On 30 November John Fisk gave an update on the voluntary administration process to a group of Central Plateau tourism operators. The proceedings were informal and mostly specific to the tourism industry. But some parts were of interest to the wider mountain community.
PwC have provided a copy of the presentation for distribution as a number of local tourism operators and interested parties were unable to attend on the night.
We've also collected a few notes below from attendees who were willing to share their impressions of the update from John. The situation is evolving fast and even the government decisions discussed at the meeting are subject to change and input. Nevertheless, the discussions are useful background for the wider mountain community.
Voluntary Administration Process
John started by acknowledging the time that Ngati Rangi have taken taken to talk with PwC and explain how important the Mountain is. He acknowledged the hosts (Kings of Ohakune), the local council, Jono Dean (CEO of RAL) and Sam Clarkson who is on the creditors committee.
John explained to the attendees that the Voluntary Administration process is one where there's essentially 3 possible outcomes. One is that the administrators restructure the business and hand it back to the directors. Second, the administrators do something that creates a better outcome than liquidation. And the third outcome is liquidation.
The first option of handing it back to the company or to the directors, that's not really an option. In this case, there's too much debt. The structure of the company is not right and the administrators just don't see that as being a practical way forward. So we're not gonna be handing the company back to the directors.
The next thing is, can the administrators get a better outcome? And that's what we've been working really hard to try and get a resolution on that. And I'll go into some of the the detail of what we've been looking at.
The last option of liquidation is still very much on the cards. But it's the worst possible outcome.
It costs about $1.5 million a month over the summer months and to prepare for opening next season. That is things like power, insurance, wages and anything else. And this is one of the harshest environments anywhere in the world for a ski field.
John noted that on the Turoa side it's about $15 million of the deferred maintenance and things that need to be done over the next 5 years. And on the Whakapapa side there's about $10 million of work that needs to be done. He admitted that perhaps a small amount of that that may be "nice to have" rather than essential. But in the short-term to get through to the start of the 2023 season, the company needs about $9 million.
Economic Importance of the Region
In terms of the implications for the area, what we know is that pre-covid the mountain was worth something like a $100 million a year to the local economy. That's huge as is the employment. It's the largest employer in the area as well. That gets up to 700 people at the peak of the season, and there's about 880 additional jobs that are supporting the industry, whether that's in rental equipment, accommodation or hospitality, everything else.
MBIE asked PwC to conduct a survey that was for just life pass holders. The administrators have current email addresses for about 11,000 of the 14,000 life pass holders. The MBIE survey focused on willingness to pay a renewal / transfer fee to continue using those life passes.
PwC also separately surveyed the wider mountain community. John pointed out for example, that there are about 12,000 members of the mountain clubs, but apparently only about 2,000 of those members are life pass holders. So that's an example of a group of 10,000 people who are really interested in skiing, but are not life pass holders.
The results of the surveys added up to about $25 million.
PwC asked several questions across the surveys and some of the results included:
Approx 3,000 life holders that they would be happy to consider paying $2,500 to transfer their life pass into a new company so that, that had the potential to about $7.3 million (but we're looking for $15 to $20 million).
Approx 1,600 people said they would buy a new life pass at $5,000.
Approx 300 people said that were prepared to buy the right to transfer their pass.
Approx 4,900 said they would buy a 5 year pass at $2,000.
And there were about $900,000 in donations offered.
New Co Structure
One of the things that PwC received a lot of feedback on is if people are going to purchase a significant product with a long time horizon to deliver the service from this new company, what does it look like? Who are the shareholders? Who are the directors? What's the objectives? How's it going to interact with the local community? How does work?
Year Round Tourism
John reinforced the need for a 12 months of the year view of tourism in the region. He noted that the whole idea of the Sky Waka was to bring in sightseers during summer. He admitted that it cost a lot of money, but now that's built it's a terrific asset that's sitting there. The hotels in around of shadow of the Mountain, have such great potential. You've got the Tongariro crossing. Railway line that comes through the region. There's so much that could be done.
Offering Shares to the Community
John commented that one of the ideas they had considered was to tap life pass holders to buy shares in a New Co. In the administrator's view, offering shares would cost money and take time. And looking at the company's "funding envelope", in their view the company doesn't have that time available at the moment. John was also of the view that if the company starts selling shares, then we get into the Securities Act and needing a prospectus or a public disclosure document so that creates problems.
Use of Funds
A question was asked: Is the $15 to $20 mil, that needed for NewCo in addition to the $9 million to get to July 2023? Or is the $9 mil included in that $15 to $20? John explained that the $15 to $20 is made up of:
Repayment of the recent $4.5 million emergency loan that the government made.
Money to be able to carry out the operations.
A little bit in the reserve in case you have another bad year.
Capital to to maintain and improve the the assets.
A question was asked whether the Watershed meeting can that be moved back out to May. And why was it brought forward? John replied that:
"There's no point in having a watershed meeting in May if we run out of money in December."
John explained that one of the powers that a liquidator has is to disclaim onerous property. So the license from DOC could be considered onerous property because there's an obligation to make good under the deed. So that means that essentially DOC, the government may well have to wear the cost of remediation.
John mentioned that he sees the potential solution being "closer to home" than a big operator or a big corporate coming in.
I think it's something that would be difficult for a big corporate to swallow, and I don't think that's what a lot of people would want.
Cabinet Decision Making
John shared that the government funding being talked about is a decision mainly from cabinet because it's somewhat out the ordinary course of normal government funding. So Minister Nash is involved, along with Grant Robertson, and the Prime Minister.