Although its increased value and profitability would suggest it is something worth keeping, CCHL thinks otherwise, which I agree with, because Enable is just part of the picture.
As well as full ownership of Enable, CCHL has a 75% stake in Christchurch Airport and a 90% stake in the Orion electricity lines company.
It also fully owns the Citycare construction, maintenance and facility management business; the EcoCentral rubbish and recycling facility; and the Lyttelton Port Company.
And it’s the port company, I think, that needs to be front and centre of any decisions regarding future council ownership of Enable. Which I’ll get to.
First, though, why sell? According to a report by Macquarie Capital and Deloitte, the company has largely delivered on what it was set up to do: roll out fibre broadband infrastructure in the Greater Christchurch area.
What’s more, CCHL believes the company’s increased profitability and increased value makes it attractive to potential buyers. In other words, there may never be a better time to sell. And it has recommended that city councillors give the go-ahead for it to be put on the market.
Which means one thing: cue the asset sales bunfight.
Someone likely to be in the sell camp is city councillor Sam MacDonald, who chairs the council’s finance and performance committee. Not that long ago, he did some numbers and thought CCHL could get as much as $1 billion for Enable.
Publicly, CCHL isn’t being quite so bullish. In its latest annual report, published last week, chairman Bryan Pearson and chief executive Matthew Slater only go as far as saying that selling Enable would allow debt to be paid down and investments made elsewhere.
No doubt, after considering the pros and cons of retaining its ownership, CCHL will have a price in mind. This may sit somewhere around the latest valuation of $776m (or less), somewhere closer to Sam MacDonald’s $1b or somewhere in between. Who knows?
What we do know is that, even with $275m of debt on its books, the sale of Enable would free up hundreds of millions of dollars that could be put to better use.
This is where my thinking turns to the Port of Lyttelton.
Because of growing demand from South Island exporters and to accommodate bigger ships, the council-owned port company plans to spend $821m expanding its container terminal and building a new deepwater wharf.
CCHL is going to put in $300m. The rest is going to be a mix of borrowed money and the port’s own resources.
But why burden the project with unnecessary debt when there is money tied up elsewhere?
Which is why I think it would make sense to sell Enable and pour the proceeds into the port expansion. Because, long term, an expanded port will deliver more for the local economy than a fibre broadband company ever will.
Not that the development doesn’t have potential downsides. For example, in a report released late last month, Parliament’s transport and infrastructure committee raised concerns about the impact Lyttelton’s expansion could have on smaller regional ports, such as Timaru and Otago.
But it also acknowledged the significant benefits the expansion would deliver for Canterbury. Which is the point city councillors need to focus on.
They also need to remember that they call these companies of theirs strategic assets for a reason. Any decision about Enable’s future ownership needs to be made with strategic thinking, not parochial narrow-mindedness.
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