Richard Nacey from PwC and Robert Krebs from the Save Mt Ruapehu Group appeared on National Radio this week.
Will the Ruapehu skifields re-open this winter?
Listen here: https://www.rnz.co.nz/national/programmes/ninetonoon/audio/2018881073/will-ruapehu-ski-fields-re-open-this-winter
Radio NZ Interview Transcript
Ruapehu skiers will be able to take to the slopes this winter but many questions remain about how Whakapapa and Turoa skifields will operate. Ruapehu Alpine Lifts remains in voluntary administration but Administrator John Fisk has announced it will soon sell winter season passes for 2023. No precise date or costs has been outlined. Nor has the situation for life pass holders been clarified. RAL had received $10 million from the Government but Administrator John Fisk says more is needed. A group of life pass holders and the Save Mt Ruapehu SkiFields group are soon to form an incorporated society as part of a bid for the skifields to be community owned and not for profit.
Richard Nacey
PwC partner and RAL co-administrator Richard Nacey is with us. Richard, can you explain what is the plan for offering seasons passes this year?
Yes, at the moment we're in the process of getting ready to launch the season pass campaign. So the Government has, as you've mentioned, funded us over the summer to carry out the key maintenance tasks and to prepare the skifields for the winter season. And now what we really need is the assistance through the skier and rider community to purchase those season passes to ensure that we have the required support to open for winter 2023. So in terms of timing, over the next week or two we're looking to release the pricing, the benefits that will come from the passes and also the terms and conditions around them, and then we're expecting a launch date of around the end of this month.
How much do you need to raise from seasons passes to have a viable season, and is it on both fields, both Whakapapa and Tūroa?
We'll be selling a season pass that covers skiing and riding for both Whakapapa and Tūroa, as we've done previously. In terms of the amount that we need, I think it's difficult to answer at the moment because that really is combined with what we might receive in terms of funding for an overall solution to get this thing sorted out for the longer term.
Okay, so there's two components, right? There's getting through this season and then there's having a viable entity going forward. And how do they speak to each other? If you're going to release seasons passes within a week, you must have a price, you must have an estimate of how many tickets might be bought. Is that only going to partially cover the costs of running the season?
What we want to do is, through the season pass campaign, is generate revenue to allow us to get through that winter 2023 season. And what we're looking to do, and appreciating that there's a level of uncertainty here, is to put the funds that we receive for the sale of those season passes into a trust account that will be released at the opening of the season. And the reason for that is that with regard to the timing, so the timing that we need to have to come up with a longer term solution is around the middle of May, about the 9th of May is when the watershed meeting is.
You need some short term cash flow?
We've got funding to get through to the start of the season, but what the skifield needs is the funding from the season passes to see it through to the end.
What I'm trying to get at is how much you need in total to run through this season. I appreciate, perhaps we'll get to part two and then we'll come back to the actual costs and terms and conditions and everything else. Because part two involves the life pass holders and coming up with a solution that may involve them stumping up again in order to be part of a viable entity going forward. Now, are you telling me that the resolution of that situation is also part of the season's pass launch this year, that there's an overall package in two parts?
Well, I think what we need to do is we need to establish that there's adequate support for RAL or skiing on Mount Ruapehu going forward. And as you say, there's two components to that. So we need a successful season pass campaign to generate cash to allow us to open for winter. But we also need to have an entity going forward that is appropriately capitalised to enable skiing and riding on the mountain for years to come, rather than being in the situation in a year or two's time.
What is confusing for people, I think, is being asked to pay for a season's pass before knowing whether what they pay as part of the solution, say what a life pass holder pays as part of the long term solution, being asked to stump up ahead of that, right? Is that a timing issue? Is it simply that you can't resolve the bigger picture in time to be ready to go this season, that you do need this interim funding?
What we want to do is we need to get on and have a season pass campaign to provide skiers and riders with the ability to plan for going into the winter 2023 season. In terms of the life pass holders, we will be releasing further information to life pass holders around how they fit into this in due course. But what we want to do is provide life pass holders with a longer term solution, rather than just letting them know how they get through 2023. But they are intertwined.
Will the season pass campaign have to reach a certain threshold in order for it to be viable for this year to go ahead?
It needs to be successful. If we don't sell any season passes, then I think we've got a big issue. I'm not going to put a number on what we need to sell. But what we do want to do is sell as many as we possibly can.
You need in the thousands, don't you?
Yes, yes, certainly in the thousands. What we'd be looking to do is try and sell season passes in similar volumes to what we've sold them previously.
What were they, by the way? Did they get as high as 20,000 some seasons?
I believe so, yes.
And do you need to be in that vicinity, or would half that amount be sufficient? Give us a ballpark at least.
Look, I'm not going to. I can't be drawn to that. I don't think we're expecting 20,000, but we want to have a reasonably successful season pass campaign that generates a reasonable amount of revenue and gives people a little bit of certainty that they'll be able to ski on Whakapapa and Turoa during the course of the season.
Have you already decided a price point for it?
We're working through that at the moment, and we'll be releasing that hopefully at the end of next week or the start of the week following.
Will it be less or more than what it's been in the past?
We've actually come up with what we think is a relatively interesting approach. So there'll be, I think, three different tiers of season pass with different levels of benefits. They will be priced well and attractively priced. And we're looking forward to releasing that in the next week or two.
How much of the mountain will be open, each of the mountains being open relative to previous seasons?
So there'll be top to bottom skiing on both sides of the mountain, which is fantastic. So I think it's about 10,050 hectares of terrain, which is really exciting.
Some modification to what's typically available at Turoa, is there?
We're still working through that, but what we can say is that provided there's a good level of snow, you'll be able to go right to the top and ski right to the bottom.
One of the questions the Life Pass holders will have is, if we're potentially going to be asked to pay hundreds or a thousand or more to secure the future of this company or entity, will this year's seasons pass be deducted from what we're asked to stump up?
Look, we're still working through that. And as I said earlier, what we want to do for life pass holders is provide them with a longer term solution rather than just a bandaid for 2023. So we're working through that at the moment. It's relatively complex given the timing, but we're hoping to go out to Life Pass holders, certainly before the watershed meeting and let them know what the position is.
When is the watershed meeting?
9th of May.
Do they need to buy their seasons passes in advance of that, or can they wait to buy? This is what's confusing people. How much am I going to have to pay if I'm going to be part of the solution?
We will be releasing information to Life Pass holders regarding how they fit with a season pass in the next week or two when we release the season passes and then the longer term requirements, if any, will be released ahead of the watershed meeting.
What's holding up being able to give us those details this morning? How it's going to work, what's still to be done in the next week or two?
Yeah, look, I mean, we're planning the launch of it. There's a bit of marketing that needs to go behind it. We're excited about releasing it. We've set a launch date and we're sticking to that and working towards it.
Are there still standalone investors waiting in the wings to buy the whole business? What's left on the table as a solution for this business?
Look, I think there's a number of stakeholders that are likely to be involved in a solution. I'm not able to discuss who those are, but I think there's a fair bit of interest and we're hopeful that we can reach a solution that we're able to recommend that creditors accept on the 9th of May.
Do those stakeholders include private investment in some form?
I'm not going to be drawn on that at the moment, I'm afraid.
You've said there'll be more of an ask for government funding. When will that happen and what will it be for?
I don't think I have said that, I'm afraid. We've got funding that will take us through to the start of the season and government may or may not be part of the sort of longer term solution that we propose at the watershed meeting, but there hasn't been an additional request to government at this stage.
They could be part of the solution that you're talking about at the stakeholders meeting?
Potentially.
Where are you at with things like staffing and recruitment for this season?
So we've got 77 staff currently employed and we need to ramp up to a peak of around 420 at peak winter. So there's a lot of work underway at the moment to recruit staff. I think we're in a challenging environment, as everyone is, but we're working through that and making good progress.
The crunch meeting with creditors in May, is this a realistic time frame for a long-term solution to be presented, just two months away now?
We think so. There's been a lot of hard work that's been going into this. We've had a number of months already and I think doing it ahead of the winter season in May works well in terms of timing. There's still a lot of work to do, but I think the timing is fine.
We've mentioned the possibility of private investment, some sort of government involvement, stakeholding, loan, whatever. And we've mentioned also the Life Pass holders. What is the status of their bid for a crowdfunded option? Is it being seriously considered?
Everything's being seriously considered and we'll look at any option that allows this to continue into the future and be well capitalised so that we're not here in another year or two's time. What I can't do is go into any detail, but we're certainly considering all options, including anything put forward by the Life Pass holder group.
Considering all options, but just two months out from that meeting, do you feel like you have the shape of a proposal pretty well fleshed out and it's a question of whether it stacks up or not?
Yeah, I think we're making good progress. I think the proposal is coming along well and you're right, it's going to come down to whether it stacks up and whether it gets the support of creditors on the 9th of May.
Rolling back to the season pass launch that you're about to make then, how much is riding on those numbers coming through and there being significant numbers?
Look, there's no doubt that it's important and we need to see some really good support from those skiers and riders that want to buy a season pass. It is important and I think we need both a successful season pass campaign and we need a successful solution, longer term solution, that we can put to creditors in May.
How would you describe the mood of the administrators, yourself and John Fisk and others, on the prospects for the Ruapehi skifields going forward?
Yeah, look, I think we're in a situation that's inherently uncertain, but John and I are reasonably confident of where we're at. There's been a lot of hard work that's gone into it and there's a bit more hard work to go, but I think we're confident that we'll be able to put something up to creditors. There's things outside of our control, but to a certain extent, the uptake in season passes, but we're doing what we can and working really, really hard to make sure that we've got a sustainable solution for everyone that loves skiing and riding on Mt Ruapehu.
Just a quick update on how much was or has been loaned by the government to date, if you would, Richard. So we've got a facility of $10.5 million in total. 10.5, okay, thank you.
That is Richard Nacey, who is a PwC partner and RAL co-administrator.
Robert Krebs
Robert Krebs we'll bring in now from the Life Pass Holders Association, also a member of the creditors committee. Robert, there's some optimism there coming out of the RAL administrators, but still not a lot of detail, either on the shape of what might be put to creditors in May or on the prospects for the season pass holders role. What's your view of where things are at?
I think it's really positive that we have an announcement that there will be a 2023 season. Obviously, there's still a lot of uncertainty around that with who will be running it. Will it be RAL or will it be a New Company? That uncertainty will be causing a bit of anxiety amongst the life pass holder groups and season pass holders and the clubs, these 50 ski clubs and they've got about 15,000 members. So the sooner we can get some certainty around the actual sale of a season pass, I think that will be great.
And what's your advice to people, including the life pass holders? Do they get on and buy a season pass and then wait and see what happens in May or what?
Well, if I was a life pass holders, they currently still have a pass because RAL still exists. Until RAL doesn't exist, then life pass holders should wait and see what the offer is to them because it's likely that any new ski operator is going to require some financing from the life pass holders. And the life pass holders have a really good long-term interest in the mountain, but selling a season pass to a life pass holder is the wrong thing to do because life pass holders on average only ski 3 days a season and they might ski every second season. Utilization of life pass passes overall is only around 50%. And so if you average that over a year, they're skiing one and a half days a year. So selling season passes is the wrong product. A life pass is a product of convenience. Life pass holders will support the mountain. We know this because we've done capital surveys prior to the voluntary administration. We were aware that RAL had some liquidity issues. They're financially strained and they needed to recapitalize. So we've been pushing for RAL to crowdfund prior to being in this situation.
I remember the history. I guess we just got to keep moving forward. And as I understand it, from previous interviews the prospect of RAL running this has already been ruled out. So it will be a new entity of sorts. Where are the life pass holders at with their own proposal? You've done quite a thorough costing and you want it to be of a particular nature. You want it to be not-for-profit, community-owned. Could you overview it?
Our vision is to have a crowdfunded entity, community-owned, and not-for-profit. We've done surveys and that's what the crowd want. There are a whole community of people wanting to support the skifields and that includes life pass holders, ski club members, season pass holders, the local community, and local businesses. The way our model would work is we'd keep the life pass funding model because the cost of capital for life passes is actually very cheap. It's 2% to 5%. Whereas you compare that to bank debt, you're up at 7% to 8% these days with interest rates going up. If you compare that to private investors, they're going to want a return of at least 10% or more. And we know from historical data that private enterprise businesses on Mt Ruapehu have only lasted between 4 and 10 years, whereas the crowdfunded model is proven and tested and has lasted 70 years, until it recently changed to become debt-funded with the SkyWaka investment and that's where it's at now.
You've also got the issue of the potential of fewer snow days a year with climate change. You're looking at potential investment to have a year-round business on the mountain. With the life pass model, does it add up, and particularly if people are going to be asked to pay for a second time for a life pass, does your model add up to the realistic costs of running the mountains?
If you're going to ask life pass holders to front up for a second time, they've essentially been sold a product that's failed. So to get their money a second time, you need to give them some assurances that we're not going to end up in this position again. And in life, there is no guarantees, but to give them some assurances, the way to do that is offer them equity so they can buy an ownership stake in the company, have a voice, be able to elect the board of directors that they want to represent them and choose the management team.
Does it add up financially, Robert? I know you've crunched numbers. Does it add up?
We've put together a proposal and we've done different scenarios with different cash flows and the way it does add up is if you do equity crowdfunding of $2 million a year. And we know that life pass holders, they're not investing to make a financial return, they're investing for good skiing. So if you're investing for good skiing, it does add up. If you're investing to make a financial return, then go and invest in retirement villages or some other business that makes money.
Final question, Robert, does it require the likes of the banks to forgive debt? Because that seems to me like it would be a very big ask.
Well, actually, the ANZ Bank have already said that they're going to forgive their $13 million debt and MBIE are going to write off their $15 million debt. So MBIE and ANZ Bank have been very supportive. Sam Clarkson, myself and a couple of other representatives from the Save Mt Ruapehu Group, we've met with MBIE and they know the importance of the skifields to the local region. They generate about $100 million in tourism spend. So they don't want to see liquidation. So they're keen to work closely with us. They're very interested to hear that we're on the verge of incorporating a society. We had our first meeting to approve the constitution of the Ruapehu Skifield Stakeholders Society. And the purpose of that society is to advocate on behalf of members to ensure that the skiing on Ruapehu is financially sustainable and look after those stakeholders such as ski club members, season pass holders, local community, and local businesses. Because we've already seen the local effects of Ruapehu getting into financial trouble. Such as the Grand Chateau, with the keys being handed back.
Got it Robert. Good on you. All the best with it. And we'll see, May is going to be a very interesting meeting and we'll see what happens with the seasons pass cash raising as well in the next few weeks. Robert Krebs there and Richard Nacey earlier.
