John Sandford and Sam Clarkson were interviewed on the Nine to Noon show on National Radio. The recording of the interview is available on the National Radio Nine to Noon website. The Waikato Times has also published an article featuring the John Sandford bid to purchase Turoa.
At least two potential bidders have emerged for Ruapehu Alpine Lifts, which collapsed last October going into voluntary administration. This morning we hear from the first out of the blocks. It is a consortium of residents, local businesses, seasoned and life pass holders, out of town property owners from Ohakune and its environs. The threat of loss of the tourism magnet that is the skifield has prompted intense efforts for a survival plan for the major tourist attraction and lifeblood for local businesses. Administrators have been working since October trying to find a long-term solution for Ruapehu Alpine Lifts, which runs both Whakapapa and Tūroa ski fields. RAL has debts of $35 million and the government has put in $10 million to keep the business running while a solution is sought.
A group of life pass holders in the Save Mt Ruapehu Skifields group have formed an incorporated society as part of a proposal for the ski fields to be community-owned and not-for-profit. We've heard from them previously on Nine to Noon. Now at least two separate bids for all or part of the business are in the offing. The first we'll speak to today is for the Tūroa operation alone.
Meanwhile, the first snow of the winter has fallen on the mountain but season passes are yet to be made available. John Sanford is a former RAL board member, businessman and company director who's leading a new entity Tūroa Alpine Limited which lodged a bid with both MBIE and the administrators last week.
So tell us about Tūroa Alpine Limited and who is involved?
I'm not at liberty to give the other names but your description earlier was a good summary of the spread and depth of potential ownership if we're successful. And businesses around the region, not necessarily related to the skifield but who understand the importance, the economic and social importance of that entity to what was used to be called the Waimarino region and now the Southern part of the Ruapehu region.
So what will the structure of the proposed business be?
It will be a public company and people will be able to buy shares in the company. It will be a standard commercial entity and we won't be seeking public-benefit-entity status, i.e. being able to be regarded as tax free. It will be just a standard business model.
So fully commercial and what form of business? Could you give us an indication, a bit more detail of what the actual business entity would be legally? What format it would take?
It would be a publicly owned company. So with more than a couple of hundred shareholders, it could well have a thousand or more. And the capital will be raised to not only make the bid and pay for the opportunity to acquire the business and operating assets around Ohakune and Tūroa, but also having enough money in the bank that it doesn't doesn't suffer the same fate that RAL did.
So you're not aiming to make millions out of this, but you want to be profitable, you want to break even at least. Is the capital raising going to come from the shareholders? That will be the entire source of the capital raise?
Do you know if you have enough yet to do this?
I don't know if we have enough yet, but I'm confident with what we, the commitments that we do have, that we'll be able to raise the capital needed.
What's the figure you need?
At the moment we're planning around $10 million, maybe $8 million, between eight and ten, but there's still some work to do on that.
What would that buy?
The right to operate Tūroa skifield and continue to operate it.
It would purchase the assets?
Yes, the business and assets of Tūroa are both on the mountain and in Ohakune.
Could you clarify whether some of the hospitality and other businesses actually on the mountain are assets of RAL? In other words, you know, are you going to have a restaurant and a cafe and a ski shop and all those things? Or are we talking absolute bare-bones? What would it look like?
Initially, it would include all those things and in long term, all those services will be supplied on the mountain. But our intention would be over time to let other people have the opportunity of running various commercial activities on the mountain, such as the cafes.
Which would be a shift from RAL's direction in some ways, wouldn't it? It was a fairly limited shop on that front?
That's right. But we just feel that it's a better business model to allow other people to supply that and that our focus ultimately ends up being on making sure that the actual facilities are fit the purpose, meet DOC requirements and all other health & safety requirements, and work properly, and make sure that the infrastructure works well for the business. And then other people can engage in other things such as a retail, hire shops, cafes, etc.
What are the operating costs like though on this mountain?
It's expensive infrastructure. It needs a lot of maintenance and that's in the absence of a disaster like we had 3 years ago taking out the High Noon lift. It's got to deal with a particularly nasty and complicated form of de-icing that has to happen on that structure. And there's a limit to how often it's typically going to open in a year.
So explain to me the maths. If RAL couldn't do it, how can your new consortium do it? What's the nitty gritty?
The challenge really in the past, and RAL actually operated profitably for many, many years. It was only in recent years that it's run into this problem. What it did is it ran out of cash and wasn't well enough capitalised to weather some bad seasons. So our intention is to have enough money in the bank to operate, if we are successful, to be able to operate from this year and the next two years, so three years with three bad seasons. Now, if you go back over the records, Ruapehu and Tūroa, they haven't had three bad seasons in a row, three big impacts in a row, but we're actually budgeting on actually having three bad seasons in a row. So we had COVID interruptions and then we had a shocking no-snow season last year. But you would be capitalising and have an operating budget, including staff salaries, all the maintenance, all the stuff that would enable you to go three years of pretty rubbish seasons.
Can I ask then, given you were on the board of RAL, why it was so undercapitalised that it could not cash flow its way through three bad seasons?
When I was on the board, the company was managing to pay its way and showing profits annually. So I can't comment on what happened subsequently, but in essence, they did too much, too fast, with not enough capital to make it work. So some of the expansion that we saw in facilities such as the gondola on the National Park side on Whakapapa, was that a factor? I don't know to what extent, and so I couldn't comment on that because the Sky Waka was financed off-balance-sheet in a sense. It was bondholders, a number of bondholders who put up the money to pay for the Sky Waka, but there were other associated costs. You ran out of cash, and because of the previous capital structure of RAL, it was operating with a capital structure of $130,000 put up many years ago by a group of individuals, and to protect the non-taxpaying status of the company, it couldn't introduce new capital in a way that would attract people to invest because no benefits of any kind could be paid to those shareholders, and that's how it retained its tax-free status.
That $130,000, was that the life pass holders?
No. That was the paid-up capital of the company when it was formed 70 years ago this year, actually, and so people put in money, and the capital was $130,000. And shares did subsequently change hands sometimes, but they only ever changed hands for their nominal value, i.e. $1 or $20 a pop, because the company couldn't pay any benefit of any kind to shareholders, so the shares were only worth their "par" value in a sense. Although, if you looked at the balance sheet, it was different to that, but that's another whole story. Because the company did have some accumulated retained earnings over the years, and so under Dave Mazey's tutelage and leadership, the company in the 20-plus years that Dave was there, the company did well and made some good profits.
What I'm hearing from you is you can't be a bit horse and a bit donkey. You're either, as we might hear in a moment, from the life pass holders, you're going community-owned, not-for-profit, or you are going full commercial, don't try and be both. Is that what I'm hearing from you?
That's my view, and in fact, there are a lot of life pass holders that actually expressed interest in taking a stake in this business. So they see the difference, and it's worth saying that whatever proposal we come up with, we will respect the current situation of life pass holders and work together with the representatives and even individually if necessary to come up with something that may not please everyone, but hopefully will please the majority.
What will happen to the $40 million debt, and will you be depending on that being written off somehow?
We're not involved in that. That's entirely over to the administrator of the company.
You would need a clean sheet?
We would have a clean sheet because what we're doing is offering to buy the assets, and we're taking over some liabilities too, particularly around staff. So we're taking over some liabilities, but the actual debt itself, including to life pass holders, of which my family have a couple, that rests with RAL.
You're not asking for a fresh contribution from life pass holders other than those who want to become part of your consortium. Would you honour those who already have an RAL life pass?
We haven't resolved that completely yet. I'll be having discussions about that with Sam and his fellow people in the Save Mt Ruapehu consortium.
What happens to a life pass holder? Obviously, some are going to become part of your consortium, but the question is, will you honour the others who have life passes?
It's not resolved, but people won't be left out to dry. We won't be saying you're abandoned or you've got to write out another check for another life pass that's similar to the amount you paid before. We would look at a compromise.
Why Turoa only, and why would the administrators be interested in only selling part of the asset?
Because that's the area that I was born and raised in, and I've been involved in businesses and life there for many, many years. But also, I can see, having run businesses myself in the past, I can see how with good community and wider business engagement between the operations on the mountain and those other communities, that you can create a really dynamic and successful business because it's engaged with much more than the business Tūroa has been engaged with the community in the past.
Is this a pitch to local businesses?
Ohakune is a flourishing town, but there's a big difference when there's thousands of people up on that mountain or in for the winter and when there's not.
Is this a big difference? Are you reaching out and saying, we're not going to shut you out of a connection to the skifield? We may not even directly compete with you in some of your businesses, for example, in equipment hire or supply or whatever. We might even let you run a transport operation up the mountain and not take control of that. Are you pitching this to the local businesses as saying, we will work with you? In fact, we want you to own us.
Yes, that's right. Because I'm not looking for a big stake in this business, and I'm not even looking to be a director. I'm just doing it as a promoter because I can see the big picture. I know that will work. I feel very confident that will work. And to me, it's the right thing to do for the community in which I was born and raised.
Are you in conversation with other potential bidders for the whole operation? Is there any indication, and we're going to speak to a second potential bidder later in the week. Is there any potential for cooperation between these groups? Or are you quite different beasts with quite different interests and quite different structures in mind?
Yeah, I think that's the best description. I have been in discussions with a bidder for the whole business. And I've also been in discussions with another bidder for the Tūroa part of the business. But yeah, there's no deal for now, let's put it that way. They are different beasts. I mean, our beast, if you like to call it that, is one with extensive ownership. And other bids are actually being made by people with just a handful of shareholders at the stage, or as I believe.
How quickly are things moving?
Probably not quickly enough. But I mean, that's just a matter of the process that's underway. Because not only are the voluntary administrators involved, also MBIE are involved as well.
Your bid is in?
Sam, is one of two elected representatives of Life Pass holders who are on the creditors committee. And they have been putting together their own proposal for the future of what will replace RAL. Sam, good morning and welcome. What do you make of this? I know you'll be familiar too with the other bid that we will be talking to later in the week. As options for the future of these two operations?
We've had a pretty clear steer from our constituents, the Life Pass holders and the wider community. And just to remember that the Life Pass holders are creditors only because they tick a particular legal box. And for example, ski club members aren't because they don't. But we're talking to all of them. The clear steer we've had from the wider community is that people would prefer to see both sides of the mountain retained as one operation so that people can have free choice about where they ski. Further, we believe the medicine that Tūroa needs is exactly the same medicine that Whakapapa needs. And that if we are to apply that medicine, we will do better on both sides of the mountain for all mountain users.
What's happening then? What do you think is going to unfold? These individual bids are going to go in. They're either going to be accepted individually or not accepted by the administrators or the administrators are going to say, you've got all these interested parties together. How do you see it playing out?
Well, a bit like John said, it's not moving fast enough. There's a bit of an opportunity lost. We've got in our group, a very broad and deep set of industry experts who have been waiting to be given access to the company data so that we can sit around and actually thrash out the real problems. John mentioned that it was profitable under Dave Mazey. No, RAL was run to the ground by those previous managements and was in a dire strait before the gondola, COVID, and La Nina came along. So where we're at is that we are now waiting for MBIE and their consultants, Calibre Partners, to get around the table with these experts and actually thrash out what's really wrong. We know what's wrong. The problem is they don't. And that's because none of them work from within the industry, but we do.
They've got to follow due process though, Sam, can't they? They can't provide privileged information to one party and not another, right? And is that part of the problem?
We're already inside, as in the Life Pass holders have already put up $45 million historically. And the fact that RAL bought Tūroa and built the High Noon Express, etc. Is all off the back of the Life Pass money that's already been paid. So it's not a matter of privilege. It's a matter of giving the people that have already got their money on the table access to the same data the other parties have been given access to.
Specifically, what do you need?
We need the opportunity to take the consultants through a learning process whereby we go through the size of the corporate management within the company, which we believe is oversized for the size of the operation. We need to go through the deferred maintenance, the deferred capital requirements and shake them down to get the most efficient outcome so that we can point the capital that will be raised by crowdfunding towards the most efficient future operations and the most sustainable future operations.
What is the scale of that deferred maintenance and capital requirements?
It depends who you're talking to. We believe that with our industry insiders that we can do a far better job of shaking down what is actually required.
How many millions?
You're asking me the impossible question, but I'm going to throw a dart and say that if we were to put $15 million on the table, that we could make decisions for the future that are sustainable.
Is it welcome to hear that another group believes it can raise $8 million to $10 million, particularly using local, not entirely local, but largely local vested interests in a positive sense? Businesses, people who live there, property owners, people who have been coming every year for winter for years and years. Is it welcome to hear that kind of money is on the table? Is there going to be a lot of overlap or is there a way to bring this all together?
Well, we've done a bit of surveying. In the past, we did one on the life pass holders, but again, for the reason that they are identified as a specific creditor class, we've currently got a survey out on the Save Mt Ruapehu website. And that is asking really the same question, which is of the non-creditor class, i.e. the ski clubbies, the old RAL shareholders, the season pass holders, local businesses, and in fact, anybody who might be interested, we're asking them what they are prepared to contribute and why. So I invite everyone to get onto that website and put their five cents worth in.
A bit of snow sort of scattered in a few places just in recent days, and we were talking a long time ago to the receivers about when this life pass detail information might come out. Feels like a few weeks have drifted by since then. If this is going to work this season, even as a bridging season, what needs to happen and how quickly?
This is the missed opportunity that I was talking about. We should have been doing this six months ago, this detailed work, and winter is upon us shortly. I don't think it's too late at all for people to get a sniff of the cold air and go, oh, that's right, skiing is happening, let's get into it. So I don't think it is too late.
One thing I want to add before we go, one of the things that we fundamentally want to see done is the creation of contingency funds. Over the last La Nina, which was in 1998, and those were eruption years as well, no future provision was made at the time for the inevitability of future such events, such as we had last year. We've always proposed that there would be the creation of contingency funds into the future. Two of them, one to cover for bad snow seasons, and the second one to build up capital for the purchase and creation of new facilities and lifts. I believe those funds need to be kept separate from day-to-day management and ring-fenced off into trusts or whatever governing body. Now, should Tūroa end up with separate owners, I believe we can work with those people, but I do believe we can do a better job ourselves.