Taxpayers are unlikely to ever see the repayment of the $15 million the Government loaned the North Island ski fields, that were once New Zealand's busiest
The Government has refused Ruapehu Alpine Lifts another bailout, forcing the company into effective receivership.
The company came to the Government for additional support, after Ministry for Business and Innovation officials had already, quietly, provided it an additional loan last year.
MBIE had first granted it a $10m loan in 2018 to build its Sky Waka gondola on the slopes of Whakapapa. Then, as the effect of the Covid border closures bit tourism, the ministry agreed to an additional $5m loan at the concessionary interest rate of 2.78 percent.
Taxpayers are unlikely to ever see that money back again: the terms of the loan, disclosed in a footnote to the ski operator's most recent accounts, reveal that it will only be repaid if the numbers of passengers other than skiers on the new gondola exceeds 300,000 in one financial year. Right now, the company is not getting even a fraction of that patronage.
The company now owes $15 million to MBIE as well as a $6 million loan facility from ANZ bank – an overdraft it has been struggling to service. Senior staff were called into a crisis meeting on Tuesday afternoon.
Newsroom called PwC partner John Fisk at lunchtime on Tuesday, who confirmed his involvement. He subsequently said he and a colleague Richard Nacey had been appointed voluntary administrators of Ruapehu Alpine Lifts Limited, following a resolution of the company directors.
Ruapehu Alpine Lifts operates both the Whakapapa and Tūroa skifields in the central North Island's Tongariro National Park, by concession to the Department of Conservation. With its snow all washed away, Tūroa has closed early for the year.
Chief operating officer Travis Donoghue declined to comment, but said there would be "more communication and interface available" in due course.
"As the company is in voluntary administration rather than liquidation, the impact on the Crown’s balance sheet is unclear at this time." – Minister Stuart Nash's office
The company posted a statement on Facebook on Tuesday evening, saying Whakapapa would continue to operate as planned, weather permitting, through to season close. That is tentatively set for October 24. The three T bars – Valley, Knoll, and Far West – would run, with the Sky Waka gondola for access and sightseeing.
The company expressed its sadness. "E kore e hekeheke, he kākano rangatira," the post said. "A noble heritage will never perish"
Ruapehu Alpine Lifts is a not-for-profit business that was set up by ski club members in 1953.
Though the Government may never see its money back, it does have some recourse: the terms of its second loan provide it a security over the capital assets purchased with the money. It can demand that the loan be converted into $5m in shares in the company, for what that's worth, given the company is now in administration.
A spokesperson for Regional Development Minister Stuart Nash said: "As the company is in voluntary administration rather than liquidation, the impact on the Crown’s balance sheet is unclear at this time."
Weston Kirton had only taken up the chains of the Ruapehu District mayoralty on Monday morning. On Tuesday evening, he got a call from his chief executive advising him the company had been put into administration. The council had invested $500,000 in the new gondola on the slopes of Whakapapa; Kirton said councillors were yet to meet to discuss how they would treat that debt.
"Yes, we do have a loan, and it is of concern, and the ratepayer has every reason to question what's going to happen with that." – Weston Kirton, Ruapehu mayor
"The new council haven't formed a view on that yet. I had a two-hour briefing about council business from our chief executive today – but this wasn't on the agenda at that time!
"Yes, we do have a loan, and it is of concern, and the ratepayer has every reason to question what's going to happen with that. The new council has to digest exactly what's happening up there on the mountain, and whether central government are going to play a part in the future, to allow them to work through some of the issues that they've got."
Kirton said he had met MP Ian McKelvie earlier this year, and told him central government needed to step up and assist. "Bear in mind this is a national asset as well as a local asset."
He said the company had formally requested Government assistance, but been refused by Cabinet. "There was a request for funding and it was turned down. And that's probably resulted in this situation today."
In August, the company laid off about a third of its mainly seasonal workforce of 405. That continued to reduce until, by this week, Fisk said the company has about 196 remaining staff employed across the two fields.
Many of those left jobless had been supported by the local community with about 180 food parcels handed out this winter, as their hours dwindled or disappeared entirely.
"The company has had a very difficult last three years, with the impact of Covid-19 restrictions, paired with poor weather this season, meaning that the business has been placed under significant cashflow pressure," Fisk said.
"The directors of Ruapehu Alpine Lifts have explored a number of options, including a capital raise and a request for additional Crown funding, but have not been able to secure the required level of capital.
"As such, the directors made the decision to appoint voluntarv administrators. The voluntary administrators will now continue to trade the business while we look to determine the most appropriate way toward to maximise recoveries for creditors."
Late last year, Newsroom reported that lenders ANZ and MBIE were putting the squeeze on the company. Chair Geoff Taylor called a special meeting of shareholders, in response to the pressure caused by the Covid lockdowns, the expense of the new Whakapapa gondola, and Tūroa's need for new lifts.
"There's a lot of hate for Ruapehu Alpine Lifts around the industry because of decisions they made in the past. I don't necessarily agree with them taking down the lifts. But it's a very challenging mountain to operate." – Sean Drinkwater, Jones Brothers
The board was asking investors to vote to approve a new structure which could allow it to raise $30 million by selling 50 per cent of the company to the private sector. Shareholders agreed, under some duress.
But neither that, nor an appeal to the Government, was successful in salvaging the company's sunk revenues.
Tonight, Fisk said he and Nacey would deliver an initial report on the financial state of the company that would be tabled at the first meeting of creditors shortly.
Sean Drinkwater, director of Ohakune ski and board business Jones Brothers, told Newsroom it was bad news for the community. "The reasons that some of the resorts down south like NZSki survive is because they've got a little bit of mountain biking, a little bit of tourism as well. But up here, you can't move into other things like mountain biking because it's a National Park."
"What they were trying to do, by putting up the Sky Waka gondola, was trying to have a sustainable business year round. It was for tourists – it was a drawcard."
Drinkwater has a security registered allowing him to reclaim any of his ski and board supplies, but he says the company owes him no money this year as they haven't had the customers in their shops on the mountain.
"There's a lot of hate for Ruapehu Alpine Lifts around the industry because of decisions they made in the past. I don't necessarily agree with them taking down the lifts.
"One hundred percent, we need that mountain to operate... It's a hugely important part of our industry and without it, it puts a lot of pressure on the South Island resorts." – Simon Knight, Summit Collective
"But it's a very challenging mountain to operate – there's nowhere else in the world like it. I explain this all the time to my suppliers: there's the weather, the ice, the snow, it's a volcano and it's a national park. They have to deal with iwi. It's all very, very unique."
Simon Knight is director of another of the ski operator's secured creditors – Summit Collective supplies the company clothes, goggles and helmets mainly. "One hundred percent, we need that mountain to operate," he said.
"It's got the biggest catchment of population of any ski field in New Zealand. And when it's on, it's amazing. If we only go back three years, we were selling a lot of products through the stores there and through the rental departments on both sides of the hill.
"It's a hugely important part of our industry and without it, it puts a lot of pressure on the South Island resorts. And we saw that this year with Cardrona in particular, and I think to a slightly lesser degree Coronet Peak. It definitely puts the pressure on numbers."
Another on the long list of secured creditors is ski and snowboard company Burton Australia. Its finance manager Martha Hill declined to comment at this time. Bridgewater and several finance companies are also secured creditors. The Tuwharetoa iwi lent money towards the gondola, and Maori Investments Ltd is an investor.
Fletcher Steel and its sister company Placemakers are both secured creditors, though they appear to have little exposure. "We are aware of the situation and will work with any relevant parties if necessary," a Fletcher spokesperson said.
"Taupō District Council chose to invest $1 million of investment bonds in the Sky Waka gondola... We have great empathy for both the business and the people who work so hard in it and very much hope that a solution can be found to enable RAL to continue to operate going forward." – Gareth Green, Taupō District Council
Taupō District Council chief executive Gareth Green told Newsroom the council chose in 2018 to invest $1 million of investment bonds in the Sky Waka gondola.
"We have had confirmation that Ruapehu Alpine Lifts is in voluntary administration and will be working with the administrators over the coming weeks," he said on Tuesday evening.
"The ski field operations on Mount Ruapehu are one of the cornerstone activities of the Central North Island.
"The positive impact that Ruapehu Alpine Lifts and its operations have on our local economy is significant and hugely important to our district from a tourism and cultural perspective. We have great empathy for both the business and the people who work so hard in it and very much hope that a solution can be found to enable Ruapehu Alpine Lifts to continue to operate going forward."
Comments flooded the Ruapehu Alpine Lifts Facebook page, as word got out on Tuesday evening. "I sit here with tears I’m my eyes reading this," wrote Gillian Press. "I have lived & breathed this special place as did my parents, my children and grandchildren. If the government keep AJ Hackett going through 2020 lockdown, step up now – soooo sad."
And Nathan Shugg wrote: "Knock after knock, hurts everyone, not just RAL, government should step up here."
"Hope it comes right for next season," said Barry Murphy. "Government loves to bail so many things out, hopefully they sort our only North Island ski mountain."
