The Crown’s preferred bidder for the insolvent Whakapapa skifield has walked away from negotiations, throwing the future of skiing in the North Island, and tourism in the central region, into further doubt.
“It’s a dead bid... there’s inadequate [Crown] funding,” Tom Elworthy told the NZ Herald.
He said a combination of factors now make a commercial business case for the operation impossible: the untenably short licence to operate the ski field on offer by the Department of Conservation (DoC) - the skifield is in the Tongariro National Park - and a “fiscal cut” to the Crown’s commitment to the bid, a change since the election of the new Government in October.
Any new operator of the skifields is required to seek a fresh operating concession from DoC; the department offered Elworthy’s group a 10-year concession, however its terms are subject to review in five years. The timeframe is a drastic reduction from the status quo.
“We’re on the sidelines, definitely... no sane person is going to take on a business with a looming $15m debt [repayment], deferred maintenance and the other risks, and a very short concession,” Elworthy said.
Last year, Elworthy and partners from the Christchurch-based private equity firm The South Island Office were the government’s preferred bidder, through Whakapapa Holdings Ltd, for assets of the Whakapapa skifield on Mt Ruapehu, the largest of the two fields operated by Ruapehu Alpine Lifts (RAL), now in receivership.
The skifield now appears to face a funding crunch next month. Without further taxpayer money to help it prepare for the ski season and to hire staff, it’s not clear that Whakapapa can operate this winter.
For the last 16 months insolvent, not-for-profit operator RAL has been kept afloat with $20m of taxpayer money, none of which is expected to be repaid. The last round of funding was approved by the Labour Government in early October. At the time, $4.3m was earmarked to keep RAL operations afloat until March 2024 (and $3m was earmarked for Crown commitments to a separate bid for the Tūroa skifield).
The previous government claimed that the importance of the skifields to the economy of the central North Island, and particularly to the local tourism sector, justified the hefty expense. The new National-led coalition government may be altering course.
The Ministry of Business, the government agency driving the process to sell RAL’s assets, said in a statement: “Commercial arrangements for the Whakapapa skifields are under active consideration. MBIE cannot comment any further on this process.”
Finance Minister Nicola Willis’ office directed questions on the matter to Minister for Regional Development Shane Jones. Jones provided no comment on the matter, beyond that offered by MBIE.
The Crown is RAL’s biggest creditor and largely controls its fate. However, three iwi have interests in the Tongariro National Park and among these, Ngāti Tūwharetoa, in particular, opposes the commercial sale of the skifields.
Iwi interests in the two ski areas differ. Ngāti Tūwharetoa’s interests are centred on the Whakapapa field on northern side of Mt Ruapehu, while Ngāti Rangi and Uenuku interests centre on areas including the Tūroa skifield on the mountain’s southwest slopes.
DoC is required to meaningfully consult iwi on the matter of the skifields’ concessions.
Treaty settlement in Tongariro National Park
Ngāti Tūwharetoa is connected to the Whakapapa skifield through its traditional rohe (territory), and additionally through bond holdings totalling $9.5m which give it security over the field’s gondola - the $25m gondola was built in 2018 and it was also funded with an ill-fated $10m loan from the Crown’s Provincial Growth Fund.
A bid on behalf of Ngāti Tūwharetoa for all or part of RAL was expected in 2023, but in October the iwi advised ministers of a change of heart: It now opposes the commercial tender process.
A November briefing by officials to the new Minister of Conservation, Tama Potaka, noted: “Ngāti Tūwharetoa wrote to ministers and officials [in 2023] to advise that they would not bid for RAL’s assets, do not support a private commercial tender for the purchase of RAL and would prefer to work with the Crown to develop an acceptable transition plan that would operate until the successful conclusion of the Tongariro National Park settlement negotiations.”
The iwi’s Treaty 2018 settlement requires the Crown to negotiate terms of “cultural redress” over the Tongariro National Park. This process is also expected to include other iwi and hapū with interests in the park. Negotiations started last year after a long delay and are likely to take at least several years.
“Given some of the positions expressed by iwi regarding a commercial operation on Mt Ruapehu, there is a risk of a prolonged concession process, legal challenges and additional costs to the Crown to keep running the skifields prior to the completion of any transaction,” officials warned.
In 2023, the previous government acknowledged considerable deficiencies in officials’ consultation and engagement with iwi on the matter of the RAL insolvency.
Pure Tūroa bid moving ahead
Separately, the sale of RAL’s Tūroa skifield to Pure Tūroa Ltd is slowly moving ahead - the company is jointly owned by businessmen Greg Hickman of Ōhakune and Cameron Robertson of Taupō. The purchase price is $1; the terms commit both the buyer and the Crown to further investment in the company.
After considerable delay, Pure Tūroa signed a conditional agreement to buy the skifield at the beginning of the month, but completion is contingent on the issuance of a new operating licence by DoC.
Public hearings on Pure Tūroa’s licence application are expected later this month. If executed, the deal requires a Crown investment of at least $3m in the company, and it would take a 25 per cent equity stake.
Pure Tūroa is seeking a licence to operate the Tūroa ski field for a 10-year term, with a review after three years. It would also have rights to a 20-year extension, with further reviews every five years.
Sticking points for Whakapapa Holdings
Elworthy said his company would need a much longer licence term to make a viable, commercial investment in the Whakapapa skifield.
A 10-year licence, reviewable at five years, would be a remarkable departure: RAL’s current licence to operate the Whakapapa skifield runs for 30 years (2017 to 2046). It also contains considerable rights of extension from 2046.
Elworthy also noted the requirement to assume more than $14m in secured “gondola bonds”, which come due in 2026. Elworthy said the debt is structured as “equipment bonds” and the bondholders have security over the physical gondola.
He said earlier iterations of the deal between WHL and the Crown made some “provision” for these costs “but that’s changed”.
Mounting Crown costs
Crown costs sunk into the failing RAL operations, or anticipated against it, now top $100m. The lion’s share is made up of a $47m to $88m contingent liability for the clean-up of infrastructure on the mountain in the event of the ski fields’ closure. The liability, which previously sat with RAL, appears to have been assumed by DoC.
In addition, the Provincial Growth Fund, also under the direction of Shane Jones as the former Regional Development Minister in the Labour-led coalition Government of 2017, lent $15 million to RAL in 2018 and in 2020. This is expected to be written off entirely.
Further government funding of $20m has floated skifield operations since October 2022.