ANNUAL REPORT 2015 - Port Nelson · 4 port nelson annual report 2015 port nelson annual report 2015...

ANNUAL REPORT 2015

To operate Port Nelson as a successful business providing cost efficient, effective and competitive services and facilities for Port users and shippers. To provide for the present and future needs of Port Nelson in ways that are sensitive to people, use resources wisely, and are in harmony with the environment of an export port.

Performance .....................................................................4Chair / CEO report ............................................................8Environment....................................................................14People ..............................................................................18Community ......................................................................20Governance .....................................................................24

Directors ..........................................................................25Financial highlights .......................................................26Financial report ..............................................................27Directory ..........................................................................49Port Nelson’s vision pillars ...........................................51

MISSION statement

CONTENTS

port nelson annual report 2015 port nelson annual report 20152 3

PERFORMANCE

2015 2014 2013 2012 2011

Operations

Cargo throughput (cargo tonnes) 2.6m 2.7m 2.6m 2.7m 2.7m

Container throughput (TEUs – twenty-foot equivalent units) 90,422 87,462 83,380 86,200 83,800

Shipping tonnes (GRT – gross registered tonnes) 9.2m 8.6m 7.8m 6.9m 7.9m

Vessel arrivals (more than 100 GRT) 747 730 733 850 835

Employees (FTEs – full-time equivalents) 145 143 136 135 136

Financial (millions)

Revenue $42.2 $43.3 $39.6 $38.8 $38.3

Earnings before interest, tax, depreciation and amortisation $17.3 $18.5 $16.9 $19.1 $16.9

Earnings before interest and taxation (EBIT) $12.2 $13.0 $12.1 $14.4 $12.6

Net interest expense $1.8 $2.2 $2.5 $2.5 $2.7

Taxation $2.9 $3.3 $2.5 $1.6 $3.4

Net profit after taxation $7.5 $7.6 $7.1 $10.4 $6.6

Dividends declared $5.7 $4.2 $4.2 $12.2 $4.2

Capital expenditure $3.6 $2.0 $4.7 $3.3 $10.3

Term debt $22.1 $27.0 $35.4 $39.9 $39.3

Total non-current tangible assets $179.7 $182.7 $190.5 $185.6 $186.8

Shareholder return metrics

Earnings per share (cents) 29.6 29.9 27.9 40.8 25.9

Dividend per share (cents) 22.4 16.5 16.5 48 16.5

Net assets per share $5.8 $5.8 $5.6 $5.3 $5.4

Equity 79.0% 77.2% 72.7% 69.9% 70.6%

Return on average shareholders’ funds 5.1% 5.2% 5.1% 7.7% 4.9%

Return on average assets 6.4% 6.7% 6.2% 7.5% 6.6%

performance

Once again we are able to report a solid result for the year.


Kelly Leonard

Kelly Leonard has worked as Port Nelson’s Environmental Officer since February 2015, bringing her knowledge and experience to a role that she describes as “very varied and dynamic”.

Kelly has input into the Port’s routine operations, policies and plans that relate to the environment, and any relevant projects that have an environmental element to manage. Further to this, Kelly is responsible for the integration of sustainability into the business and for providing advice and education about best practice environmentally, as well as raising environmental awareness.

Many of the Port’s activities and operations have an environmental aspect, and Port Nelson operates within both a strictly controlled legislative and self-imposed environmental framework.

“Port Nelson doesn’t just want to meet the minimum environmental requirements that are embedded in legislation such as the Resource Management Act 1991 and the Nelson Resource Management Plan. We aspire to be better than that, constantly striving for continual improvement. My role is important as a focal point for managing, driving and implementing the Port’s environmental aspirations.”

“We have an environmental management system and I’m responsible for the maintenance of both that and our AS/NZS ISO 14001 certification.”

Currently Port Nelson is the only port in New Zealand with AS/NZS ISO 14001 accreditation for its environmental management system.

Kelly also oversees the implementation of the Noise Management and Mitigation Plans, and chairs the Port Nelson Environmental Consultative Committee. The committee provides a forum for stakeholders and affected parties to discuss initiatives, changes and any incidents that may occur.

Staff PROFILEStaff PROFILE

$42.2Min revenue

for 2015

$7.5MNET PROFITAFTER TAXATION

CONTAINER THROUGHPUTin TEUs

90,422

2015 2014 2013

87,46283,380

VESSEL ARRIVALSover 100GRT

747 733730

2015

2014 2013

EMPLOYEES(FTEs)

20152014 2013145143 136

CARGO ThroughputIN TONNES

2.6M

TOTAL VESSEL GRT in millions7.8

8.6

9.2

2013

2014

2015

TON

79%SHAREHOLDER

equity 29.6cearningsper share

port nelson annual report 20156

PERFORMANCE PERFORMANCE

CHAIR / CEO REPORT It was always going to be challenging to emulate last year’s financial result given the impact of the FPSO vessel Raroa’s visit on our revenue in 2014. This situation was exacerbated when the 2015 year started with a softening of the log market in China. Log export volumes were down at a number of ports in New Zealand, including Nelson.

In addition, in November 2014 parts of Nelson and Motueka were hit by the largest hailstorms for some years leading to significant damage to export apple crops, particularly around the Riwaka area.

Six months into the 2015 financial year when we were analysing likely cargo volumes for the full year, we did not expect to achieve the positive result that we are reporting in this document.

However, while log and export apple volumes were down on budget, this was offset by volumes for other commodities such as motor vehicle and fertiliser imports and increased wine-related activity.

Financial performanceOnce again we are able to report a solid result for the year with earnings before interest and tax of $12.2 million as against the budget of $10.9 million.

We have continued to work through the process of reviewing the conditions of some of our older buildings, taking into account any that could be earthquake prone as well as those that may require removal. This ensures a better use of the limited space available to us for cargo

consolidation, particularly during the peak season.

Taking these matters into account we have achieved a net surplus after tax of $7.5 million as against the budgeted figure of $6.4 million. This is a pleasing result, especially given the reduction in log and apple export volumes.

Cargo throughputLower than budgeted volumes for logs and apples meant that we did fall very slightly behind budget in terms of overall revenue tonnes handled for the year with total cargo figures of 2.604 million tonnes as against the budget of 2.615 million tonnes.

We handled 569,000 tonnes of logs during the year, down on the 633,000 tonnes handled in 2014. Processed wood tonnages, and sawn timber in particular, were also slightly down on budgeted levels, partly as a result of greater volumes being directed to the domestic market. Motor vehicle import volumes, however, were well above expectations, buoyed by the strong new-car market. General import and export volumes were also ahead of budget for the 12-month period.

A strong result in a challenging year


CHAIR / CEO REPORT

demolition of the former ENZA Coolstore, known as #6 shed, started just before the end of the financial year.

In November we purchased the former Nelmac site on the corner of Vickerman St and Haven Rd. This means we own the entire corner block bounded by QEII Dr to the east and Wildman Ave to the north. This presents promising developmental opportunities for the Port.

There is strong interest in a number of potential property developments in the 2016 year. There may well be significant changes in a number of areas within the Port as we consolidate cargo storage areas and free up additional land for development.

Health and safetyWe spent a significant part of the 2015 financial year focusing on health and safety within the Port. One of our main aims has been to try and reduce the amount of unnecessary foot and vehicle traffic within operational areas.

The first part of that process was the relocation of our stevedoring staff and part of our HR operations from the former amenities building on McGlashen Quay into the former Toll site adjacent to our main administration building. At the same time our marine staff relocated within our main cargo gate operations area. These moves have gone well operationally and have significantly reduced traffic through our busy areas.

After a period of significant consultation with Port users, we introduced random drug and alcohol testing of third parties working within our operational area in May 2015.

This move was generally well received and we hope it will assist us in our aim of making the Port area as safe as it can possibly be.

The likely passing of the new planned Government legislation towards the end of this year will be a further step towards improved health and safety throughout the country and we are committed to playing our part in that process.

EnvironmentWe continue to have a strong environmental focus within our organisation. We are mindful of our proximity to the Nelson Haven and to local residential areas. The noise liaison committee continues to make an important contribution, with the assistance of local resident representatives. Any feedback on potential noise concerns from the wider public is very much viewed as an opportunity to improve our operations.

Our two-yearly AS/NZS ISO 14001 audit was again successful and it was pleasing to note that we showed ongoing improvement in our environmental operations. During the year we said farewell to our Environmental Officer Thomas Marchant. He was replaced by

For the second year in a row we achieved a record container volume for the year with a total of 90,422 TEUs being handled during the period, up on the 87,442 that we handled in the 2014 year. This was also a welcome result given the reduced apple volumes due to hail damage.

ShippingThe number of container vessel calls increased in the 2015 year following the February 2015 decision by MSC and ANL to discontinue their joint service and operate as separate entities. Weekly calls from Maersk, MSC, ANL and Pacifica Shipping and the continued fortnightly service from Swire Shipping, provide our local importers and exporters with a wide range of shipping options.

The container vessel sector had a challenging 12 months, with a general overcapacity of space on the majority of trades. This has led to a reduction in freight rates in many areas. While this is beneficial for importers and exporters in the short term, it is questionable whether that is sustainable in the long run. All parties involved in the logistics chain need to have the ability to turn a profit.

In addition to the container side of our business, we continue to get regular calls from lines such as Toyo Fuji shipping as well as visits from log vessels, fuel tankers and a variety of other vessels.

The gradual growth in the number of cruise vessels calling here is encouraging and we will continue to work with vessel

operators and local tourism industry representatives to promote Nelson as an alternative port of call.

InfrastructureIn the 2015 year we once again invested in the replacement and upgrade of significant plant within our site to ensure that we are sufficiently equipped to meet the requirements of Port users. We have purchased additional forklifts, upgraded our internal radio capacity, and rebuilt another section of our container yard. We also continue to invest in ICT systems.

We had a very busy year in our property portfolio. The demolition of our amenities and Mission to Seamen buildings on McGlashen Quay was completed and the


Andy Farmer

It’s been 16 years since Port Nelson’s Terminal Operations Supervisor Andy Farmer left his former trade as a builder to help out a friend working at QuayPack for a few months. After working his way up to supervisor within QuayPack Andy shifted across to his current role. The logistics container yard team has grown around him to include 10 drivers and six office-based roles.

“There are a lot more containers, plant and people than when I started,” says Andy. Current CEO Martin Byrne’s arrival some years ago provided the motivation for Andy to stay at the Port and he has appreciated the opportunities he has been given to manage a team and develop his knowledge of the Port’s operations.

“It’s part of our vision to give our people opportunities where we can. That’s not always possible but I’ve been really proud when members of my team have transferred internally to other roles – it means that they’re in demand for all the right reasons!”

Managing the flow of export containers and empty containers can be a busy job and the team works particularly hard during the peak fruit export season.

“Everyone steps up and gives it their all. We try and balance the needs of all our customers given the limited space that we have. While we’re sometimes juggling resources there has been a lot of investment in plant in our part of the business to make sure that we can do the best job possible for the Port’s customers.”


CHAIR / CEO REPORTFor the second year in a row we achieved a record container volume for the year.

CHAIR / CEO REPORT

When we combine those with the planned relocation of our weighbridge facility in the 2016 year and the relocation of the majority of our log storage to within our operational area, we can see that we are entering an exciting time for the business.

We are also likely to sign off on the purchase of a replacement harbour tug in the coming months. Infrastructure such as this does not come cheaply but is critical to our ability to handle shipping tonnage in the years to come.

As always, we would be unable to function efficiently and profitably without the support of the many companies that utilise the services we offer – including importers, exporters and the shipping lines that carry those cargoes. Thank you for your ongoing support.

We also offer our thanks to our amazing staff for the effort that they put in.

Our business is very much a 24-hour, seven day a week operation. When most people in our region are at home fast asleep, we often have people working hard to ensure that the region’s produce is being safely loaded onto vessels for export. We are proud of the role that the Port continues to play in facilitating regional prosperity.

Our very best wishes for the coming year.

Phil Lough Chair of Directors

Martin Byrne Chief Executive Officer

Kelly Leonard who came to us from the Southland Regional Council. Kelly has fitted in very well and brings a wealth of experience to her role with us.

CommunityPort Nelson continues to play a major part in our region in a number of ways, including its sponsorship of a wide range of organisations and events. We are particularly focused on supporting organisations that we believe share similar values to our own, such as Big Brothers Big Sisters and St John Ambulance. We are also keen to support new events that we believe have significant potential, such as Light Nelson. In addition, we support industry-related groups and business organisations such as the Institute of Directors.

Like many large organisations, we receive a significant number of requests for financial support. There is of course a limit to how many organisations we can assist,

and we remain mindful of the need to share funds around wherever possible.

GovernanceAt the end of 2014 long-serving Chair and Board member Nick Patterson stood down as a Director after 20 years and was replaced as Chair by Phil Lough. Tony Reynish joined the Board as a Director and brings with him a wealth of senior management experience within the port industry.

The coming yearAs often seems to be the case when previewing the year ahead, the 2016 financial year looks like it will be a challenging one. At this stage it is expected that container vessels with capacity of around 6500 TEUs will be on the New Zealand coast towards the end of the 2016 calendar year. That is likely to result in changes in the way that certain

shipping lines service New Zealand ports. The concept of hub and feeder ports has been around for many years now but it certainly appears to be closer to becoming a reality than ever with regional ports such as ours likely to be affected to some degree.

Given our relative isolation and the lack of rail services in the region we certainly believe the Port remains the logical exit point for cargo out of Nelson, Tasman and Marlborough and that we will continue to be serviced by a mixture of direct call and feeder service operators. Cargo forecasts for the coming year remain encouraging and as we continue to develop our operational business, we believe we are well-positioned to work with importers and exporters to increase the range of services we can make available to them.

As mentioned earlier in this report our property holdings offer significant development opportunities.


Karen Morris

Karen Morris is a new member of staff in the administration area. Karen lived and worked in Perth for 15 years before moving to Nelson with her husband and two young children. Returning to the paid workforce has been a really positive step, she says. “I had heard that the Port was a great place to work and the team here are certainly helpful and friendly. I’ve learnt a lot!”

Karen’s role involves processing invoices and she is often the person who answers the main phone line at the Port or greets people when they come to reception.

“It’s a refreshing change to be back in a professional environment with other adults while still being able to work part-time and pick my children up from school. That’s really important to me.”

CHAIR / CEO REPORT


It has been a pleasing year for Port Nelson from an environmental point of view. We have embraced a number of initiatives during the course of the year and continued the trend for improvements across environmental targets.

Our annual surveillance audit was held in March for our AS/NZS ISO14001 certification. One of the notable comments made during that audit was around the state and robustness of our Environmental Management System and how this is reflected in the system’s ability to seamlessly roll over between changes in key staff. Next year will see a full recertification audit of the Environmental Management System.

Review of the noise contour mapThis year also saw completion of the first review of the noise contour map. This map identifies the degree to which neighbouring properties are deemed to

be affected by noise emanating from the Port. The review was undertaken, and subsequently peer reviewed by acoustic engineers. The recommendation made was, taking into account the magnitude of minor variations this review identified, that the original contours are still robust and appropriate. This finding was endorsed by the Port Noise Liaison Committee and so the original contours have been retained.

Environmental Ship IndexIn March 2015 Port Nelson became an incentive provider with the Environmental Ship Index. This means we now offer discounts to ships listed on the index. These ships have been assessed against

standards for greenhouse gas emissions and are identified to be performing better in reducing air emissions than the current emission standards of the International Maritime Organisation.

Environmental indicatorsThere were some notable improvements reported against our environmental targets for 2015. In particular a significant reduction in methyl bromide use is noted. This is the result of a successful trial of fumigation in vessel holds with pestigas, meaning no bulk timber fumigation occurred during the year. An increase in waste volume is noted, and this is consistent with a few large-scale projects

ENVIRONMENT

happening at the Port, and some changing trends in service provision by the Port. It’s pleasing to see a 2% increase in volumes recycled.

Calwell Slipway remediation projectAn area of major focus is the final planning phase of the Calwell Slipway remediation project in conjunction with the Ministry for the Environment and Nelson City Council. Historic ship repair work has contaminated the marine sediment in the Calwell Slipway basin which is the third-largest slipway in the country. The slipway is a significant commercial asset to both the Nelson region and the ship repair industry in New Zealand. The primary contaminants of concern in the sediment are tributyltin and copper.

Port Nelson and the Ministry for the Environment signed a letter of intent in January 2015, reaffirming both parties’

intention to remediate the Calwell Slipway contaminated sediment through the Contaminated Sites Remediation Fund. Nelson City Council and Port Nelson made an application to the fund in March this year for the final planning phase of the project.

This phase will include confirmation of dredging methodology, preparation of detailed designs in line with the preferred remediation option, ongoing consultation and the preparation/lodging of consent applications for the site remediation. We will hopefully begin remediation of this site in the second half of 2016.

Giving a little back to the communitySeveral members of the Nelson Unit of the New Zealand Cadet Corps spent a Saturday morning at Port Nelson this year as a result of a staff initiative. The group was in need of funds to help send the

cadets to leadership and training courses and to purchase uniforms. We invited them to separate the packaging for the bulk flexi containers. This is a single-use product used for packaging wine. In its used state it cannot be recycled because it is comprised of both paper and plastic. One of the great features of this exercise was the time taken by staff to build in leadership training, team building and some real life skills such as job safety analysis and hazard identification.

As a result of the cadets’ efforts three and a half 1100L bins of both plastic and cardboard was recycled. This would otherwise have been destined for landfill. This was a really meaningful result from an environmental perspective. It was also an enjoyable morning for those that participated and exemplifies the Port’s environmental and community vision.

There were some notable improvements reported against our environmental targets for 2015.


ENVIRONMENT

Aspect Indicator 2015 2014 2013

Fuel Fuel use (litres) per TEU of cargo handled Fuel use (litres)

8.08 731,113

8.15 712,719

7.49 624,598

Power Electricity use (kWh per TEU of cargo handled) Electricity use (kWh)

48.74 4,407,488

49.39 4,320,108

49.55 4,131,354

Waste Waste generated (m3 per FTE employee) Waste generated (m3) – disposed of at landfill Waste generated – recycled

3.26 473 44%

3.60 515 42%

3.25 443 54%

Water Water use (m3 per TEU) site use excluding ships Water use (m3)

0.32 29,081

0.18 16,254

0.33 27,539

Methyl bromide Quantity of methyl bromide used at Port Nelson (tonnes)

1.4 3.0 4.3

Noise Number of noise complaints 16 12 19

Oil spills Number of oil spills when bunkering - - -

Dust Number of dust complaints - 1 1

Codes of practice Number of audit reports completed 9 13 13

Number of non-conformances identified 3 2 6

Number of non-conformances resolved 3 2 6

Continuous improvement

Number of targets reported on 15 15 15

Number of new initiatives 22 19 12

Indicators of environmental performance

Our performance indicators are provided in both actual units and in TEU to provide a measure of the improvements in efficiency. Most indicators are showing that Port Nelson is making good progress in reducing its environmental footprint.

44%of waste recycled

zero dust complaints

ZERO OIL SPILLSwhile bunkering

50%+reduction inmethyl bromide usage

compared to 2014

4.3

3.0

1.4

tonnes in 2013

tonnes in 2014

tonnes in 2015

22in 2015 12

in 201319

in 2014

AROUND THE PORTnew initiatives


ENVIRONMENT ENVIRONMENT

HEALTH AND SAFETYDriving a culture of zero harmOur continued focus on safety at the Port has led to the introduction of a number of initiatives. These include the Port Users' Drug & Alcohol Programme, a more in-depth approach to investigations, the introduction of new Health & Safety Representatives and additional safety resourcing to support the implementation of new initiatives.

Introduction of the Port Users’ Drug & Alcohol ProgrammeUpcoming changes to the Health & Safety legislation have led to an increased focus on working in partnership with Port users to increase the safety for all workers on Port Nelson sites. One of the first initiatives is the introduction of the

Port Users’ Drug & Alcohol Programme. This programme was developed in conjunction with Port users. The programme requires all workers to be ‘fit for work’ when on Port sites and includes reasonable cause and random testing. Each month fifteen Port users are randomly selected for testing at one of the Port’s controlled gates. The programme has been successful in identifying workers who are unfit to enter Port sites. There will be a continued focus on working more closely with Port users to ensure a safer workplace and to meet the requirements of the new Health & Safety legislation.

Gaining tertiary accreditation

ACC undertook its biennial audit of Port Health & Safety Systems. Port Nelson maintained its tertiary qualification,

the highest level achievable. The audit included focus groups with supervisors and safety representatives and observation of operations with a key focus on new initiatives implemented to improve safety at the Port.

Developing CapabilitiesSome of the new people who joined us and increased our collective expertise in 2015 include:

Eugene Beneke

Eugene joined us as the Port’s new Business Development Manager. Eugene worked in several logistics and supply chain, and business development roles for companies such as Fonterra and Kotahi before moving from Auckland to take up his role at Port Nelson.

Adam O’Loughlin

Adam joined us as the Port’s Business Systems Manager. Adam was previously with Fonterra based in Auckland. Prior to that he held a variety of roles at companies such as Auckland Council and Leslie Rugby Ltd.

Cameron Johnston

Cameron joined the Port’s safety team in the role of Safety Advisor. Cameron was previously based in Perth working as Health & Safety, Environment and Security Officer at the LNG Project. It is great to have him on board supporting the Port’s drive towards zero harm.

Darryl Fraser

Darryl joined the workshop team as an Electrician. Darryl originally hails from

Canterbury but work took him up north where he spent 15 years working for companies including Telecom, Siemens and Meridian Energy. His last position was as Team leader for Meridian Energy, based at the Te Uku windfarm in Raglan.

TrainingWe have continued our investment in training during 2015. We have continued to develop learners’ guides and assessments. This has led to a number of new modules being completed and more stevedores gaining their National Certificate in Stevedoring. There has also been an increased focus on fatigue management training. Sixty people at the Port have now completed this module.

Hayden Grainger

Operational Systems Administrator Hayden Grainger’s role has evolved during his nearly 10 years at the Port, giving him experience in a number of operational areas. Most of his work has involved systems maintenance and logistics as he has a talent for learning about new software applications. He is often the ‘go to’ person in the office if someone is having software challenges.

Hayden’s day-to-day work involves liaising with Port customers so that they can track their cargo and plan for its arrival and departure via vessels calling in Nelson. Customers can do this using the online version of the Port’s operating system, which they can log into from their own devices. “It’s a live mirror for what is happening at the Port,” says Hayden.

Hayden’s natural ability for learning new systems and processes has led to some great opportunities at the Port.

Currently he is expanding his knowledge by learning to be a ships planner. Once he is fully trained his role will be evenly split between ships planning and systems administration. The Port is also supporting his studies towards a diploma in IT at Nelson Marlborough Institute of Technology.

“Ships planning is the final piece in the puzzle for me in terms of what the logistics team does,” says Hayden. “It’s been really interesting to learn about it. Diversifying and continually learning new skills has made it possible for me to stay living in Nelson – which is great!”


PEOPLE


HighlightsWe are pleased to support a number of initiatives and organisations around our region, ranging from sports to business and the arts. The Port contributes approximately $100,000 each year to such sponsorships. Our sponsorships in the 2015 financial year included:

SportsNelson Cricket, Summer Swim Series, Kaiteriteri Mountain Bike Park, Transport and Shipping Golf Tournament, Tasman Bay Snapper Classic

EnvironmentNelson Environment Centre – Community Guided Snorkel Day

CommunitySt John 4WD vehicle upgrade, Nelson Women’s Centre, Nelson Women’s Refuge, CACTUS,

Sealord Marine Rescue Centre, Victory Community Centre – Victory Swimming Project, Big Brothers Big Sisters, The Bishop Suter Trust (Rita Angus “The Apple Pickers” painting appeal)

ArtsLight Nelson

BusinessNelson Tasman Chamber of Commerce, Institute of Directors, Port Nelson Fishermen’s Association


Supporting young people: CACTUSPort Nelson has sponsored Nelson’s CACTUS (Combined Adolescent Challenge Training Unit Support) programme in conjunction with Nelson Red Cross for a second year in 2015.

CACTUS is a national programme, originally initiated by a police officer in Hokitika and has been running in Nelson for five years. CACTUS is supported locally by the Nelson City Council, the Nelson Police, the Fire Service, Riverside Pool, and Results Gym.

Up to 27 teenagers aged from 14 – 17 take part in the eight-week programme, with each of the participating schools – Nelson College, Nelson College for Girls and Nayland College – putting forward up to seven students. Alternative Education

Marichen Botha

Marichen Botha is Port Nelson’s HR and Training Coordinator and brings a wealth of human resources experience gained in South Africa and Auckland to her role.

Marichen filled in for the Port’s Human Resources Advisor at the start of 2015 before successfully applying for her newly-created role. She is responsible for ensuring that staff members' training and certification records are up to date and that inductions and training take place as and when they should. She also undertakes recruitment for casual staff at the Port.

A desire for a lifestyle change prompted Marichen and her husband to move to Nelson from the Hibiscus Coast last year. The couple had both led very busy professional lives working for Auckland Council. Marichen was heavily involved in the human resources work necessitated by the creation of the Auckland Super City and also worked on the Rugby World Cup, interviewing the many, many volunteers needed to host such a large event.

“It was really amazing to be a part of both of those pieces of work even though it was extremely challenging.”

Moving to Nelson has been a welcome change, she says. “My husband and I both come from rural South Africa,” says Marichen. “We’re not really big city people. We were really happy to have the opportunity to move to Nelson.”

COMMUNITY

Students participate in a training exercise at Port Nelson as part of the first CACTUS programme for 2015. (Photo supplied by Martin de Ruyter, Nelson Mail)


Community

Provider, Youth Nelson, and Nelson Police Youth Services also nominate several participants.

“Course participants have a wide range of motivations for coming on the course,” says Nelson Bays Police Youth Services Superviser Charlie Parfitt. “Some are wanting to develop their leadership skills and some want to take their fitness to the next level or improve their self-confidence.”

It’s a rigorous and physically demanding experience. Participants attend three times a week for eight weeks and are expected to be ready to start in the Nelson College for Girls gym at 5:55am sharp. “The early morning starts really put people out of their comfort zone,” says Youth Nelson Manager Maree Shalders, “but the results can be instant and very positive.”

This year the programme ran in June-July and was led by Juliana Tautari. Previously Vicky and Reid Carnegie have also led the programme. All three instructors have army backgrounds and make sure that participants are really put through their paces. Most of the training takes place outdoors, regardless of the weather, and included a mud run in the estuary in winter.

“Even after a day we notice that the students are pumped and motivated,” says Maree. “It’s so inspiring. There’s an immediate improvement in our students’ relationships with other people and an improvement in their attitude towards the police. We notice that they see the police as supportive figures rather than just the authorities.

“Students’ attitudes towards our staff at Youth Nelson also improve and we

see positive impacts in terms of their classwork and their confidence in their own ability to achieve their goals. One of the Deputy Principals at Nayland College said to me that it’s the best extra-curricular programme he’s seen in his 30 years of teaching.”

Each programme costs $5,500 to deliver to the group of participants, even with the financial and ‘in kind’ support of a number of Nelson businesses and organisations, the donation of the use of facilities at Nelson College for Girls, and the work of a team of volunteers.

“Volunteers play a huge part in the running of the programme,” says Charlie. “We have two or three people who go on the run with the participants at each training session and parents are welcome to come along and make the shared breakfast.”


Students participate in a training exercise at Port Nelson as part of the first CACTUS programme for 2015. (Photo supplied by Martin de Ruyter, Nelson Mail)

Johan Verhage

Port electrician Johan Verhage loves the variety of his role. On any given day he could be travelling out via boat to install or do repairs and maintenance on a beacon, he might be working on complex software diagnostics on one of the Port’s cranes or crane spreaders, or he could simply be installing a new power point or phone connection.

“I really enjoy the complexity of some of the work that I do and the trouble-shooting aspects of some of the diagnostics,” says Johan.

During his six and a half years with the company, Johan has twice been sent overseas to gain specialist knowledge about the Port’s cranes and crane spreaders. “The Port has invested a lot of time and money into helping me gain the detailed understanding I need to keep its plant performing optimally.”

Johan is one of three full-time electricians at the Port who look after plant electrics (including the Port’s tugboats), electrical hardware and fibre cable installation.

VICTORY SWIMMING PROJECTIn April this year the Port began sponsoring the Victory Swimming Project, which provides swimming lessons for adult, former refugees.

Victory Community Centre’s Extending the Hub Coordinator, Katie Hughes, organises and facilitates a range of community outreach programmes, including the Victory Swimming Project.

Katie identified a need for adult swimming lessons within the former refugee community after a conversation with local Red Cross Refugee Services. “We were discussing how to build community relationships with the former refugee community and noticed a gap,” says Katie. “The children learn to swim at school, but many of their parents are not confident in and around the water. This means that they miss out on joining in everyday Kiwi activities like going fishing, or taking the kids to the river or the beach.”

The programme was trialled in May 2014. Since that time, demand has grown and

remained constant. Small group classes are held at the ASB Aquatic Centre, and each participant receives five lessons. “We run two groups back-to-back during each school term. This works out to about 32 people receiving lessons throughout the year. The classes cater for all experience levels. We have participants that have never been in the water and after five lessons they will be floating, treading water and swimming underwater.

“The feedback we receive is overwhelmingly positive. The participants get a lot out of the programme and really enjoy the lessons; there’s lots of laughter!” The Victory Swimming Project is funded in part by the Victory Community Centre and the Todd Foundation. Port Nelson’s funding means that the programme can now run until late 2016.


Community

Director changesMr N Patterson retired as Chair in September 2014 but remained a Director until December 2014. Mr P Lough retired by rotation and was reappointed for a further three years in September 2014. Mr T Reynish was appointed to the Board in November 2014 for a three-year term.

Board as at 30 June 2015Phil Lough (Chair) Peter Schuyt (Director) Tim King (Director) Paul Le Gros (Director) Bronwyn Monopoli (Director) Tony Reynish (Director – appointed November 2014) Nick Patterson (Chair – retired in September 2014 but remained a Director until December 2014)

Meeting attendance BOARDFINANCE

& RISKREMUNERATION

& APPOINTMENTS

Meetings held 12 3 2

A Patterson 3 - -

P Lough 11 - 1

P Schuyt 11 3 -

T King 12 3 -

P Le Gros 12 - 2

B Monopoli 11 3 -

T Reynish 6 - 2

GOVERNANCE

DIRECTORS

Phil LoughPhil is currently Chair of Methven Ltd and Quotable Value Ltd and holds directorships with a range of other New Zealand companies. He was previously employed as CEO of the Sealord Group and is now based in Nelson. He was made a Companion of the New Zealand Order of Merit and is a fellow of the Institute of Directors (IOD).

Paul Le GrosPaul used to be a partner with Duncan Cotterill but is now a consultant with the firm. He holds other business and board appointments. Over the past 30 years, Paul has been extensively involved with the YMCA movement in Nelson at a national and international level.

Nick PattersonNick is the Managing Director of Wai-West Horticulture Ltd, an integrated horticulture company with extensive plantings and post-harvest investments in the Nelson district. Nick is a Director of Cold Storage Nelson Ltd, Freshco Nelson Ltd and other associated companies. He retired as Chair in September 2014 but remained a Director until December 2014.

Tony ReynishTony is a former senior executive of the Port of Tauranga with more than 25 years experience in port developments, property, and commercial contracts. He currently holds a number of directorships in port-related companies. Tony was appointed to the Board in November 2014.

Peter SchuytPeter is a professional Director and holds directorships in a number of organisations across a range of different business sectors. He previously worked as a Chief Financial Officer for several major New Zealand companies.

Tim KingTim is Deputy Mayor of the Tasman District Council and chairs its Corporate Services Committee. He farms on the Waimea Plains and has governance roles within a range of community organisations, including the Waimea Rural Fire Authority and the Wakefield and Community Health Centre Trust.

Bronwyn MonopoliBronwyn is Associate Principal of Crowe Horwath, specialising in rural business accounting services, taxation and business advice. She brings a wealth of governance experience to her role and is currently a Director of several companies and trusts. Bronwyn has an Honorary Doctorate in Commerce from Massey University and is a fellow of the College of Chartered Accountants. Awarded an MBO (Civil Division) for services to business management, she has been inducted into the Nelson Tasman Chamber of Commerce Hall of Fame.


FINANCIAL REPORT

CONTENTS

Independent auditor's report ..................................28Statutory information ..............................................29Statement of corporate intent ................................31

Financial statementsStatement of comprehensive income ....................32Statement of changes in equity .............................33Balance sheet .........................................................34Statement of cash flows .............................................35

Notes to the financial statements ..........................36

A. Revenue and expensesA1. Revenue ............................................................38A2. Other operational and property expenses ......38A3. Net financing costs ...............................................39A4. Taxation ..................................................................39

B. Key assetsB1. Property, plant and equipment ........................40B2. Investment properties ......................................41B3. Capital commitments .......................................41B4. Fair value measurements ................................41

C. Financial risk managementC1. Financial instruments ............................................43

D. Other informationD1. Provisions ..........................................................45D2. Reconciliation of net operating cash flows......46D3. Contingent assets and liabilities .....................47D4. Issued capital ...................................................47D5. Related-party disclosures .................................47D6. Investment in associate ...................................48D7. Events after balance date ...................................48

port nelson annual report 201526 27port nelson annual report 2015

OWNERSHIPNelson City Council 50% Tasman District Council 50%

PRINCIPAL ACTIVITIESPort Nelson's principal activities during the year were:

• The provision of port facilities

• Providing marine services, cargo-handling operations and slipway services

• Investment property portfolio

ROLE OF THE BOARDThe Board is appointed by the Shareholders. The Board is responsible for the governance and strategic direction of the business of Port Nelson to achieve its objective in accordance with Port Nelson's Corporate Governance Code of Practice. The Board is also responsible for the monitoring of the business in accordance with Port Nelson's Corporate Governance Code of Practice.

Port Nelson operates under the Port Nelson Corporate Governance Code of Practice. The Code specifies matters such as:

STATEMENT OF CORPORATE INTENTIn June each year, in accordance with section 16 of the Port Companies Act 1988 and the Company’s constitution, the Board submits a draft Statement of Corporate Intent (SOCI) to its shareholders. The draft SOCI sets out the Company’s overall objectives and intentions and its financial, port operations, environmental and health and safety performance targets for the following three financial years.

After due consultation with the Company’s shareholders the shareholders approve the final SOCI and deliver it to the Board. A copy is also placed on the Company’s website.

The Board also aims to ensure that the shareholders are informed of all major developments and issues affecting the Company.

BOARD COMMITTEESThe Board delegates some responsibilities and tasks to Board committees. However, the Board retains the ultimate responsibility and accountability for any committee’s actions or inactions. All Directors receive agenda papers for committee meetings and all Directors have the right to attend committee meetings.

The Board's two standing committees are as follows:

• The Finance and Risk Committee liaises with the Company’s independent auditor and it reviews the quality and reliability of internal controls and financial information used and issued by the Board.

• The Remuneration and Appointments Committee reviews the Company’s remuneration policies and practices, and reviews and sets the remuneration of the Company’s Chief Executive Officer and Senior Management Team respectively.

The following Directors served as standing committee members during the year:

Finance and Risk Committee

Peter Schuyt, Bronwyn Monopoli, Tim King

Remuneration and Appointments Committee

Phil Lough, Paul Le Gros, Tony Reynish (appointed November 2014), Nick Patterson (retired as Chair in September 2014 but remained a Director until December 2014)

DIRECTORS' INSURANCEThe Company arranges comprehensive liability insurance policies for the group, Directors and officers within the limits and requirements as set out in the Companies Act 1993 and the Company’s constitution.

LOANS TO DIRECTORSThe Company does not make loans to Directors.

DONATIONSDonations made during the year are disclosed in the financial statements.

AUDITORSIn accordance with section 19 of the Port Companies Act 1988 and section 14 of the Public Audit Act 2001, Audit New Zealand on behalf of the Auditor-General is the auditor of the company.

USE OF COMPANY INFORMATIONDuring the year the Board received no notices from Directors requesting to use company information received in their capacity as Directors that would not otherwise have been available to them.

statutory informationto the shareholders, on the affairs of port nelson limited for the year ended 30 june 2015

Independent Auditor’s Report

The Auditor-General is the auditor of Port Nelson Limited (the company). The Auditor-General has appointed me, John Mackey, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements of the company on her behalf.

OpinionWe have audited the financial statements of the company on pages 32 to 48, that comprise the balance sheet as at 30 June 2015, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, and the notes to the financial statements that include accounting policies and other explanatory information.

In our opinion, the financial statements of the company:

• present fairly, in all material respects:

» its financial position as at 30 June 2015; and

» its financial performance and cash flows for the year then ended; and

• comply with generally accepted accounting practice in New Zealand and have been prepared in accordance with New Zealand equivalents to International Financial Reporting Standards.

Our audit was completed on 4 September 2015. This is the date at which our opinion is expressed.

The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and our responsibilities, and explain our independence.

Basis of opinionWe carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to influence readers’ overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation of the company’s financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

An audit also involves evaluating:

• the appropriateness of accounting policies used and whether they have been consistently applied;

• the reasonableness of the significant accounting estimates and judgements made by the Board of Directors;

• the adequacy of the disclosures in the financial statements; and

• the overall presentation of the financial statements.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. Also, we did not evaluate the security and controls over the electronic publication of the financial statements.

We believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.

Responsibilities of the Board of DirectorsThe Board of Directors is responsible for the preparation and fair presentation of financial statements for the company that comply with generally accepted accounting practice in New Zealand.

The Board of Directors’ responsibilities arise from the Port Companies Act 1988.

The Board of Directors is also responsible for such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for the publication of the financial statements, whether in printed or electronic form.

Responsibilities of the AuditorWe are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001.

IndependenceWhen carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the External Reporting Board.

Other than the audit, we have no relationship with or interests in the company.

John Mackey Audit New Zealand On behalf of the Auditor-General Christchurch, New Zealand

To the readers of Port Nelson Limited’s financial statements for the year ended 30 June 2015

• Ethical standards

• Role of the Board

• Composition and performance of the Board

• Directors' duties and responsibilities

• Committees of the Board

• Finance and risk

• Role of the Chair

• Role of the CEO

• Shareholder relations and Statement of Corporate Intent

• Reporting and disclosure

• Health and safety


Directors' register of interestsDirectors recorded the following interests in the interest register for the year ended 30 June 2015.

Tim King

Tasman District Council, Deputy Mayor Waimea Water Augmentation Committee, Member Kaiteriteri Recreation Board, Member Waimea Rural Fire Authority, Independent Director The Rural Committee of the Fire Service Commission, Member

Paul Le Gros

Building Connexion Ltd, Chair Nelson Electricity Ltd, Chair FICO Finance Ltd, Director Unimar Ltd, Director Nelson Honey Ltd, Chair HealthPost Ltd, Director Waimea Nurseries Ltd, Chair

Phil Lough

LIC Ltd, Director Methven Ltd, Chair Fisher and Paykel Appliances, Director

Bronwyn Monopoli

Nelson Millennium Centre Trust, Trustee Wearable Art Development Charitable Trust, Trustee Crowe Horwath Accountants, Associate Principal Light Nelson Trust, Trustee Thames Farming Enterprises New Zealand Group Limited, Director Thames Dairy Ltd, Director

Peter Schuyt

Tatua Dairy Co-operative Ltd, Director Dairy Investments Funds Ltd, Chair Landcare Research Ltd, Chair Pumpkin Patch Ltd, Chair Tax Management NZ Ltd, Chair Foodstuffs North Island Ltd, Director DairyNZ Ltd, Director

Tony Reynish

Stallion Plastics Ltd, Director/Shareholder MetroBox Ltd, Director Quality Marshalling Ltd, Director Timaru Container Terminal Ltd, Director Nga- Ma- tarae Charitable Trust, Trustee Port of Tauranga, Consultant

DIRECTORS' REMUNERATIONThe total remuneration received by the Company's Directors during the year was as follows:

EMPLOYEE REMUNERATIONThe following table reflects remuneration paid to employees in excess of $100,000 per annum. The amount paid reflects actual payments made during the year. Any 'at risk' payments that were paid after balance date are excluded.

Phil Lough

Chair of Directors For and on behalf of the Board Date: 4 September 2015

Peter Schuyt

Director

RemunerationNUMBER OF EMPLOYEES

$100,001 to $110,000 1

$110,001 to $120,000 1

$120,001 to $130,000 1

$140,001 to $150,000 3

$200,001 to $210,000 2

$210,000 to $220,000 1

$360,001 to $370,000 1

T B King $33,746

A O Patterson $23,060

P M Schuyt $33,746

P D Le Gros $32,802

P V Lough $56,745

B A Monopoli $33,746

A P Reynish $19,431

TOTAL $233,276

measure of performance against objectives Target 2015 2014 2013 OUTCOME

Lost time injury frequency rate* <1.50 2.99 1.64 4.95 Not achieved

Net debt/equity ratio <45.0% 14.4% 16.8% 24.2% Achieved

Dividends declared $4.2m $5.7m $4.2m $4.2m Achieved

Cargo throughput (cargo tonnes) 2.6m 2.6m 2.7m 2.6m Achieved

Shipping tonnes (GRT) 8.5m 9.2m 8.6m 7.7m Achieved

Ship visits 697 747 786 729 Achieved

Revenue $39.0m $42.2m $43.3m $39.6m Achieved

Return on average shareholders’ funds** 4.0% 5.1% 5.2% 5.1% Achieved

Return on funds employed 6.0% 7.1% 7.5% 6.9% Achieved

Capital expenditure $4.0m $3.6m $2.0m $4.7m Achieved

Incidents leading to pollution of harbour Nil Nil Nil Nil Achieved

Compliance with all resource consent conditions 100% 100% 99% 100% Achieved

Compliance with Maritime New Zealand safety standards 100% 100% 100% 100% Achieved

STATEMENT OF CORPORATE INTENTfor the year ended 30 june 2015

mission statementTo operate Port Nelson as a successful business providing cost efficient, effective and competitive services and facilities for Port users and shippers.

To provide for the present and future needs of Port Nelson in ways that are sensitive to people, use resources wisely and are in harmony with the environment of an export port.

objectives

1. To operate as a successful business

2. To be a good employer

3. The debt equity ratio not to exceed 45.0% (31/69)

4. To aim to grow the business through stimulation of throughput, added-value services and related business activities, so leading to increased revenue

5. To achieve a commercially acceptable rate of return on shareholders’ funds in accordance with meeting the objectives herein

6. To ensure that Port development takes place which meets the needs of the region

7. To ensure that high environmental standards are maintained

8. To strive for continuous improvement in everything that we do

* LTI frequency rate: lost time injuries divided by hours worked in period multiplied by 100,000.

** Return on average shareholder’s funds is based on the net profit earnings figure prior to other comprehensive income.


statutory information

These statements are to be read in conjunction with the notes to the financial statements on pages 37 – 48. These statements are to be read in conjunction with the notes to the financial statements on pages 37 – 48.

ISSUED CAPITAL

RETAINED EARNINGS

ASSET REVALUATION

RESERVEHEDGING RESERVE

TOTAL EQUITY

$000 $000 $000 $000 $000

BALANCE AT 1 JULY 2013 6,046 43,522 95,268 (1,518) 143,318

Net profit for the year - 7,590 - - 7,590

Other comprehensive incomeImpairment recognised - - (822) - (822)

Changes in the fair value of cash flow hedges - - - 1,016 1,016

Deferred tax impact of movement in reserves - - 315 (285) 30

Transfer to revaluation reserves - 54 - 54

Total other comprehensive income - 54 (507) 731 278

TOTAL COMPREHENSIVE INCOME FOR THE YEAR - 7,644 (507) 731 7,868

Transfer to (from) revaluations reserve – properties sold - 581 (581) - -

Dividends payable - (2,200) - - (2,200)

Dividends paid - (2,000) - - (2,000)

BALANCE AT 30 JUNE 2014 6,046 47,547 94,180 (787) 146,986

Net profit for the year - 7,534 - - 7,534

Other comprehensive incomeImpairment recognised - - (261) - (261)

Changes in the fair value of cash flow hedges - - - (749) (749)

Deferred tax impact of movement in reserves - - 200 209 409

Reclassification of property, plant and equipment - - (446) - (446)

Total other comprehensive income - - (507) (540) (1,047)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR - 7,534 (507) (540) 6,487

Dividends payable - (3,200) - - (3,200)

Dividends paid - (2,500) - - (2,500)

BALANCE AT 30 JUNE 2015 6,046 49,381 93,673 (1,327) 147,773

statement of changes in equityfor the year ended 30 june 2015

statement of comprehensive incomefor the year ended 30 june 2015

NOTES 2015 2014

$000 $000

revenuePort operations A1 36,344 36,841

Property A1 5,869 6,435

TOTAL REVENUE 42,213 43,276

expensesEmployee benefit expenses 12,275 11,734

Other operational and property expenses A2 12,534 12,849

Earnings before interest, tax, depreciation and amortisation 17,404 18,693

Depreciation and amortisation 5,154 5,481

Earnings before interest and tax 12,250 13,212

Net financing costs A3 1,768 2,155

Share of loss from associate 93 181

NET PROFIT BEFORE INCOME TAX 10,389 10,876

Income tax A4 2,855 3,286

NET PROFIT AFTER INCOME TAX 7,534 7,590

other comprehensive incomeMovements in revaluation reserves (507) (453)

Movements in hedging reserve (540) 731

TOTAL OTHER COMPREHENSIVE INCOME (1,047) 278

TOTAL COMPREHENSIVE INCOME 6,487 7,868


statement of cash flowsfor the year ended 30 june 2015

NOTEs 2015 2014

$000 $000

cash flows from Operating activitiesCash was provided from:

Receipts from customers 35,339 36,486

Rent received 5,587 6,435

Interest received 14 14

40,940 42,935

Cash was applied to:

Payments to suppliers and employees 24,478 23,537

Interest paid 1,839 2,194

Taxes paid 3,319 3,350

Net gst received/(paid) 94 (68)

29,730 29,013

NET OPERATING CASH INFLOWS D2 11,210 13,922

Cash flows from investing activitiesCash was provided from:

Sale of property, plant and equipment 16 2,932

Distribution from associate D6 471 -

Dividend received from associate D6 - 383

487 3,315

Cash was applied to:

Purchase of property, plant and equipment 3,491 1,957

Purchase of intangibles 112 69

3,603 2,026

NET INVESTING CASH INFLOWS/(OUTFLOWS) (3,116) 1,289

cash flows from financing activitiesCash was applied to:

Loans repaid 4,900 8,400

Dividend paid 4,700 5,200

9,600 13,600

NET FINANCING CASH OUTFLOWS (9,600) (13,600)

Net increase/(decrease) in cash held 1,506 1,611

Cash and cash equivalents at 1 July 2,358 747

CASH AT 30 JUNE 852 2,358

These statements are to be read in conjunction with the notes to the financial statements on pages 37 – 48.

NOTES 2015 2014

$000 $000

current assetsCash and cash equivalents 852 2,358

Trade and other receivables C1 5,538 4,400

Inventories 550 459

Prepayments and accruals 147 138

Investment in associate D6 - 564

Total current assets 7,087 7,919

less current liabilitiesTrade and other payables C1 2,104 2,120

Employee benefit entitlements D1 1,379 1,346

Tax payable 1,895 1,969

Dividend payable 3,200 2,200

Derivatives C1 526 100

Noise mitigation D1 53 53

Total current liabilities 9,157 7,788

WORKING CAPITAL (2,070) 131

non-current assetsProperty, plant and equipment B1 164,605 169,014

Intangible assets 368 462

Investment properties B2 15,024 12,911

Derivatives C1 55 195

Total non-current assets 180,052 182,582

LESS non-current liabilitiesEmployee benefit entitlements D1 173 171

Deferred tax liability A4 6,025 6,824

Term loan C1 22,100 27,000

Derivatives C1 1,372 1,189

Noise mitigation D1 539 543

Total non-current liabilities 30,209 35,727

NET ASSETS 147,773 146,986

shareholders’ fundsIssued capital D4 6,046 6,046

Retained earnings 49,381 47,548

Asset revaluation reserve 93,673 94,180

Hedging reserve (1,327) (788)

TOTAL SHAREHOLDERS' FUNDS 147,773 146,986

balance sheetAs AT 30 june 2015

Phil Lough

Chair of Directors For and on behalf of the Board Date: 4 September 2015

Peter Schuyt

Director

These statements are to be read in conjunction with the notes to the financial statements on pages 37 – 48.port nelson annual report 2015 port nelson annual report 201534 35

Notes to the Financial Statements: About This Report

REPORTING ENTITYPort Nelson Limited (Port Nelson) is a for-profit company incorporated under the Companies Act 1993 and created pursuant to the Port Companies Act 1988.

Port Nelson operates in one industry and one geographical segment providing and managing port facilities, marine services, cargo-handling operations and investment properties at the port of Nelson and within the wider Marlborough region.

BASIS OF PREPARATIONThe financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ('NZ GAAP'). They comply with New Zealand equivalents to International Financial Reporting Standards and International Financial Reporting Standards.

The financial statements are presented in New Zealand dollars rounded to the nearest thousand. The financial statements were authorised for issue by the Directors on 4 September 2015.

NOTES TO THE FINANCIAL STATEMENTSInformation that is considered material and relevant to the users of these financial statements is included within the notes to the financial statements. The assessment of materiality and relevance includes qualitative as well as quantitative factors including the size and nature of the balance and if the balance is important in understanding Port Nelson's current or future performance.

FOREIGN CURRENCYTransactions in foreign currencies are converted at the New Zealand rate of exchange ruling at the date of the transaction. Capital items are converted at the exchange rate ruling at balance date or the forward exchange contract rate where derivatives have been used to hedge the exposure.

CRITICAL JUDGEMENTSIn preparing these financial statements Port Nelson has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent

actual results and are continually being evaluated based on historical experience and other factors, including expectations or future events that are expected to be reasonable under the circumstances. There are no estimates and assumptions in the view of the Directors that have a risk of causing a significant adjustment to the carrying amounts of assets and liabilities within the next financial year.

STANDARDS AND INTERPRETATIONS ISSUED AND NOT YET ADOPTEDPort Nelson has applied all new and revised accounting standards and interpretations that are effective in the year. This did not result in a material impact on the financial statements.

There are a number of other new and amended accounting standards and interpretations not yet effective that will be adopted by Port Nelson when they become mandatory. Those relevant to Port Nelson include NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue. The financial statement impact of the adoption of these standards has not yet been analysed.

ACCOUNTING POLICIESThere have been no changes in accounting policies during the financial year disclosed in the Financial Statements. Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements.

MEASUREMENT SYSTEMThose accounting principles considered appropriate for the measurement and reporting of results and financial position under the historical cost method, modified by the revaluation of land, buildings, wharves and investment property have been followed.

Effective for the financial year ending

NZ IFRS 15 Revenue from contracts with customers 30 June 2018

NZ IFRS 9 Financial instruments 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS


Recognition and MeasurementFinance revenue

Finance revenue represents interest revenue received. This is recognised on a time proportion basis using the effective interest method.

Finance costs

Finance costs are recognised as an expense when incurred. Financing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that take a substantial period of time to get ready for their intended use, are added to the cost of those assets until such a time as the assets are substantially ready for their intended use.

Current TaxThe income tax expense for the financial year is the tax payable on the current financial year’s taxable income based on the income tax rate and adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements and for unused tax losses (if any).

Deferred TaxDeferred tax assets and liabilities are recognised for temporary differences at the rate expected to apply when the assets are recovered or liabilities are settled. The tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.

Deferred tax assets are recognised for deductible temporary differences only if it is probable that future taxable amounts will be available to utilise those temporary differences.

Deferred tax is charged or credited to the Statement of Comprehensive Income, except where it relates to items charged or credited directly to equity, in which case the tax is dealt with in other comprehensive income.

A3. NET FINANCING COSTS 2015 2014

$000 $000

Finance revenue 14 14

Finance costs 1,782 2,169

NET FINANCING COSTS 1,768 2,155

Provision for Taxation 2015 2014

$000 $000

Current tax 3,245 3,884

Deferred tax (390) (598)

TAX EXPENSE 2,855 3,286

Profit from continuing operations 10,389 10,876

Tax at 28% 2,909 3,045

Prior year adjustment (88) -

Non-deductible expenses 76 471

Non-taxable income (88) (231)

Deferred tax movement 46 1

TAX EXPENSE 2,855 3,286

Deferred tax (assets) and liabilities

2015 PP&E Other Total

$000 $000 $000

Opening balance 7,458 (634) 6,824

Charged to profit and loss (236) (154) (390)

Charged to equity (200) (209) (409)

BALANCE AT 28% 7,022 (997) 6,025

2014 PP&E Other Total

$000 $000 $000

Opening balance 8,428 (993) 7,435

Charged to profit and loss (672) 74 (598)

Charged to equity (298) 285 (13)

BALANCE AT 28% 7,458 (634) 6,824

Imputation Credits to Shareholders 2015 2014

$000 $000

Imputation credits available to shareholders for future use 19,408 18,138

A4. TAXATION

A1. REVENUE 2015 2014

$000 $000

PORT OPERATIONSOperations 36,335 36,676

Gain on sale of assets 9 165

Total Port operations 36,344 36,841

PROPERTYProperty leases and licences 4,637 5,041

Investment property 948 953

Gain on sale of assets - 368

Fair value adjustment of investment property 284 73

Total property 5,869 6,435

TOTAL OPERATING REVENUE 42,213 43,276

A. Revenue and Expenses A. Revenue and Expenses (CONTINUED)

Recognition and MeasurementRevenue is recognised to the extent that it is probable that the economic benefits will flow to Port Nelson and that revenue can be reliably measured.

Operating revenue consists of revenue arising from cargo, marine and stevedoring operations.

Cargo and marine revenue is recognised based upon the departure of the vessel.

Stevedoring revenue is recognised based upon the level of completion of the vessel at balance date.

Property lease revenue is accounted for on an accrual basis at balance date. Rentals are payable in advance.

Future Receivables under Operating LeasesNon-cancellable operating leases represent future expected lease receipts arising from the rental of Port Nelson property.

Non-Cancellable Operating Leases as Lessor 2015 2014Not later than one year 4,196 4,552

Later than one year and not later than five years 9,727 10,749

Later than five years 3,431 3,172

17,354 18,473

A2. OTHER OPERATIONAL AND PROPERTY EXPENSES 2015 2014

$000 $000

Audit fees – current year 62 61

Bad debts written-off 10 -

Contract services 1,671 1,550

Directors' fees 233 231

Donations and sponsorship 100 92

Electricity 825 855

Fuel 792 930

Impairment of assets 463 569

Noise mitigation expenses 25 24

Plant hire 1,145 1,504

Rates 543 423

Repairs and maintenance 3,651 3,257

Other operating expenses 3,014 3,353

12,534 12,849

Administration and Other ExpensesAdministration and other expenses are recognised as an expense when they are incurred.

Impairment of AssetsAt each reporting date Port Nelson reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Where the carrying amount of the asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. For revalued assets the impairment loss is recognised against the revaluation reserve for that asset. Where the impairment loss is greater than the balance in the revaluation reserve, the excess impairment is expensed through profit or loss. For assets not carried at a revalued amount the impairment loss is recognised in profit or loss.


Notes to the Financial StatementsNotes to the Financial Statements

B1. PROPERTY, PLANT AND EQUIPMENT (Continued)

Valuation Basis The asset classes that are subject to revaluation are assessed at each balance date to ensure that the values are not materially different from fair value. Where the carrying value is materially different from fair value a revaluation is undertaken. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses are included in the Statement of Comprehensive Income. When revalued assets are sold, the amounts included in asset revaluation reserves in respect of those assets are transferred to retained earnings.

Land and buildings are valued at least every three to five years respectively. Land and buildings are included at the valuation as at 30 June 2013. As at 30 June 2015 Port Nelson engaged TelferYoung, an independent valuer, to complete a fair value assessment. No revaluation was required. The Land and Buildings valuation was completed by Ian McKeage, Indepedent Registered Valuer, FNZIV, FPINZ of TelferYoung. TelferYoung has recent experience in the location and category of the items being valued. Further detail on the fair value measurement is included in note B4.

Wharves are valued at least every five years. Fair value was last determined as at 30 June 2013. The valuation was prepared by Port Nelson’s engineering staff and reviewed by Ian McKeage, Registered Valuer, FNZIV, FPINZ of TelferYoung. Further detail on the fair value measurement is included in note B4.

B4. FAIR VALUE MEASUREMENTSThe valuation of land, buildings, wharves and investment property requires estimation and judgement. At each reporting date, the independent valuation reports are subject to internal review by the management team. The review focuses on checking material movements and ensuring all additions and disposals are captured. A summary report on valuation movements is provided to the Board and full copies of the valuer’s reports are available to Directors. Valuations are categorised within a three-tier fair value hierarchy table based upon the observability of valuation inputs.

Level 1 inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2 inputs: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly, as prices, or indirectly, derived from prices.Level 3 inputs: Inputs for the asset or liability that are not based on observable market data, that is, unobservable inputs.

B2. INVESTMENT PROPERTIES 2015 2014

$000 $000

Opening fair value of investment property 12,911 13,305

Additions/reclassifications 1,829 1,260

Revaluations (recognised in property revenue) 284 73

Properties sold - (1,727)

Closing fair value of investment property 15,024 12,911

B3. CAPITAL COMMITMENTS 2015 2014

$000 $000

Commitments for capital development 2,214 120

Recognition and MeasurementInvestment property which is property held to earn rentals and capital appreciation is measured at its fair value at the reporting date. Gains or losses from changes in the fair value of investment property are included in the Statement of Comprehensive Income in the period in which they arise. Investment properties are not depreciated.

Valuation BasisInvestment properties are revalued every year. Investment properties were valued on 30 June 2015 by independent registered valuer Ian McKeage, Independent Registered Valuer, FNZIV, FPINZ of TelferYoung. TelferYoung has recent experience in the location and category of the item being valued. Further detail on the fair value measurement is included in note B4.

Capital commitments at balance date include the purchase of two sections of public road and a 22-tonne forklift, the construction of a new weighbridge and building demolition.

B1. PROPERTY, PLANT AND EQUIPMENT

Operational Land and

Buildings at Fair Value

Property Land and

Buildings at Fair Value

Wharves at Fair Value

Plant, Furniture

and Equipment

INFrastruc-tural Assets Dredging

Work in Progress Total

$000 $000 $000 $000 $000 $000 $000 $000

Cost or fair value

At 1 July 2013 64,115 51,524 25,606 50,618 11,482 2,192 568 206,105

Additions and transfers (62) (1,197) 7 1,672 325 22 (421) 346

Disposals (105) (229) (454) (515) - - - (1,303)

Impairment charges (869) (467) - - - - - (1,336)

At 30 June 2014 63,079 49,631 25,159 51,775 11,807 2,214 147 203,812

Additions and transfers 1,298 (1,472) - 1,269 299 - 397 1,791

Disposals (43) (7) - (438) - - - (488)

Impairment charges - (441) - (22) - - - (463)

Revaluation surplus (446) (261) - - - - - (707)

At 30 June 2015 63,888 47,450 25,159 52,584 12,106 2,214 544 203,945

Accumulated depreciation and impairmentAt 1 July 2013 - - - (28,085) (2,046) - - (30,131)

Depreciation expense (442) (399) (1,115) (2,914) (290) - - (5,160)

Disposals - - 22 471 - - - 493

At 30 June 2014 (442) (399) (1,093) (30,528) (2,336) - - (34,798)

Depreciation expense (31) (497) (1,057) (3,076) (286) - - (4,947)

Disposals 43 7 - 355 - - - 405

At 30 June 2015 (430) (889) (2,150) (33,249) (2,622) - - (39,340)

Net book valueNet book value 30 June 2013 64,115 51,524 25,606 22,533 9,436 2,192 568 175,974

Net book value 30 June 2014 62,637 49,232 24,066 21,247 9,471 2,214 147 169,014

Net book value 30 June 2015 63,458 46,561 23,009 19,335 9,484 2,214 544 164,605

B. Key assets B. Key assets (CONTINUED)

Port Nelson is undertaking independent seismic assessments of some of its buildings in accordance with the Building Act and Nelson City Council’s Policy for Earthquake-Prone, Dangerous and Unsanitary Buildings. Buildings assessed as earthquake prone will either require seismic strengthening or demolition in the longer term. To date these seismic assessments have led to the impairment of five buildings. Port Nelson expects that the programme to complete all of the required assessments will extend over a number of years.

Infrastructural assets include hardstanding and roadways as well as stormwater, sewerage and water reticulation located underground.

Recognition and MeasurementProperty, plant and equipment, except land, buildings, wharves and infrastructural assets are stated at valuation taken over from the Nelson Harbour Board on 1 October 1988 and subsequent additions at cost. Land, buildings and wharves are stated at fair value. Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefit or service potential associated with the item will flow to Port Nelson and the cost of the item can be reliably measured. Dredging is not amortised. The cost of maintaining the dredged depth is expensed. Depreciation is written off depreciable assets on a straight line basis over the estimated economic lives of the assets, ranging as follows:

YEARS

Plant, furniture and equipment 20 – 72

Wharves and berths 5 – 40

YEARS

Infrastructural assets 50 – 80

Buildings 2 – 100



B. Key assets (CONTINUED)

C1. FINANCIAL INSTRUMENTSPort Nelson's operations expose it to a variety of financial risks which it seeks to manage through the application of its Treasury Policy. This policy provides guidance to management on carrying out appropriate financial risk management activities including the use of derivative financial instruments to manage risk. Port Nelson does not enter into speculative trades.

The key financial risks are:

Interest rate riskPort Nelson is exposed to interest rate risk on the cash flows arising from its variable rate borrowings. The Board does not consider there is any significant exposure to interest rate risk on its investments.

The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding at the end of the reporting period, including those with forward start dates, designated into cash flow hedging relationships.

C. Financial Risk Management

Required Hedging Levels on Borrowings

TermMinimum Fixed

Rate AmountMaximum Fixed

Rate Amount

Fewer than 2 years 50% 100%

3 years to 5 years 25% 80%

6 years to 10 years 0% 60%

Sensitivity Analysis

Interest rate changeImpact on

profitImpact on

equity

-100bp 12 (1,272)

+100bp (12) 1,186

Cash flow hedges Average contracted fixed interest rate Notional principal value ($000)

2015 2014 2015 2014

Less than 1 year - 6.3% - 4,000

1 to 2 years 6.5% - 11,000 -

2 to 5 years 5.1% 6.5% 15,000 11,000

5 years + 4.8% 5.4% 18,000 23,000

44,000 38,000

Port Nelson's interest rate exposures are managed in accordance with specific borrowing parameters outlined in the Treasury Policy which requires the fixing of interest rates for specified portions of borrowings based upon the term remaining and outlines the approved derivative instruments that can be used to do this. Port Nelson currently manages this risk by using Interest Rate Swaps (IRS) which swap the floating rate exposure on a notional amount of borrowings for a fixed rate.

Such derivative financial instruments are held at fair value. The effective portion of changes in the fair value of the derivative financial instruments that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to any ineffective element is recognised immediately in profit or loss.

If a hedging instrument is sold, terminated, revoked or no longer meets the criteria for hedge accounting, the cumulative gain or loss that remains recognised directly in equity from the period when the hedge was effective will be recognised in profit or loss.

The table to the left illustrates the potential profit and loss and equity impact for reasonably possible interest rate movements, with all other variables held constant, based on Port Nelson's financial instrument exposure at the balance date.

B4. FAIR VALUE MEASUREMENTS (Continued)

Fair value measurements using significant unobservable inputs (level 3)

The following tables summarise the valuation approach and key assumptions used by the valuers to arrive at fair value.

The key assumptions used to measure the fair value of land, buildings, wharves and investment property classified as level 3, along with their sensitivity are as follows:

Valuation approach Description of the valuation approach

Adjusted sales comparison approach

A valuation methodology whereby the subject property is compared to recently-sold properties of a similar value with fair value determined through the application of positive and negative adjustments for their differing attributes

Income capitalisation approach

A valuation methodology which determines fair value by capitalising a property's sustainable net income at an appropriate, market-derived capitalisation rate with subsequent capital adjustments for near-term events, typically including letting-up allowances for vacancies and pending expiries, expected short-term capital expenditure and the present value of any difference between contract and market rentals

Optimised depreciated replacement cost

Reflects the amount that currently would be required to replace the service capacity of an asset adjusted for the remaining useful life of the assets (depreciation)

Asset classification

Valuation approach

Significant unobservable inputs

Range of unobservable inputs Relationship of unobservable input to fair value

Land Adjusted sales comparison approach

Freehold land value per m2

$10 – $917 The higher the price per m2 the higher the fair value

Ground rental rate 6.6% – 7.1% The higher the market rental rate versus the contract rent, the lower the fair value

Discount rate to calculate PV of rent loss/benefit

8.0% The higher the discount rate the lower the fair value

Lessor's interest discount 5% (terminating lease) – 7.5% (perpetual lease)

The higher the discount the lower the fair value

Buildings Income capitalisation approach

Rental per m2 $12.50 – $155 The higher the rental per m2 the higher the fair value

Capitalisation rate 7.5% – 9.75% The higher the capitalisation rate the lower the fair value

Buildings Optimised depreciated replacement cost

Remaining useful life 2 – 40 years The higher the remaining useful life the higher the fair value

Replacement cost per m2 $219 – $3,499 The higher the replacement cost the higher the fair value depending on the remaining useful life

Wharves Optimised depreciated replacement cost

Remaining useful life 1 – 67 years The higher the useful life the higher the fair value

Replacement cost per m2 $786 – $2,276 The higher the replacement cost the higher the fair value depending on the remaining useful life

Investment property – land subject to ground leases


Freehold land value per m2

$177– $568 The higher the price per m2 the higher the fair value

Ground rental rate 6.25% – 6.75% The higher the market rental rate versus contract rent, the lower the fair value

Discount rate to calculate PV of rent loss

8.0% The higher the discount rate the lower the fair value

Lessor's interest discount 5% terminating lease – 7.5% (perpetual lease)

The higher the discount the lower the fair value

Investment property – freehold


Freehold land price per m2

$231 – $353 The higher the price per m2 the higher the fair value

port nelson annual report 2015 43


C1. FINANCIAL INSTRUMENTS (Continued)

Maturity analysis for the principal amounts of non-derivative financial instrument liabilities based upon the contractual maturities

2015 ($000)Weighted Average

Effective Interest RateDue within

1 yearDue between 1 to 2 years

Due between 2 to 5 years Total

Borrowings 5.75% - 18,100 4,000 22,100

Trade and other payables - 2,104 - - 2,104

- 2,104 18,100 4,000 24,204

2014 ($000)

Borrowings 5.69% - - 27,000 27,000

Trade and other payables - 2,120 - - 2,120

- 2,120 - 27,000 29,120

Recognition and measurement

Borrowings are initially recognised at their fair value. After initial recognition, all borrowings are measured at amortised cost using the effective interest method where this differs from face value.

Trade and other payables are recognised at fair value on receipt of goods and services. Payment normally occurs within 30 days. These payments are non-interest bearing.

Fair value of financial instruments

Port Nelson considers that the carrying values of financial assets and financial liabilities recorded in these financial statements approximate their fair values.

The only financial instruments carried at fair value are the interest rate swaps which are fair valued at a total liability of $1.843m (2014: liability of $1.094m) at balance date. These are considered Level 2 valuation in the fair value hierarchy defined in Note B4. The valuation of interest rate swaps is derived from the New Zealand Financial Markets Association closing rates on the revaluation date. From these rates the mark to market is calculated to reflect the net present value of the remaining fixed and floating cash flow obligations.

C1. FINANCIAL INSTRUMENTS (Continued)

Credit riskPort Nelson is exposed to credit risk from the possibility of counter-parties failing to perform their obligations.

Principally any risk is in respect of cash and bank and trade and other receivables. No collateral is held on these accounts. The major components of trade and other receivables exposure are to shipping companies and forestry exporters. Terms of trade are either payment on the 20th of the month following or 7 working days. The majority of trade and other receivables are major international companies with extensive histories of payment. There is no material credit risk with respect to trade and other receivables or any single debtor.

Exposure to credit risk will be managed by establishing approved counterparty and settlement limits and setting maximum exposures that Port Nelson is prepared to accept for individual counterparties. Port Nelson instigates a credit check on new customers prior to providing business on Port Nelson's Standard Terms and Conditions. Port Nelson's maximum exposure to credit risk at balance date is best represented by the carrying amount of financial assets on the balance sheet, comprising cash and cash equivalents and trade and other receivables.

The credit quality of trade and other receivables that are neither past due nor impaired has been assessed as high based upon historical information about counterparty default. Cash is held with a single counterparty with an AA- credit rating.

Currency RiskPort Nelson is exposed to currency risk on purchases of plant and equipment from overseas which it undertakes from time to time.

Management actively monitor the currency risk exposure and will enter into forward foreign exchange contracts to hedge this risk where required by the Treasury Policy. Port Nelson is therefore able to fix the New Zealand dollar amount payable prior to delivery of the plant and equipment from overseas. As at balance date Port Nelson had nil currency risk exposure (2014: $Nil).

Liquidity RiskLiquidity risk is the risk that Port Nelson will encounter 'difficulty' raising funds to meet commitments as they fall due.

Liquidity risk is managed by maintaining sufficient cash. This is achieved by ensuring the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Port Nelson aims to maintain flexibility in funding by keeping committed credit lines available.

Port Nelson has financing arrangements with Westpac Banking Corporation totalling $40,000,000 for a multi-option credit facility made up of two facility agreements. The first is for a funding facility of $20,000,000 for a term of two years commencing from 2014. The second is for a funding facility of $20,000,000 for a term of three years commencing from 2014. Security for the multi-option credit facility is by a first and exclusive debenture charge over the assets and undertakings of Port Nelson. Port Nelson classifies its borrowings as non-current liabilities.

Trade and Other Receivables 2015 2014$000 $000

Trade receivables 5,538 4,402

Related-party receivables 4 10

Less provision for impairment in receivables (4) (12)

5,538 4,400

Trade receivables past due

Fewer than three months 1,630 940

More than three months 13 33

TOTAL PAST DUE 1,643 973

Trade receivables not past due 3,895 3,429

TOTAL TRADE RECEIVABLES 5,538 4,402

Recognition and MeasurementTrade and other receivables arise in the ordinary course of Port Nelson’s business and are initially valued at fair value and subsequently measured at amortised cost using the effective interest method less any provision for impairment. They are non-interest bearing.

Impairment of Trade ReceivablesA provision for the impairment of receivables is established when there is objective evidence that all amounts due will not be able to be collected as per the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the effective interest method.

D. Other Information

Employee Benefit Liabilities 2015 2014$000 $000

Accrued pay 440 387

Annual leave 747 716

Long-service leave 153 162

Retirement gratuities 47 47

Other benefits 165 205

1,552 1,517

Current 1,379 1,346

Non-current 173 171

1,552 1,517

D1. PROVISIONS

Recognition and MeasurementProvisions are recognised when a present obligation exists as a result of a past event, the future sacrifice of economic benefits is probable and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation.

Provision is made in respect of Port Nelson’s liability for annual leave, long-service leave and retirement gratuities. Annual leave and long-service leave have been calculated on an actual entitlement basis at current rates of pay and retirement gratuities calculated at current rates of pay assuming the payment will be made upon retirement.

C. Financial Risk Management (CONTINUED) C. Financial Risk Management (CONTINUED)



D3. CONTINGENT ASSETS AND LIABILITIESThe Calwell Slipway basin, which has been fully impaired, contains contaminated seabed sediments. Port Nelson has title to this area of seabed. While the marine engineering and vessel coating industries in and around the slipway area are now controlled, the historical contamination still persists in the sediments. The ongoing sedimentation of the basin now requires dredging to allow for the ongoing operation of the slipway. Port Nelson, together with the Nelson City Council, continues to seek certainty around the quantification of any liability associated with the eventual remediation works.

During 2013, Port Nelson and the Nelson City Council obtained funding from the Ministry for the Environment (MFE) to undertake Remediation Planning (Phase Three) work to establish a preferred approach for remediation of the contaminated sediments. The work required under Phase Three was completed during the 2014 financial year.

During the 2015 financial year Port Nelson and MFE signed a letter of intent that proposes remediation begins in the 2017 financial year. Prior to remediation occurring (Phase Four), further remedial planning work is required in Phase Three to confirm the feasibility of the suggested remedial option, develop cost estimates and apply for resource consent. Port Nelson obtained further funding from MFE in June 2015 to carry out this additional remedial planning. That work will occur in the 2016 financial year.

D4. ISSUED CAPITALAt 30 June 2015 Port Nelson has 25,415,404 ordinary shares. All shares are fully paid and have no par value. All shares carry equal voting rights and the right to share in any profit on winding up of the company. None of the shares carry fixed dividend rights.

D2. RECONCILIATION OF NET OPERATING CASH FLOWS 2015 2014$000 $000

NET PROFIT 7,534 7,590

Add non-cash items:

Depreciation and amortisation 5,154 5,481

Net movement in deferred tax (390) (611)

Impairment of assets 463 569

5,227 5,439

Add (less) movements in other working capital items:

Trade and other receivables (1,138) 288

Inventories (91) 64

Prepayments and accruals (9) (81)

Accounts payable (1) (129)

Current employee benefit entitlements 33 121

Tax payable (74) 518

(1,280) 781

Add (less) items classified as investing activities:

Non-current employee benefit entitlements 2 (4)

Net gain on sale of assets 67 (394)

Appreciation of investment property (284) (73)

Capital creditors (149) 402

Share of loss from investment in associate 93 181

(271) 112

NET CASH INFLOW FROM OPERATING ACTIVITIES 11,210 13,922

Port Nelson recognises it has an obligation to assist with noise mitigation works for noise-affected properties adjacent to the Port. Noise mitigation costs may include building work, professional fees, building consents, preparation of drawings and project management.

Noise-affected properties are separated into three stages based on the level of Port noise received. For properties in Stage One, those properties that are exposed to night time Ldn (day/night average sound level) from Port-generated noise of 65 dBA or more, Port Nelson is required to make offers to either fully fund noise mitigation work or to purchase the properties. There are eleven designated Stage One properties. As at 30 June 2015 the Port had met its obligations to nine of those properties (2014:9). For properties in Stage Two, those properties that are exposed to night time Ldn from Port-generated noise of between 60 to 64.9 dBA, Port Nelson has offered to contribute up to 50% of noise mitigation costs. For properties in Stage Three, those properties that are exposed to night time Ldn from Port-generated noise of between 55 to 59.9 dBA, property owners can request Port Nelson to provide technical advice and a contribution of up to 50 percent of noise mitigation costs. There is no obligation on Port Nelson to make offers for the purchase of either Stage Two or Stage Three properties.

Recognition and MeasurementPort Nelson reviews its noise mitigation provision each year as the mitigation work is undertaken. The year-end provision balance relates to Stages One, Two and Three. The noise variation within the Nelson City Resource Management Plan became operative on the 23 February 2012. Port Nelson has quantified the cost of its obligation as at 30 June 2015.

Noise Mitigation Provision 2015 2014Comprising: $000 $000

Current 53 53

Non-current 539 543

592 596

D1. PROVISIONS (Continued)

D5. RELATED-pARTY DISCLOSURES 2015 2014$000 $000

Nelson City Council Services provided by Port Nelson 90 105

Services provided to Port Nelson 637 554

Accounts receivable by Port Nelson 4 9

Accounts payable by Port Nelson 17 7

Dividends paid by Port Nelson 2,350 2,600

Tasman District Council Services provided by Port Nelson - 1

Accounts receivable by Port Nelson - 1

Dividends paid by Port Nelson 2,350 2,600

Nelmac Services provided by Port Nelson 88 -


Accounts receivable by Port Nelson 1 -

Accounts payable by Port Nelson 1 1

Unimar Services provided by Port Nelson - 3


Nelmac

Nelmac is 100% owned by Nelson City Council and is therefore a related party. In 2015 Port Nelson purchased the Land at 8 Vickerman Street, Nelson from the Nelson City Council.

Unimar Group

In 2015 the Unimar Group was wound up. Up until this time Port Nelson owned a 44% share in the Unimar Group. No inter-entity debt has been forgiven or written off (2014 $nil).

Directors

Mr A O Patterson is a Director of Cold Storage Nelson Ltd, a company that leases land from Port Nelson. The amount received from Cold Storage Nelson Ltd was $449,007 for the year (2014 $449,036), and $47 was receivable at year end (2014 $nil). The amount paid to Cold Storage Nelson Ltd was $3,837 (2014 $2,351) for the year, and $nil was payable at year end (2014 $nil).

D. Other Information (CONTINUED) D. Other Information (CONTINUED)



D. Other Information (CONTINUED)

Board of DirectorsPhil Lough (Chair) Peter Schuyt Tim King Paul Le Gros Bronwyn Monopoli Tony Reynish (Appointed November 2014) Nick Patterson (Chair – retired in September 2014 but remained a Director until December 2014)

SecretaryDaryl Wehner

Senior ManagementMartin Byrne (Chief Executive Officer) Melisa Kappely (Employee Relations Manager) Matt McDonald (Infrastructure Manager) Daryl Wehner (Chief Financial Officer)

Registered Office10 Low Street, Port Nelson PO Box 844, Nelson 7040, New Zealand Tel. (03) 548 2099 Fax. (03) 546 9015 [email protected] www.portnelson.co.nz

AuditorAudit New Zealand (on behalf of the Auditor-General)

SolicitorsPitt & Moore, Barristers and Solicitors, PO Box 42, Nelson 7040

Simpson Grierson, Barristers and Solicitors, PO Box 2402, Wellington 6140

BankersWestpac Banking Corporation, PO Box 643, Nelson 7040

The Port Nelson annual report is proudly produced by WaltersPR, Hothouse and Tim Cuff Photography.

Port Nelson’s management operations team from left to right are: Melisa Kappely, Daryl Wehner, Eugene Beneke, Martin Byrne, Matt McDonald, Digby Kynaston and Dave Duncan.

DIRECTORY

D7. EVENTS AFTER BALANCE DATE

Port Nelson is unaware of any significant events between the preparation and authorisation of these financial statements on 4 September 2015.

Details of compensation paid to key management personnel and Directors during the financial year 2015 2014

$000 $000

Salaries and other short-term benefits 1,584 1,524

D5. RELATED-PARTY DISCLOSURES (Continued)

D6. INVESTMENT IN ASSOCIATEPort Nelson's associate investment represents an investment in the Unimar Group, an entity over which Port Nelson has significant influence. This investment has historically been accounted for using the equity method. In the year ended 30 June 2015 the entity entered into liquidation and was wound up with a trading loss of $212,000. As a result, the carrying amount of Port Nelson's investment in the associate decreased to $nil as at 30 June 2015 (2014: $564,000). A final distribution of $471,000 was received from the entity. There were no dividends received in 2015 (2014: $383,000).

Mr P Schuyt is a Director of Tax Management New Zealand Ltd (TMNZ), a company that provides a tax pooling service to Port Nelson. The amount paid to TMNZ was $3,319,734 for the year representing tax payments fully transferred onto the Inland Revenue (2014 $3,349,774) and $nil was payable at year end (2014 $nil).

Ms B A Monopoli is an Associate Principal of Crowe Horwath (NZ) Limited, the company that provides accounting services to Port Nelson. The amount paid to Crowe Horwath (NZ) Limited was $5,897 (2014 $6,800) and $nil was payable at year end (2014 $nil). Ms Monopoli is also a Director and a Shareholder of Fried Eggs on Toast Limited, a company that provided hospitality services to Port Nelson. The amount paid to Fried Eggs on Toast Limited was $1,159 for the year (2014 $nil) and $nil was payable at year end (2014 $nil).

Mr P D Le Gros is the Chair of Nelson Electricity Limited, a company that uses Port Nelson’s services. The amount received from Nelson Electricity Limited was $nil (2014 $30,036) and $nil was receivable at year end (2014 $nil).

Key Management Personnel

Mr M J Byrne is a board member of Big Brothers Big Sisters of Nelson, an organisation that receives sponsorship from Port Nelson. The amount paid to Big Brothers Big Sisters was $6,150 (2014 $2,400) and $nil was payable at year end (2014 $nil).

Mr D R Wehner is a member of Nelson Marlborough Institute of Technology (NMIT)’s council. NMIT leases land from Port Nelson and provides training courses to Port Nelson. The amount received from NMIT was $1,033 for the year (2014 $1,017), and $nil was receivable at year end (2014 $nil). The amount paid to NMIT was $5,742 (2014 $3,657) for the year, and $nil was payable at year end (2014 $nil).

Mr D J Duncan is a Trustee of Sealord Marine Rescue Centre, an organisation that receives sponsorship from Port Nelson. The amount paid to Sealord Marine Rescue Centre was $2,127 for the year (2014 $2,120), and $nil was payable at year end (2014 $nil).

Mr D Kynaston is a Committee Member of Nelson Triathlon & Multisport Club, an organisation that receives sponsorship from Port Nelson. The amount paid to Nelson Triathlon & Multisport Club was $3,500 for the year (2014 $nil) and $nil was payable at year end (2014 $nil).


Notes to the Financial Statements

PORT NELSON'S VISION pillars

Financial results“A sustainable business delivering value to our shareholders”

• Consistently meet our agreed targets

• Minimise reliance on one-off events

• Minimise waste to reduce our costs

• Identify new opportunities to grow our revenue

• Reduce business risk through diversity

Community“A sense of pride in the role we play in our community”

• Have a sponsorship programme that supports our local region

• Make opportunities for our people to volunteer in our community

• Provide access for the community to the Port

• Deliver external communications that inform and engage

Customers“An organisation that delivers real value to its customers”

• Understand our customers and their needs

• Deliver consistent service

• Develop active and engaged working groups

• Build strategic alliances with our key customers

• Grow the business through attracting new customers

Environment“A leader in sustainable environmental management in the New Zealand port industry”

• Implement best practice environmental management

• Minimse the impact of our operations

• Integrate sustainability into what we do

• Raise environmental awareness

• Measure, report and improve our performance

People“An engaged and highly capable team at Port Nelson”

• Increase the engagement of our people

• Provide training opportunities for ongoing training and learning

• Drive a culture of zero harm

• Maximise career options

• Increase the utilisation of our talent

• Provide opportunities for our families to see what we do

Processes“An efficient and consistent approach to the way we do things”

• Embed a culture of continuous improvement

• Ensure the integrity of source data

• Provide for an accurate flow of information between systems

• Streamline processes to achieve zero wastage

• Standardise, document and train in what we do


www.portnelson.co.nz

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