Astrolabe – Not Just a Space Odyssey

A little over two weeks ago the Rena did not mean anything to the majority of New Zealanders. Unfortunately this all changed when the Rena struck the Astrolabe reef near Motiti Island just after high tide as it was making for the Port of Tauranga. Now the Rena will go down as the worst shipping disaster to occur in New Zealand waters. Unlike most shipping disasters there has not been any loss of human life.

What differentiates the Rena from a long history of boat sinkings will be the environmental impact. It may be fortunate that the oil residue is coming ashore on white sandy beaches, as these are a lot easier to clean up than rocky coastline, or the iron sand beaches of the west coast of the North Island.

The details of how the accident occurred will no doubt come out in the inevitable formal inquiry. What is already known from positioning data that the ship transmitted, is that the Rena was on a direct course to the Astrolabe reef for around one hour, plenty of time for someone on the bridge to have noted a major hazard.

The economic impact of this event is largely unknown. Much will depend on the speed of the clean-up. As a holiday destination, the beaches of the Bay of Plenty, and this includes the Eastern Bay of Plenty if the oil drifts this way, will be impacted. This impact would most likely be felt by accommodation providers, the hospitality industry, tourism companies and retailers in general.

There could be an impact on the Port of Tauranga (POT). For example cruise ships may choose to by-pass Tauranga, which could impact tourism in places such as Rotorua. Freight could possibly be diverted to other ports such as Auckland or Napier. If this occurs, revenues for the port may decline, which will have a flow on to the shareholders.

The largest Port of Tauranga shareholder is the trading arm of Bay of Plenty Regional Council, Quayside Holdings. Quayside owns almost 55% of the Port of Tauranga. This stake is valued currently at around $700 million. Quayside has also issued $200 million of Perpetual Preference Shares. Fortunately Port of Tauranga is not wholly reliant on revenues from port activities. They have diversified their revenue streams and are regarded as a well-run company. If for example their revenues suffered significantly there could potentially be a flow on impact to the funding of the Bay of Plenty Regional Council.

Over the past year, New Zealand has had more than its fair share of high impact events. This has impacted on our economy. Fortunately the economy is a lot more diversified than it historically was. We are however, very reliant on ocean freight, for the export of our goods. Inevitably, accidents will happen, and there will be oil spills. The challenge is to be better prepared and to minimise any long term damage, so we can focus on growing our economy.

Disclaimer

Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.