta or DCHL, and we should be at least grateful to Mayor Cull that the scales appear to have finally have fallen from his eyes and he sees Mr McLauchlan for what he is.
Let us not forget the most telling example of Mr McLauchlan’s invertebratedness : In the 2007 directorial decision to waste $8-9M at Luggate Mr McLauchlan’s sole contribution was : “If the other directors agree the I agree”. Not forgetting also that in the case of the Scenic Circle Dunedin City legal dispute with the JV partner, Mr McLauchlan was found by the Court to be an unreliable witness.
Mr McLauchlan is so toxic he doesn’t just need to be signposted, he is a walking talking accounting contamination.
On the subject of contamination, Kyle Cameron – stand up and take a bow, Kyle Cameron! – has made it very sure that Grady Cameron will never lead either of Delta or Aurora, by recommending that they need separate CEOs. As Mr Healey has said, the board will do to Grady what he has done to many others – disestablished their positions, creating new roles, and of course Grady will not quite have the “most appropriate skill sets” for either role. Sorry about that old chap, terribly close call of course, better luck next time– (in another continent please).
Grady, you have just been right-sized.
Another right-sizing would be to appoint Kyle Cameron to the Aurora board, and remove former ORFU/Highlanders director Mr Thompson with links to the $5M ORFU pokies scandal. Mr Thompson is tight with Mr McLauchlan of course, Mr McLauchlan being the Chairman of the Highlanders at the time the South Auckland pokies scandal was in full swing. McLauchlan – scandal – bees – honey.
Not right-sized, of course, is the matter of the Aurora replacement budget. We all know – now – that Aurora were going to spend $443M in deferred maintenance over 10 years (yes, stop dissembling Grady, it’s $443M, not $417M, but what they haven’t set out is where the money is coming from. Lines charges are fixed, and in very, very broad terms if we, the ratepayers, have to spend $443M to basically maintain what we have – then the very big question is – what is the depreciated, deteriorated asset worth …right now?
[An alarming example that comes to mind is the DCC purchase of the Dunedin Railway Station in the early 1990s. A wonderful asset now (pity about the decks) after a number of millions have gone into its restoration and upkeep over a 10-12 year period ….but what did the DCC pay ? ….the answer ? precisely one dollar.]
Now the Aurora 2016 Annual Report says in its headline “Trend Summary” (aka the good news feel-good piece early in the report at page 12) is that the ratepayers have equity of $183M in Aurora, and equity to assets is 42.1%, but unsurprisingly (this is Grady and the gyroscope we are dealing with here) the very bad news – the debt is $253M and is not going away – doesn’t quite make it into the good news piece.
So if we are charitable and assume that only say $250M of the $443M is actually for direct Dunedin infrastructure renewal and the balance being for actual expanded capacity then, then $250M of shareholder equity is needed for the upgrade. But wait Batman ! We only have $185M of equity. Holy exploding potheads Batman !! What do we do ? Batman: Elementary, my dear Doctor Parton —In the immortal words of Christine Fletcher, mayor of Auckland in 1986 when asked the same question by Fletcher Construction (of the cost to finish the Aotea Centre), “That’s what the ratepayers are for.”
Readers, you might well be thinking at this stage, CD has it wrong again – when I put in a new kitchen and bathroom in my villa in Belleknowes, it was worth more, so it didn’t matter that there was more debt ….because the asset was worth more. However, the value of power networks is determined by the Commerce Commission, who regulate what amounts each network can charge ….based on the value of the asset. Your correspondent surmises that the next scandal to unfold at Aurora is that resident Delta toxicologist, Matt Ballard of Capability and Risk, has overseen a massive overstating of the present value of the network. The bottom line is : with $250 – $400M of work needed FOR MAINTENANCE, ie NOT GENERATING EXTRA CAPACITY, it is worth nowhere near $436M right now. What does that mean? It means, readers, that the “jewel in the crown” of the DCHL, our cash cow HAS NO SHAREHOLDER EQUITY and has 100% debt to equity. Hilary Calvert is correct – if this were DC Ross, or any other private company, the receivers would have been called in long ago. However, accountants like the caustic Mr McLauchlan prefer companies with no shareholder equity because the returns on equity are out of this world…. until something happens.
Readers, what dissembling Mayor Cull will never tell you is that just like in Central Otago, as helpfully described by Nick Loughnan in the ODT a few weeks ago, you are about to experience in your future either some eye watering rates increases or, if the Commerce Commission allows, some similar exponential line charge increases. It’s one or the other. There is no other way.
Mayor Cull is aware of the consequences set out above : he said at the outset of Mr Healey’s crusade that he did not want public confidence shaken.
The questions or scenarios above are not pleasant – as the biblical line goes, these are hard questions, who can answer them ? They are the lines industry equivalent of farting in church – rude, inappropriate but better to get it out in the open before there is a big mess (or at least know the mess is coming). Yes, the air will be blue for a while – a long while. Messrs McLauchlan, Parton, Kempton, Frow, Wood, Thompson have done more than farted, they have created a stinking “code brown” mess. They will not be missed.
Legal advice to the DCC on new 3-term limits for CCO directorships ‘may have’ forced this change. Debatable.
█ For more, enter the terms *delta*, *aurora*, *grady*, *luggate*, *jacks point*, *dchl*, *auditor-general*, *noble*, *yaldhurst* or *epic fraud* in the search box at right.
Posted by Elizabeth Kerr
This post is offered in the public interest.
*Image: markeweebly.com – farting dog by mark cable, tweaked by whatifdunedin