The director of a company behind a Canterbury skifield’s expansion says two Russian businessmen haven’t sold out. David Williams reports
Days before Christmas in 2006, a $1.7 million deal was approved by the Overseas Investment Office allowing an Australian-dominated consortium to buy Canterbury’s Porter Heights ski area, on the southern end of the Craigieburn Range.
It could easily have been overlooked.
But in the coming years, plans for a large-scale resort at the skifield – about an hour west of Christchurch – made headlines with eye-poppingly large figures and bold claims.
What was initially touted as a $250 million expansion – including a 3500-bed alpine village, hot pools, and a 1.8km gondola ski-lift – was re-costed to double that as four Russian investors paid $6.9 million to come on board in 2011.
The project was going to create 1000 jobs, and bring more than $1 billion of economic benefit to Canterbury.
There was even talk of Christchurch rivalling Queenstown for the international ski-tourist dollar.
That is, if the expansion was approved – and without it, the development company said, Porters might have to close.
There was another catch.
To give investors certainty, a controversial land swap was proposed. To the surprise of many, the Department of Conservation (DoC) accepted it.
Under the deal, panned as “dodgy”, 198 hectares of conservation land at Crystal Basin, adjacent to the Porters skifield (on 708 hectares of leased land from the Department of Conservation), would be freeholded in return for a 70ha forest block on Banks Peninsula known as Steep Head Gully.
(A smaller land swap enabled the expansion of Lords Bush Scenic Reserve near Springfield, in exchange for 21 hectares of land at the skifield.)
Crystal Basin wasn’t just any piece of land. The “pristine” valley was part of a “nationally important” purchase of 8500ha by the Nature Heritage Fund in 2004. It was meant to be permanently protected by being added to the Craigieburn Conservation Park.
But DoC boss Al Morrison approved the deal and Conservation Minister Kate Wilkinson reversed the previous minister’s commitment to reclassify it. (Later, Wilkinson axed the chair of the Canterbury Aoraki Conservation Board, who spoke out against the land swap.)
Forest & Bird pointed out to Morrison that publicly owned land of high conservation value was being given away for land under no particular conservation threat.
In 2012, after final council and court approvals were secured, Simon Harvey, the Sydney property developer heading the project, said a new ski area at Porters could be ready for the winter of 2016.
Despite the controversy and hype, few headlines have been generated, subsequently.
Until, that is, the invasion of Ukraine and the realisation of Porters’ Russian links.
Now, a Porters Ski Area Ltd director, Dmitri Aronov, reveals details of a recent share restructure and why the development’s taking so long.
Also, the former Australian frontman of the planned Porters ski area expansion explains why he exited the project – and he’s pointing the finger at DoC.
First, the Russian question
PSA Capital Ltd is the company that owns Porters skifield. Companies Office records show two Russians, Oleg Kirillov and Yury Koropachinskiy, sold their shares on February 15, just nine days before the invasion of Ukraine.
The pair – who, in 2012, lived in Krasnoyarsk, Siberia, but now live in Australia – transferred their shares to Australian company SM Capital Group and Cyprus firm Stalakton Investments.
Aronov, a Ukrainian living in Sydney – who had 5500 of his own shares in the company transferred to SM Capital on the same day – says the transaction occurred last November.
“Our accountants only lodged the documents in February, for reasons unknown to me.”
(Aronov is a director of PSA Capital and Porters Ski Area Ltd.)
SM Capital, which owns 13.7 percent of PSA Capital, is owned 50-50 by Kirillov and Koropachinskiy, Aronov explains. Meanwhile, Stalakton, which owns half of the Porters-owning company, is also owned by the pair, as well as Israel-based investors Yury Zelvenskiy and Vladimir Uchitel – who lived in Moscow a decade ago.
“SM Capital and Stalakton are both their investment vehicles, so it was more of a question of concentrating shares in these two entities.”
Kirillov and Koropachinskiy have been tax residents of Australia for a number of years, Aronov says. “I doubt they have any knowledge of what goes on in the heads of Russian government officials.”
Two other Russians – Galina Slavova (9 percent), and Mikhail Predtechenskiy (5 percent) remain on the share register.
Aronov says: “We’ve had two Russian residents as our shareholders up until recently. One of them decided to sell his shares to one of our Israeli investors recently and a share transfer is currently in the process of being registered.
“None of our capital comes from Russia and none of our shareholders are subject to any restrictions, so we don’t expect any impact from sanctions. We do have a diverse team working on this project and would like to see it through to a successful outcome.”
PSA Capital’s other director, Roman Zelvenschi, is a Moldovan who runs a digital marketing business in Canada.
What’s the hold-up? DoC?
Things have been happening at Porters, with millions of dollars spent. In 2015, the deputy prime minister, Bill English, visited for a photo-op to open a new chairlift.
Three years later, $15 million had been spent on upgrades and expansions – but not the hundreds of millions promised. The European-style mountain village hadn’t materialised.
There had also been a pivot towards summer.
Harvey, the Sydney-based property developer, told Stuff in 2018 it intended to develop more mountain bike trails. “Porters’ longer term plans for summer activity expansion include zip lines, hot pools, health and rejuvenation as well as other activities such as hiking and tramping.”
To that end, PSA Capital received a $250,000 grant from the development-encouraging Provincial Growth Fund to build “upfront infrastructure”. Only $170,000 was spent.
Empty promises at Porters (so far) have prompted questions from Gerry McSweeney, a member of the Nature Heritage Fund since its inception in 1990, who was angered by the Crystal Basin land swap deal.
“Why are we still proceeding with freeholding a mountain range? It seems to me to be a quid pro quo they haven’t delivered on. So why should they get ownership – freehold ownership, which is quite exceptional?”
Newsroom asked the Overseas Investment Office, which has approved four Porters-related transactions, about the lack of follow-through.
How much had been spent? How many jobs created? Has any action been taken because of broken promises?
The emailed response skied neatly past the first two questions.
Toitū Te Whenua Land Information New Zealand head of regulatory practice and delivery Rebecca McAtamney said PSA Capital has until 2032 to complete the development.
And then, a crucial bit of information that explains the delays: the central land swap, of Banks Peninsula land for 196ha at Porter Heights), isn’t complete, more than a decade after it was approved.
The other land deal, involving Lords Bush Scenic Reserve, is complete, McAtamney said. Aronov clarifies it was sealed just before Christmas last year. “We actually failed OIO deadline a couple of times because DoC wasn’t ready to settle.”
Harvey, the main face of the Porters project since 2009, resigned as a PSA Capital director in late 2020. He blames DoC.
“The decision to exit the project was a huge decision after so many years dedicated to the vision but to be quite honest, a big factor in my decision was the unfortunate treatment by DoC on a number of issues,” he says via email.
Those issues are “putting our land tenure at risk” with delays on the land swap, and “effectively blocking” the PGF-backed gravity downhill bike park project. Porters applied for a variation to its existing ski field lease, for the operation of a mountain bike park, in April 2019.
“This was so important to us and the business as it gave us a true year round offering which not only assists in viability (with the ski season only three months of the year) but would have created another layer of confidence to springboard into future stages.”
Harvey – no relation of Harvey Norman boss Gerry – says he never lost confidence in the project, or the vision, but was met “continuously with dead-ends” by the department. “I lost a lot of confidence in the DoC process and the behaviour of one our largest and most relevant stakeholders.”
Many things can explain the stalled project in recent years – not least of which would be the Covid-19 pandemic, and New Zealand being closed to tourists. But you can see how an offshore investor might be put off a project that didn’t own the land, or have a long-term lease (Porters’ lease of 687ha expires in 2029), and faced with a potentially hostile government department.
There’s also the not insignificant fact that with Harvey’s departure the project has now shed all its original investors. McSweeney says: “It puts a huge question mark over the project.”
DoC’s director of planning permissions and land, Natasha Ryburn, says in an emailed response the department has always tried to work fairly and in good faith with Porters Ski Area “and will continue to do so”.
“Ecological advice indicated Porters Ski Area’s bike park proposal in its current form would have adverse effects on the site’s ecological values, while planning advice indicated the application was not in accordance with the Canterbury Conservation Management Strategy.”
Porters requested its variation be put on hold in June 2020.
Aronov is more diplomatic than Harvey.
“I think we have a way forward with DoC; how we can address that,” he says. “We are moving ahead slowly. I would have preferred to move ahead faster but at least we are moving.”
What now for Porters?
Aronov says PSA Capital is still pursuing a development valued in the hundreds of millions of dollars.
“The overall scale remains roughly the same, although staging of the project might change. We might also change the mix of the accommodation in the village.”
He envisages multiple stages spanning 10-to-12 years. “It takes time to build this much real estate and recreation facilities as well as for the market to absorb it.”
Once the international borders open for tourists, the company will resume searching for another investor – a strategic investor; a company with a strong background in operating ski resorts.
Porters also wants to increase summer activities, Aronov confirms – “just like many resorts are doing around the world”.
The skifield’s experiencing a slow decline in open days. “We do feel that, in general, the weather is becoming warmer, and the weather is more unstable.”
Just over 15 years since the Porters expansion emerged, there are a lot of unknowns.
What will the investment appetite be in post-Covid New Zealand? Is the project big enough to attract a sizeable, international business partner? Will DoC put its foot down to protect ecological values on public conservation land?
One thing seems certain, however: that the Crystal Basin land swap will go through – much to McSweeney’s chagrin.
He recalls the department asking the Nature Heritage Fund to purchase the land 20-odd years ago because of the “significant altitude sequence” from the Porter River to the top of the Craigieburn range.
It needed permanent protection as part of the Craigieburn Conservation Park, DoC argued. And then the Porters land swap proposal emerged.
Betrayed, the NHF essentially told the department, in McSweeney’s words: “You didn't apply and say it needs permanent protection until we get a better offer.”
