Airport report - public

The Queenstown Lakes District Council has made public a detailed report regarding last year’s issue of shares in Queenstown Airport Corporation to Auckland International Airport Limited.

“I received the final report from PricewaterhouseCoopers this morning and as indicated we have now made that report publically available at the first possible opportunity,” QLDC chief executive Debra Lawson said.

The 73-page report was a comprehensive traverse of Queenstown Airport, its constitution, the July 2010 transaction, the regulatory environment within which it was made and the airport valuation.

“This is an independent look at the deal; giving our community the first opportunity this Council has had at its disposal to put information squarely in the public arena,” Ms Lawson said.

The focus of the report was a professional opinion regarding fairness.

“A complex set of issues were involved in establishing whether the first part of the deal, that is the issue of 24.99% shares was fair. If you peel away those issues, which includes a series of factors to establish a fair market value, then PWC has been able to give some comfort,” Ms Lawson said.

Page 41 of the report finds that the price paid by AIAL for the first tranche shares (24.99%) was $6.91 per share:

“This incorporates a discount of approximately 7.5% on the value of 100% of the shares assessed by QAC and AIAL at that time of $7.47 per share. This discount is relatively low (and the price per share relatively high) for non-controlling, albeit large shareholding and may, arguably, have included a ‘strategic premium’ to gain a cornerstone stake.” – PricewaterhouseCoopers.

The report also explored the second tranche, the option to issue further shares and clearly outlines the various ‘control’ thresholds.

The QAC and AIAL announced on Monday that both parties had agreed to withdraw from the agreement to issue further shares up to 35%.

“Arguably then this changes the relevance of the PWC opinion regarding the second aspect of this deal, however it is still important disclosure for the community,” Ms Lawson said.

Simply put, the report found the issue of further shares would have come down to two things, cash versus a loss of control.

“On one hand Queenstown Airport could have received further cash of between $11 million and $21 million, of which the community could have received a sizable portion (around $10 million) as a dividend. On the other hand if Council ownership fell below 75% it would no longer have control of the constitution,” Ms Lawson said.

In the event that the Council’s shareholding fell below 75% page 38 of the report stated:

“It will no longer have control of the constitution, be able to pass special resolutions and pass ordinary resolutions without a meeting of shareholders. It will still have in excess of 50% of the ordinary shares and so will be able to pass ordinary resolutions and control the composition of the Board. However moving below 75% will diminish the control the Council can exercise over the Company.” – PricewaterhouseCoopers.

“The report is now available to anyone that would like to understand the detail,” Ms Lawson said.
The report is available on the Council website www.qldc.govt.nz or a hard copy can be collected at Council offices in Queenstown and Wanaka.