A group of ski enthusiasts has won a temporary reprieve in a battle to stop part of the not-for-profit Mt Ruapehu ski fields being carved off for sale to private investors. They say the plan risks Whakapapa and Tūroa going the way of the now-defunct Waiwera hot water slide complex near Auckland.
On November 8, Ruapehu Alpine Lifts, the company that runs the Whakapapa and Tūroa ski fields, sent a ‘we have a problem’ email to its shareholders.
RAL’s lenders ANZ and MBIE were putting the squeeze on, chair Geoff Taylor said, Covid lockdowns had hit profits, and Tūroa needed new lifts.
The company was calling a special meeting for November 26, this Friday, and was asking investors to vote to approve a new structure which could allow it to raise $30 million by selling 50 per cent of the company to the private sector.
“There are two streams of work – the first is the company restructure to put us in the position to raise new capital, and the second is to raise new capital,” Taylor said.
There were precious few details, but shareholders were urged to sign off on the first stream, to facilitate the second.
“This first step simply creates a ‘New Entity’ that will be 100 percent owned by RAL,” he said, and all RAL’s business assets and liabilities would transfer into that new entity.
“If, at a later date, we then have an offer to invest in the New Entity we will then go through a separate and normal process of seeking shareholder approval.”
Not your average shareholder company
The idea that a business would sell shares to outsiders to raise working capital is hardly a revolutionary concept. Businesses do it all the time.
But Ruapehu Alpine Lifts is far from your average business. And the shareholders – several thousand of them – are far from your average shareholders. There are, for example, descendants of 1950s ski enthusiasts who lent the then new RAL money to put in decent lifts and other facilities.
Then there are investors who have bought lifetime membership passes over the years as part of RAL’s intermittent crowd fundraising drives for upgraded facilities like lifts, or cafes or snow machines.
What makes these investors different is they aren’t in it to make money. There are no dividends – all profits are reinvested. You don’t make a profit if you sell your shares.
READ MORE:
* Ski fields claim $2.7m wage subsidies in precipitous revenue drop
* The Detail podcast: Abandoned thermal pools may rise again
* Waiwera’s future is wellness not waterslides
Instead people invest in RAL because they love to go skiing and snowboarding. And because they want a way to get great facilities on the mountain for themselves, and their children and grandchildren.
They don’t want outside investors looking for dividends, for profit centres, for returns.
In fact, the company is specifically set up to avoid that.
Fifty five percent of the shares are owned through the RAL Trust, which was created in 1983 specifically to “preserve the Company’s integrity for future generations”.
The whole point of the trust shareholding, with its four trustees, is “to prevent any individual, group of individuals or organisation being able to action a hostile takeover of the company,” according to the Mt Ruapehu website.
An alternative financial assessment
So when father and son ski enthusiasts David and Robert Krebs got a message from RAL about the special vote, they got worried.
David Krebs grandparents were among the many “clubbies” who bought shares and debentures in RAL in the early 1950s to help set up the first chairlifts. David skied from the age of eight, became a shareholder in RAL and later invested in life passes for his three children.
“I think if you ask most shareholders of RAL, they will say they are in it to grow a community asset for future generations,” he told Newsroom.
His son Robert takes up the story. “If my memory is correct, my parents bought my two sisters and I life passes back in 2000 when RAL needed to raise capital to purchase the struggling Turoa ski field from Turoa Holdings. Our family friends who we would go skiing with every year did the same for their three boys.
“My dad is a passionate skier, he believed in the crowd funding model for the benefit of all skiers. I hope to one day purchase my own son a life pass to continue to support the model that has made RAL what it is today.”
David is a retired accountant; Robert is a business analyst working for an accounting firm in Australia. They first started looking at the numbers back in July when they first heard about a possible RAL corporate restructure from a shareholder update.
“I grabbed the last few years of financial statements and spent some weekends whipping through them. People were saying RAL was on the verge of insolvency, and I wanted to put some financial analysis together to check whether it really was essential for RAL to be sold off.”
His calculations suggested it wasn’t.
“I felt it came down to a simple problem of liquidity management with the ANZ bank loan. I believed there were alternative options available."
He also queries a $20 million write-down of the book value of RAL’s Tūroa assets in the latest financial statements, which he says wasn’t clearly explained, and made the company look in a worse state than it actually was.
“Overall, RAL’s cash balance is improving,” Kreps says. Operating ebitda (earnings before interest, taxes, depreciation, and amortisation) rose from $1.9 million in the 2018 financial year to $3.2 million in 2019 and $7.2 million in 2020.
“Ironically RAL has never been placed under so much stress by the ANZ bank, despite having a stronger cash position, stronger asset base, and significantly improved operating ebitda.”
The for-profit versus NFP model
Another thing that worried Krebs and other shareholders about moving to a private sector model was there was historical evidence it just doesn’t work.
You just needed to compare two companies operating on Mt Ruapehu – RAL and Tūroa ski field, he says.
“In the Whakapapa model, shareholders don’t get a dividend, so that’s why there is money to invest." – Robert Krebs
Tūroa was opened in 1978 by Alex Harvey Industries, which eight years later became the “Harvey” in Carter Holt Harvey. In 1986 the company listed on the stock exchange as NZ Skifields, and four years after that was privatised in a corporate takeover from Turoa Holdings. It went into receivership in 2000 and was bought by RAL.
“Corporate business models have not been successful – the average financial viability for the Tūroa for-profit companies was 7.3 years. The not-for-profit model has lasted 68 years and counting.”
Krebs believes in the best case scenario, moving to a corporate model would see big increases in the cost of skiing on the mountain. In the worst case, the facilities could become increasingly run down and even close altogether.
“In the Whakapapa model, shareholders don’t get a dividend, so that’s why there is money to invest. But if equity investors are going to put $30 million, they are going to want that back and a return.
“We don’t want another Waiwera hot pools.”
The Waiwera thermal pools and slides complex, much loved by Auckland families, were bought by a Russian oligarch in 2009. The complex closed in 2018, after being run into the ground, and Mikhail Khimich disappeared owing significant amounts of money. It may open again as a spa resort, Newsroom reports, but the slides are gone forever.
Mobilising action
Krebs says he and David collaborated with other concerned shareholders and together they produced a 40-page report into RAL’s financial position. This analysis – and a five-page summary – were finished just about the same time as RAL announced the special shareholder resolution and vote on the new corporate structure.
With less than three weeks before the vote, concerned shareholders and life pass owners started circulating the report – including to the four trustees, whose total 55 percent stake makes them a lynchpin of the deal.
Elizabeth Smith is a shareholder, life pass owner and lives near the ski fields, so she can go up whenever she has time. She is also one of the members of the Mt Ruapehu Shareholders Facebook page, and has watched numbers on the page grow from very few three weeks ago, to more than 270 now.
“We were just a quiet group of people that got together a couple of years ago around the gondola project at Whakapapa,” Smith says. “Now it’s growing exponentially by the day.”
Smith says since the report came out, opposition has also come from the various ski and snowboarding clubs that use the mountain. She points out a post on the Rangatira Alpine Sports Club Facebook group, acknowledging club president Jason Platt and other shareholders and clubs.
It says: “Thanks Jason for all the hard work you put in, together with the shareholders and other clubs on Ruapehu, to get RAL to come to their senses.”
Au revoir, but not goodbye
The pressure seems to have worked – for now. Three days before the vote, RAL chair Geoff Taylor sent another message to shareholders.
He doesn’t mention any of the opposition arguments, but he does postpone the vote.
“The Directors of RAL are pleased to report that last month’s early bird seasons pass campaign has seen high subscription rates. This coupled with the continued support of ANZ, now places the directors in a position to postpone the Special General Meeting.”
Instead Friday’s meeting will be an “update session”, Taylor’s email says. And he promises an initial information pack will go out to shareholders before then, so they can ask questions.
This may also be a chance to sway the trustees in favour of the proposal – trustees were cautious about saying much to Newsroom, and would not comment on the issues raised in the alternative assessment. However, the lack of concrete details about either the new structure or future RAL plans weighed heavily on the two Newsroom spoke to.
“Trustees need more information before they can vote,” says John Parker, a former chair of the Port of Tauranga. “A lot more information.”
The same story from Jo Bouchier, a “crazy keen skier” who’s been going to Mt Ruapehu since the 1970s, and was a volunteer mountain host for 12 of them.
“We don’t have enough information, so we have not resolved how we will vote,” she says, adding that even controlling 55 percent of the shareholding as they do, the trustees hadn’t got any more details about the proposals than anyone else.
“We have the same information – or non-information – as any other shareholder.”
Newsroom asked Ruapehu Alpine Lifts to respond to the alternative financial assessment, and to explain the new proposal. Chief executive Jono Dean pointed us in the direction of Tracey Mehrtens at Accento PR, however Mehrtens said RAL would not be commenting.
Dean said there was “nothing to talk about, as the proposal has been pulled”.
However the email from Geoff Taylor email to shareholders suggests it has been postponed rather than abandoned.
The company is planning a series of face-to-face stakeholder meetings in Wellington, Ohakune, Hamilton and Auckland once people are able to travel next year, Taylor said.
“Post these meetings it remains the directors’ intention to recommend a restructure of RAL's constitution and corporate form to enable the company to source new capital to fund its future growth/investment plans.
“It should be noted that no new capital has presented itself at this point and one of the challenges for any interested parties remains the corporate form and constitution.”
