Port Marlborough will look to borrow from its parent company, the Marlborough District Council, to build a new multimillion-dollar ferry terminal, to avoid going into a "substantial amount of debt".
An artist's impression of what Picton's new Interislander terminal could look like. Photo: Supplied / KiwiRail
The Picton ferry terminal upgrade was one of 11 projects fast-tracked by government in June to help stimulate the country's post-Covid economy.
The project - a partnership between Port Marlborough, the council, KiwiRail and Waka Kotahi New Zealand Transport Agency - was needed to accommodate KiwiRail's new larger ferries.
It was expected to create up to 200 jobs and take four years to complete.
While the project's four partners had not yet agreed who would pay for what, the port expected to fork out for a new Interislander terminal building, wharf, and seawall, as these were on its land.
Picton's new ferry terminal will include an elevated walkway. Photo: Supplied / KiwiRail
Port Marlborough chair Keith Taylor told councillors at a meeting last month the port would need to enter into "a substantial amount of debt" to fund the proposed changes.
"Port Marlborough will be looking to its shareholder the MDC [Marlborough District Council] to fund this debt for us," he said.
Taylor was speaking on the port's annual report, which declared the upgrades an "extremely significant investment".
Speaking after the meeting, council chief executive Mark Wheeler said the council had long understood it could be borrowing for the port, as its AA positive credit rating - the highest in New Zealand - gave it "attractive" financial options.
"Because it's a significant investment, we'll have to consult the public on it, once the full costs and business case are complete. We won't confirm that borrowing until we've finished consultation and councillors have agreed to proceed," he said.
Funds the port borrowed could be repaid with added return under its dividends. It paid the council $3.5 million last year.
Wheeler said the borrowed money would have no impact on rates. The port's larger payments could even reduce rates.
"In the long term, it will make money for ratepayers," he said.
This year's annual report showed the council was sitting on $1.8 billion in assets, and a "proportionally small" $20m debt.
Port Marlborough chief executive Rhys Welbourn said while the proposed upgrades were set to cost the port "tens of millions", it just needed to borrow enough to cover part of the project.
The company was expected to lose $3.6m this year following a coronavirus-caused drop in log exports and cruise ship visits to Picton, but was still set to end next June with a $13.4m profit.
"Ultimately, it comes down to fact that we're a port company. KiwiRail are our biggest customer. They're getting a new fleet of ferries, and we want to accommodate that in the long term."
KiwiRail chief operating officer of capital projects David Gordon said the organisation planned to invest more than $1bn into the project, including funds towards Picton's new terminal.
Its terminal was nearing the end of its life, he said.
Port Marlborough's wharves were also in need of replacing.
Speaking at a separate meeting last Thursday, Gordon said KiwiRail wanted Port Marlborough to build the new 280-metre wharf.
He said KiwiRail had been a customer of the port for 59 years and wanted to commit to another 60, under a new contract.
"We are absolutely entwined with Port Marlborough and the Marlborough District Council ... We don't have anywhere else we can take our ships or our railway line ... There is no 'Plan B'."
When asked which organisation would cover the cost of building a bridge over the railway line at Dublin St, to prevent motorists from waiting on trains, Gordon said it was still being decided.
"I don't think it should be us [KiwiRail]," he said.
Councillor Francis Maher, holder of the roading portfolio, said he did not mind who paid for it, "so long as it's not the council".
Construction was due to begin on the terminal next year.
KiwiRail announced this week it would put its new North Island ferry terminal at Kaiwharawhara, not Wellington's inner harbour, as first proposed, after backlash from councils and the public.
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