Minutes of Regional Council Meeting

1. Welcome/Prayer/Apologies/Notices

The Chairman welcomed everyone present to the meeting, and Councillor Hewitt offered the prayer.

The Chairman advised that the meeting with the Board of Ngati Kahungunu Iwi Incorporated would be held at 12.00pm. The Council meeting would be adjourned at that time, and the public would be invited to remain.

2. Conflict of Interest Declarations

There were no conflict of interest declarations.

3. Confirmation of Minutes of the Regional Council Meeting Held on 26 February 2014

RC39/14

Resolution

Minutes of the Regional Council Meeting held on Wednesday, 26 February 2014, a copy having been circulated prior to the meeting, were taken as read and confirmed as a true and accurate record.

Scott/Graham

CARRIED

4. Matters Arising From Minutes of the Regional Council Meeting Held on Wednesday 26 February 2014

In relation to 19. Minor items not on the agenda – Councillor Belford’s request for Council’s endorsement of his private LGOIMA request for an MPI report. As his request was made as a private individual, he was advised that Council would not formally endorse his appeal to the Ombudsman without proper consideration. It was reaffirmed that standing orders allow for Minor Items not on the Agenda to be raised and discussed but that no decisions are able to be made. Items requiring a decision must be referred to a future meeting where a Council report can be considered and the required transparent decision making process followed.

In relation to the Regional Planning Committee Bill, Mrs Lambert stated that she would follow-up and advise Councillors of its status.

There were no further matters arising from the minutes.

Follow-ups From Previous Council Meetings

Mrs Lambert advised that the Maori Charter had been distributed and made available on the HBRC website, closing off the single item for follow-up.

RC40/14

Resolution

1. That Council receives the report “Follow-ups from Previous Council meetings”.

Scott/Pipe

CARRIED

Call For Any Minor Items Not on the Agenda

RC41/14

Resolution

That Council accepts the following minor items not on the agenda, for discussion as item 15:

1. Cr Belford – Nimmo-Bell report update

2. Cr Barker – Transport facilities for local businesses

Wilson/Beaven

CARRIED

Hawke's Bay Regional Investment Company Ltd (HBRIC Ltd) Business and Investment Case for the Ruataniwha Water Storage Scheme

Mrs Lambert outlined the history of the process of arriving at the Business Case being presented today. Council initiated the process and carried out, with assistance of expert Consultants, development of the Pre-feasibility and Feasibility studies before then handing over the development of the Business Case to HBRIC Ltd. HBRIC Ltd was asked, by Council, to progress the project to the conclusion of the resource consent application phase, including Assessment of Environmental Effects (AEE), Design and Construction, investment and investor structures including capital raising, water uptake

Mrs Lambert confirmed that this presentation of the business case is the first step in the process leading to the Special Consultative Procedure being undertaken by Council in determining whether or not to invest in the Ruataniwha Water Storage Scheme. The purpose of the presentation and discussion today is for Council to receive the report and seek clarification of the information provided in it.

Dr Andy Pearce, Chairman of the HBRIC Ltd introduced the Business Case and presented a series of graphics representing Tukituki river flow volumes and the purpose of the flushing flows to be provided from the dam, the environmental and economic objectives of the project and Plan Change 6, the economic benefits expected from the project, water supply breakdown, and the target project structure outlining the various levels and sources of investment in the scheme.

In stepping through the points that HBRIC Ltd is recommending that Council notes, Dr Pearce highlighted that Council’s investment is essential to the project proceeding, the environmental off sets and benefits related to the flow augmentation programme, the environmental monitoring requirements and water user requirements in terms of farm management, and the value added economic impacts of the project. Dr Pearce also covered the agreement reached with mana whenua and kaitiaki as well as upcoming EPA (Board of Inquiry) Plan Change 6 and resource consent decision dates.

Dr Pearce offered his view that the first series of ‘items to note’ are based in fact – either provided by expert evidence to the BOI, to Council or directly to HBRIC Ltd; whereas several of the points noted were done so on the basis of considered opinion given reasonable assumptions provided.

Dr Pearce also outlined the ‘costs’ of implementing Plan Change 6 requirements without the RWSS, including environmental and economic impacts.

Discussion and questions of clarification traversed:

· The conditions precedent which must be met before Council (and other investors) agrees to release any funds, including:

o Granting of resource consent for the RWSS, which in turn is recommended as being workable by all investors

o minimum 40,000,000 m³ water contracts subscription (minimum to be economically viable)

o securing the funding required to build Scheme infrastructure

o bankable construction contract with construction risk allocation adequately addressed through a fixed time, fixed cost arrangement (through D&C negotiation process)

o scheme is deemed to be environmentally, and economically feasible.

· The assumed conversion rate used in the Castalia report.

· The conditions precedent which must be met before Council (and other investors) agrees to release any funds, including:

· The way the conditions of the resource consent are structured; being:

o Category A – lock in plan change 6 policies and rules – legal requirements to meet bottom lines, e.g. maintain constant residual flow of 1.23 cumecs in main river stems during extreme low flow periods; Nitrogen and Phosporous limits and targets

o Category B – project management and reporting framework for key effects and issues, e.g. Farm Environmental Management Plans and associated audit process, Reservoir Filling & Edge Rehabilitation Plan

o Category C – establish a community liaison reporting and recommending structure, e.g. Kaitiaki Runanga; Ruataniwha Biodiversity Advisory Board

o Category D – provide environmental compensation for key effects with philosophy of ‘like for like’ mitigation and offset, e.g. Integrated Mitigation & Offset Approach (IMOA) to be implemented within one calendar month of dam construction commencing; necessary 3^rd party land agreements in place prior to dam construction commencing.

· Council’s investment ‘up to $80M’ was agreed in the 2012-22 Long Term Plan after public consultation through LTP process and Council consideration. Set as the ‘maximum’ Council is willing to invest. The current level of investment equivalent to HBRIC Ltd holding 39% equity.

· Possible impacts on HBRC cash flows. Report on rates impacts will be presented at the 16 April Corporate and Strategic Committee meeting, being another piece of information for consideration in the decision making process.

· Financial models have been through hundreds of iterations and tests. Other institutional investors are doing their own due diligence and testing the models.

· Number of new jobs projected (from the Butcher report) is 2520, which has been stated at ‘more than 2500’ in the business case.

· Whether there is a possibility of the Port dividend being less than forecast given infrastructure requirements to address capacity issues. PONL Chairman stated his view that PONL infrastructure development adequately budgeted for in Napier Port’s programmes.

· Water uptake and water price as presented in the report, sourced Irrigation NZ.

· The economic and environmental consequences of the RWSS not proceeding, specifically the flushing flows. Flushing flows are not designed to deal with minimum flows for irrigation takes, but to address the build up of periphyton algal blooms. However, flows released from the dam should increase the overall river flow in an extreme year. Increased river flows may also result from aquifer recharge if less water being taken by users who’ve switched or transferred to scheme water.

Councillor Belford proposed amendment of the recommendations, seconded by Councillor Barker; being:

1. Receives the HBRIC report entitled “Business and Investment Case for the Ruataniwha Water Storage Scheme” as an interim step toward completing a comprehensive and robust business case for the RWSS project.

2. Instructs HBRIC to furnish a final business case that includes the following additional information for Council consideration:

A. a cash flow model supported by commentary illustrating these key sensitivities and scenarios: i. variations, including shortfalls in ability to store and deliver the full amount of water under contract with the multi-year security of supply promised; ii. impact of water user non payment, however contested; iii. alternative scheme uptake scenarios including case where 40% initial uptake not achieved and a case where ramp up beyond 40% is slower than projected in this interim report; iv. impact of additional costs; v. impact of any other sensitivity that might materially affect cash flow and/or HBRC financial liability, such as late build completion date.

B. a rationale for setting 40% (or any other percentage) as the minimum volume of water contracted to initiate the project.

C. a clear indication of the contingencies that might require additional HBRC funding (i.e. ratepayer liability) for the scheme and the orders of magnitude involved, with an explanation of how, if at all, ratepayer exposure will be capped.

D. an indication of rates of return expected by all investors or loan funders, including HBRIC itself, reflecting current discussions.

E. a copy of the Water User Contract as presently envisioned.

F. a firm proposal from HBRC management regarding how diminished dividend revenue to HBRC will be offset to meet ongoing HBRC budget requirements.

3. Informs Deloitte of this additional business case information requested and instructs them to evaluate the issues raised when said information is provided.

Give the substantial content of the amendment proposed, the Chairman sought Councillors’ agreement to adjourn the meeting so that everyone could read and understand its content.

The meeting adjourned at 10.40am and reconvened at 11.15am

The amendment was determined by the Chairman to be a direct negative (not receiving the HBRIC Ltd report presented and not referring the HBRIC Ltd report to Deloitte for independent review as per the Council-agreed Terms of Reference, rather instructing Deloitte to evaluate specific issues raised in the amendment) and so not accepted.

Councillor Beaven proposed an amendment, to include the words “that the HBRIC Ltd Business Case states” after the word ‘Notes’ to clarify the source of the information being noted. The amendment was accepted by the mover and seconder.

RC42/14

Resolutions

That Council:

1. Receives the Hawke’s Bay Regional Investment Company Ltd (HBRIC Ltd) report entitled “Business and Investment Case for the Ruataniwha Water Storage Scheme”.

2. Refers the HBRIC Ltd Business and Investment case to Deloitte to undertake an independent per review and report back to Council in April.

3. Notes that the HBRIC Ltd Business Case states that investment by Council, via HBRIC Ltd, in the RWSS to a quantum of up to $80 million is essential, together with a large level of Crown Irrigation Investment Ltd (CII) debt funding, in order for the project to set a water price that is financially viable for both water users and investors.

4. Notes that the HBRIC Ltd Business Case states RWSS will make an important contribution to achieving Council’s strategic environmental objectives for the Tukituki river and catchment as set out in Land Water Us 2050 and Proposed Plan Change 6, by:

4.1. ensuring a sustained minimum flow on the Makaroro River below the dam of 1.23 cumecs, which will sustain more than 20% of the 7-Day Mean Annual Flow of the Tukituki at Red Bridge;

4.2. providing for up to four flushing flows per year of up to one million cubic metres each to assist Council to manage and mitigate periphyton build-up in the lower Tukituki in particular, thus enhancing the ecological and recreational status of the river;

4.3. providing water to sustain minimum flows set for the Waipawa River at the RDS gauging site and Tukituki River at Tapairau Rd (also ensuring that current consent holders linked to those flows are not adversely affected by the scheme);

4.4. enabling existing water users supplied by run-of-river and connected groundwater takes (which negatively affect the low flows of Waipawa and Tukituki rivers) to be supplied with stored water as an alternative; and

4.5. six substantial environmental management, mitigation and offset projects included in the RWSS project ranging from the catchment headwater to the lower estuary.

5. Notes that the HBRIC Ltd Business Case states the RWSS Consents will require, at their own cost, Ruataniwha Water Limited Partnership (RWLP) and Ruataniwha Water GP Ltd (RWGP) as the entities, respectively, owning and operating the Scheme, to undertake comprehensive water quality monitoring of 15 variables monthly and two variables annually at 16 sites throughout the catchment, commencing 24 months before any water is supplied, and that the data from these measurements will be integrated with Council’s own environmental monitoring programmes.

6. Notes that the HBRIC Ltd Business Case states the proposed Production Land Use Conditions of the RWSS consents:

6.1. require that production land water users being supplied by the RWSS must prepare Farm Environmental Monitoring Plans (FEMP) which must be regularly audited;

6.2. ensure the limits for nitrogen/nitrate management set in Proposed Plan Change 6 (which are based on site-specific toxicity guidelines developed by NIWA) and phosphorus emissions (no net increase in emissions at a sub-catchment level) are met;

6.3. require E coli levels in surface and groundwater, and a range of other environmental monitoring and management requirements that are, individually and collectively, at least as stringent and generally more stringent than are applied to irrigated land use elsewhere in New Zealand;

6.4. require that stock are excluded from all lakes, wetlands, permanently or intermittently flowing rivers on any property supplied by the RWSS.

7. Notes that the HBRIC Ltd Business Case states the RWSS will make substantial contributions to Council’s strategic regional economic development objectives, and that:

7.1. the RWSS is projected to generate $250 million per year of ongoing value-added (i.e. not gross) economic benefits in total, and the one-off benefit of the construction project is estimated as being $410 million over the construction period;

7.2. the value added on-farm is projected to be $73 million/year; the value added to farm support and services industries is projected to be $63 million/year; and the value added to processing and processing support industries is projected to be $120 million/year;

7.3. the regional economic multiplier of the value added on-farm is 3.4, and thus the added-value economic benefits of the RWSS are distributed through the wider regional economy, consistent with the findings of ex-post studies of the economic benefits of the Opuha water storage dam; and

7.4. the ongoing economic impact of value added from the RWSS is estimated to have a Net Present Value of $3.7 billion, discounted at 5% over 70 years.

8. Notes that the HBRIC Ltd Business Case states the RWSS is projected to have substantial employment and social benefits, and is projected:

8.1. to generate more than 2,500 full-time equivalent jobs, widely distributed over the agriculture, manufacturing, wholesale and retail trade, transport and communications, rural contracting, utilities and construction, and other services employment sectors; and

8.2. to generate ongoing household income of $60 million/year in farming and farm-support industries (likely to be significantly concentrated in Central Hawkes Bay) and $67 million/year in processing and processing support industries (likely to be more widely distributed throughout the region).

9. Notes that the HBRIC Ltd Business Case states that, in relation to engagement and agreements with mana whenua and kaitiaki:

9.1. HBRIC Ltd has entered into an agreement with Te Taiwhenua o Tamatea (Tamatea) that provides for ongoing close engagement between RWLP, the intended owner of the RWSS, and Tamatea through the life of the RWSS and that both the Concession Deed between Council and RWLP and the Project Agreement between HBRIC Ltd and RWLP require acknowledgement of and adherence to this agreement;

9.2. Council and HBRIC Ltd have entered into two Joint Memoranda with Ngati Kahangunu Iwi Incorporated (NKII) and Te Taiwhenau o Heretaunga with Te Taiwhenua o Tamatea (ToHTT) a party to the first and confirming their agreement to the second, which, inter alia, provides for engagement of all the Memoranda parties in a Kaitiaki Runganga (expanding the membership of the Mana Whenua Working Group of the Tamatea Agreement) and for additional monitoring activities in the lower Tukituki, both of which have been added to the proposed RWSS Consent Conditions presented to the Board of Inquiry (BoI); and

9.3. the Joint Memoranda noted in 9.2 above are also acknowledged in the Concession Deed and the Project Agreement documents in the same manner as the Tamatea Agreement, requiring adherence to what is agreed in the Memoranda.

10. Notes that the HBRIC Ltd Business Case states that, in regard to Council’s Proposed Plan Change 6:

10.1. the BoI must decide on Plan Change 6 first, then decide whether the Resource Consents sought for the RWSS are in conformance with its decisions on Plan Change 6;

10.2. the key decision to be made by the BoI that could affect the RWSS is likely to be between what Council has proposed as nitrate limits for the Tukituki which are based on nitrate toxicity to fish, OR much lower nitrate limits as sought by a range of submitters (15% to 20% of Council’s proposal); and

10.3. if the BoI decides to impose lower nitrate limits than proposed by Council there would be significant consequences for the RWSS in regard to whether, and how, it could manage nitrate emissions within a lower set of limits.

11. Notes that the HBRIC Ltd Business Case states, in regard to the consents sought for the RWSS via the BoI process:

11.1. no expert engineering evidence was submitted that contested the design, location, foundation conditions, engineering geology and seismology in regard to the dam and related infrastructure or the proposed operation of that infrastructure;

11.2. no expert engineering evidence was submitted that contested the design, location or proposed operation of the distribution system and its infrastructure such as canals, pipelines, outfalls etc.

12. Notes that the HBRIC Ltd Business Case states, in relation to the Environmental Protection Authority (EPA) decision-making process:

12.1. a Draft Decision on Proposed Plan Change 6 and the RWSS Consents is expected on 15 April 2014; and

12.2. a Final Decision must be made by 28 May 2014.

13. Notes that the HBRIC Ltd Business Case states HBRIC Ltd and co-investors in the intended Ruataniwha Water Limited Partnership (RWLP), are finalising a Design and Construction contract that is, to the maximum extent practicable, on a fixed cost fixed time basis for the Dam and Distribution infrastructure, which:

13.1. will be subject to expert panel oversight in the final design stage prior to application for building consent from Waikato Regional Council;

13.2. is able to deliver an increased volume of 104 million cubic metres of water per year (a significant increase from the 91 million cubic metres projected at Feasibility stage) without affecting the residual or flushing or other environmental flows required in the RWSS Consents;

13.3. provides water to all users on piped distribution at a pressure of 3.5 bars at the farm gate (a significant improvement on nil pressure and supply up to 2km from farm gate projected at Feasibility stage); and

13.4. enables a contracted water price of 23 c/cubic metre plus a variable charge for pressurization of up to 3 c/cubic metre (in the mid range of 22-25 c/cubic metre projected at Feasibility stage).

14. Notes that the HBRIC Ltd Business Case states:

14.1. HBRIC Ltd has received Expressions of Interest (EoI) for 47 million cubic metres of water/year to be purchased, and that HBRIC Ltd is now engaged on a process of seeking confirmed contracts for purchase under a standard Water User Agreement that requires compliance with all Land Use Conditions of the RWSS Consents submitted to the BoI process; and

14.2. achieving a target level of 40 million cubic metres/year of contracted water, or such other volume as is agreed by the parties investing in RWLP, is a Condition Precedent for Financial Close

15. Notes that the HBRIC Ltd Business Case states:

15.1. the RWSS is intended to be owned and operated as a modified Build, Own, Operate and Transfer project over a 70-year Concession Period, governed by a Concession Deed between Council and RWLP, the intended Owner of the RWSS Assets and Infrastructure during the Concession Period, and also by a Project Agreement between HBRIC Ltd and RWLP;

15.2. Ruataniwha Water General Partner Ltd (RWGP), the General Partner of the RWLP, will be the Operator of the RWSS Assets and Infrastructure during the Concession Period;

15.3. investors in RWLP will hold shares in RWGP in the same proportions as their ownership in RWLP;

15.4. local eligible investors, including farmers who have contracted for water from the RWSS, will have their investment aggregated by another Limited Partnership (Tukituki Investment LP) which will invest the aggregated amount in RWLP. It is also expected that, to the extent that there is local iwi investment in the RWSS, a similar separate LP (or LPs) will make any local iwi investment in RWLP;

15.5. at the end of the Concession Period ownership of the RWSS Assets and Infrastructure will be handed back to Council/HBRIC Ltd or successor, except that, to the proportional extent of ownership of the RWLP by local investors LP, and any local iwi LP, such owners will have continuing proportional ownership of the Assets and Infrastructure, or of the entity succeeding RWLP that owns the Assets and Infrastructure.

16. Notes that the HBRIC Ltd Business Case states in regard to the capital structure and capital raising process:

16.1. equity ownership in RWLP is expected to be subscribed for, at Financial Close, by a combination of HBRIC Ltd, a number of institutional investors, Tukituki Investment Limited Partner (TILP), and possibly by an Iwi LP;

16.2. the capital raising process will continue until Financial Close and will not be confirmed until all Conditions Precedent are satisfied and/or waived by agreement of the investor parties;

16.3. it is expected that HBRIC Ltd will subscribe for up to $80 million of equity in RWLP, with a current likely investment amount of $72 million, of which $63 million will be in cash and $9 million of already expended development expenditure and intellectual property which will be recognised by the allocation of equity interests;

16.4. it is expected that Crown Irrigation Investment Ltd (CII) will provide debt financing to the RWLP subject to their investment terms being met, the conditions precedent being met and shareholder approval;

16.5. the different equity investors will have different terms reflecting, inter alia, their different target rates of return, priority for cash-flows generated from water sales, and whether they have interests terminating at the end of the Concession Period or have ongoing equity interest beyond the Concession Period;

16.6. the terms negotiated and agreed between the investor parties, at Financial Close, have been (or will have been) negotiated and agreed between the parties on an arms-length, commercial basis.

17. Notes that the HBRIC Ltd Business Case states that in relation to the terms under which HBRIC Ltd proposes to invest in RWLP:

17.1. HBRIC Ltd will accept a low priority for cash-flows during the uptake period before the exit of CII, in order to ensure an acceptable water price and to encourage uptake;

17.2. during the uptake period, HBRIC Ltd will make a lower rate of return (base-case modelled at 5% post-tax internal rate of return (IRR), from both cash yield and incremental increase in value of interests) than institutional investors over that period;

17.3. after the uptake period, for the remainder of the Concession Period, HBRIC Ltd will make the same return as all other investors (base-case modelled as 10% post-tax IRR) – a good rate of return for a “brownfields” infrastructure investment);

17.4. the lower rate of return and slower rate to profitability that HBRIC Ltd proposes to accept on its investment in RWSS/RWLP are consistent with the provisions of its Statement of Intent (SoI) with Council, when the investment is intended to “Help achieve Council’s regional strategic economic development objectives by investing in assets that will benefit the Hawke’s Bay Region as a whole.” (Pages 3 and 4 2013/2014 SoI)

17.5. As noted in 7 above, the RWSS is projected to make substantial contributions to Council’s regional strategic economic development objectives.

18. Notes that the HBRIC Ltd Business Case states the Directors of HBRIC Ltd have given detailed consideration to extensive negotiations with counterparties in regard to investment quantum, risk and return, and have exercised their judgment, in particular, on the following key points:

18.1. the quantum proposed of up to $80 million to be invested by HBRIC Ltd (depending in part on the amount of capital raised via TILP) is appropriate and necessary (together with the large amount of CII funding) to achieve a water price that is viable for users, that will encourage uptake, and will also make the project viable for commercial investors;

18.2. the 5% post-tax IRR on HBRIC Ltd’s investment that is modelled in the base case over the uptake period is necessary (together with the low interest rate on CII debt) both to set an appropriate water price and to enable early cash-flows to be prioritised to institutional investors (delaying these cash-flows would be more expensive for the project and for HBRIC Ltd overall);

18.3. the HBRIC Ltd rate of return during the uptake period is less than a commercial rate of return, but this is acceptable under HBRIC Ltd’s Statement of Intent in order to achieve regional economic development;

18.4. the HBRIC Ltd rate of return during the uptake period being less than a commercial rate of return also reflects environmental contributions noted in 4 above;

18.5. the 10% post-tax IRR return that is modelled in the base case for HBRIC Ltd (and all investors) after the uptake period and CII has exited the project is an appropriate and good commercial rate of return on the investment;

18.6. HBRIC Ltd’s low rate of return during uptake and commercial rate of return post the uptake period mean that HBRIC Ltd should be a long-term investor in the project, at least until significantly more than halfway through the first consent period;

18.7. there is some level of risk that, under a slow uptake scenario, a significant fraction of the CII debt will have to be repaid as a lump sum under a “hard exit” by CII, after about year 15 of the project. In such a situation, which is considered unlikely, HBRIC Ltd could be required to fund in the order of $12-24 million of that payback. HBRIC Ltd has a number of options to fund such a payment, if that eventuates, or to avoid making its contribution by allowing other local investors to take up or expand their equity interests in RWLP; and

18.8. the level of governance representation that HBRIC Ltd will have in the Ruataniwha Water General Partner Ltd (which will operate the project) is considered appropriate for the proportion of equity interests held by HBRIC Ltd.

19. Notes that the HBRIC Ltd Business Case states discussions have been held between HBRIC Ltd and Council management regarding the level of dividends HBRIC Ltd can forecast in comparison with reduced cash flows to Council from interest and other cash yields from its current investments, and:

19.1. Council's cash investment into HBRIC Ltd is projected to be in two tranches – circa $22 million in 2014/15 and circa $41 million in 2015/16;

19.2. Discussions to date indicate that in the years after 2015/16 there is unlikely to be significantly less cash-flow from HBRIC Ltd to Council's operating budget than would be received by Council if the current investments were maintained;

19.3. In 2014/15 there may be a shortfall of circa $400,000 between forecast dividend payments and the reduction in Council's cash flow from its existing investments as a consequence of withdrawing $22 million from cash-generating investments, and a shortfall of circa $2,750,000 in 2015/16 as a consequence of withdrawing a further $41 million from cash-generating investments;

19.4. HBRIC Ltd holds the view that these cash flow differences for Council in 2014/15 and 2015/16 cannot be prudently met by HBRIC Ltd by requiring a higher level of dividend from Napier Port than is currently projected in Napier Port's Statement of Corporate Intent, particularly in 2015/16; and

19.5. Council and HBRIC Ltd management will continue to discuss how to mitigate the impact on Council's cash flows of changing $63 million of Council's investment portfolio from cash-generating investments to growth investments from which cash flow cannot be expected for a period of time.

19.6. HBRIC Ltd’s cash distributions from the RWSS become more reliable after the three to five year period post construction, and increase significantly after the uptake period which will enable HBRIC Ltd to meet shareholder dividend requirements.

20. Notes that the HBRIC Ltd Business Case states the following Conditions Precedent must be either satisfied or waived by agreement before Financial Close:

20.1. Granting of resource consent for RWSS, which in turn is recommended as being workable by all investors;

20.2. Subscription of a minimum of 40 million cubic metres (m³) of water contracts (Water User Agreements);

20.3. Securing the private and public funding required to build Scheme infrastructure;

20.4. A bankable construction contract with construction risk allocation adequately addressed through a fixed-time, fixed-cost arrangement.

21. Notes that the HBRIC Ltd Business Case states, in the counter-factual situation where the RWSS does not proceed either because of BoI decisions or because Council declines to make the investment proposed in the RWSS, that:

21.1. Plan Change 6, in whatever form is decided by the BoI, will become effective, without the RWSS, including increased minimum flows, water allocation limits, nutrient management limits, etc.

21.2. the environmental minimum and flushing flows set out in 4.1 to 4.3 will not be provided;

21.3. existing water users linked to minimum flows on Waipawa at the RDS gauging site and Tukituki at Tapairau Rd will not be shielded from the increased minimum flows set out in Proposed Plan Change 6;

21.4. existing water users supplied by run-of-river and connected groundwater takes will suffer economic impacts from the increased minimum flows in the catchment set out in Proposed Plan Change 6;

21.5. the contributions to strategic regional economic development, amounting to more than $4 billion, set out in 7.1 to 7.4 will not be generated; and

21.6. the employment (>2,500 jobs) and household income benefits (>$125 million/year) set out in 8.1 and 8.2 will not be generated.

22. HBRC advises HBRIC Ltd that subject to:

22.1. having received and being satisfied with its own legal advice on the RWWS documents and all related legal matters;

22.2. having received and being satisfied with its advice from the RWSS Business Case Assessment process and advisers;

22.3. having received and being satisfied with its advice from the Alternative Investments Analysis process and advisers;

22.4. having received the Draft and Final Decisions of EPA Board of Inquiry processes on Plan Change 6 and the RWSS Resource Consents and being satisfied that the RWSS can proceed as proposed under the decisions made;

22.5. having undertaken a Special Consultative Procedure of public consultation regarding whether or not to invest in the RWSS via HBRIC Ltd, and having made its determination to make such an investment; and

22.6. receiving confirmation from HBRIC Ltd that all Conditions Precedent to Financial Close of the investment by all investing parties in the RWLP have been either satisfied or waived by agreement of the parties;

it will confirm to HBRIC Ltd its decision to invest up to $80 million (projected level of $72 million) of new equity in HBRIC Ltd by subscription for additional shares at one share per $1 invested, for the purpose of HBRIC Ltd subscribing for up to $80 million (projected level of $72 million) of interests in Ruataniwha Water Limited Partnership and matching shares in Ruataniwha Water GP Ltd to implement the Ruataniwha Water Storage Scheme.

Scott/Dick

For: Dick, Hewitt, Scott, Pipe, Wilson

Against: Graham, Beaven, Barker, Belford

CARRIED

That Council:

23. Requests that, as part of the Independent Peer Review, Deloitte includes, as appropriate, consideration of and reports back to Council on:

23.1 A cash flow model, supported by commentary, illustrating the following key sensitivities and scenarios of:

23.1.1. Variations, including shortfalls in ability to store and deliver the full amount of water under contract with the multi-year security of supply promised

23.1.2. Impact of water user non payment, however contested

23.1.3. Alternative scheme uptake scenarios, including a case where 40% initial uptake is not achieved and a case where ramp up beyond 40% is slower than projected

23.1.4. Impact of additional costs, at appropriate increments, engendered by design changes to the dam and/or the distribution infrastructure

23.1.5. Impact of any other sensitivity that might materially affect cash flow and/or HBRC financial liability, such as late build completion

23.2 A rationale for setting 40% (or any other percentage) as the minimum volume of water contracted to initiate the project

23.3 A clear indication of the contingencies that might require additional HBRC funding for the scheme and the orders of magnitude involved, with an explanation of how, if at all, ratepayer exposure will be capped

23.4 An indication of rates of return expected by all investors or loan funders, including HBRIC Ltd itself, reflecting current discussions

23.5 A copy of the Water User Contract as presently envisioned

23.6 A firm proposal from HBRC management regarding how diminished dividend revenue to HBRC will be offset to meet ongoing HBRC budget requirements.

Dick/Wilson

CARRIED

Affixing of Common Seal

The Common Seal of the Council has been affixed to the following documents and signed by the Chairman or Deputy Chairman and Chief Executive or a Group Manager.

Seal No.

Date

1.1

Leasehold Land Sales

1.1.1 Lot 1

DP 11041

CT P1/826

- Transfer

1.1.2 Lot 2

DP 5296

CT 56/144

- Agreement for Sale and Purchase

- Transfer

1.1.3 Lot 318

DP 11329

CT B3/130

- Transfer

1.1.4 Lot 868

DP 7201

CT B4/942

- Transfer

1.1.5 Lot 31

DP 12692

CT E1/53

- Agreement for Sale and Purchase

3762

3763

3766

3764

3765

3768

24 February 2014

10 March 2014

25 February 2014

4 March 2014

18 March 2014

1.2

Deed of Grant of Easement

Lot 3 DP 4063

CT 86/188

(Pedestrian and cycleway – SH50 in Fernhill)

3767

17 March 2014

It was suggested that Councillors would appreciate a map being included, which would provide the locations of the properties subject to the transfers.

RC43/14

Resolutions

That Council:

1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted policy on significance and that Council can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 and make decisions on this issue without conferring directly with the community and persons likely to be affected by or to have an interest in the decision due to the nature and significance of the issue to be considered and decided.

2. Confirms the action to affix the Common Seal.

Beaven/Barker

CARRIED

Recommendations from the Corporate and Strategic Committee

Mr Adye provided an updated version of the Risk Issues as an attachment to the Agenda, and requested feedback from Councillors on those amendments. It was suggested that all Risk Statements begin with the word ‘if’ for consistency.

An issue under Risk Issue 7 – if the RWSS does not proceed – was raised, and whether Council should be proactively looking at these risks, especially given evidence heard at the EPA hearings in relation to job losses and economic downturn. Further, that direct reference to implementation of Plan Change 6 be included. It was agreed that, given the risks posed would be wider and to the region rather than to Council, this Risk Issue be framed as an additional, separate risk to be considered and developed by Council over the next month.

Mrs Lambert requested that Councillors put forward names of any potential appointees to the Council Appointments Committee to her by 11 April, to enable establishment of that Committee at the 30 April Regional Council meeting. In accordance with the adopted policy, the Committee would be made up of four members who are not seeking appointment to the HBRIC Ltd Board and, where possible the committee members will include the current chair of HBRIC Ltd, a Councillor, a recently retired Councillor and an external experienced director.

RC44/14

Resolutions

That Council:

Strategic Planning Process for 2015-25 Long Term Plan

2. Adopts the Proposed Strategic Planning Programme for the development of the Long Term Plan; being:

Phase	Period	Method/output
What will HB look and feel like in 2050? Identification / review of key issues Review purpose, vision and values, strategic framework	April to June	Council / staff workshops 7-8 May 12-13 June
Produce a branded document for public engagement (i.e. Embracing Futures Thinking yellow book, Strategic Plan discussion document)	July	Document adopted at 16 July 2014 C&S meeting, then Council
Informal engagement – Councillor / community level	August- October	Stakeholder meetings Speaker series?
Finalise Preferred Strategic Direction	November	C&S Comm / Council paper
Adopt Draft Long Term Plan	March 2015	Draft Long Term Plan
Consultation	April-May	Engagement Strategy
Hearings	Early June 2015	Officers Reports and recommendations
Adopt Long Term Plan	June 2015	Council paper / LTP

Top 10 Corporate Risks Assessment

3. Adopts the Hawke’s Bay Regional Council Risk Management Policy and Framework, March 2014.

4. Approves the risk mitigation approach to each of the ten risk issues.

Oil and Gas Exploration Policy Development

5. Defers formation of a multi stakeholder group (and its associated tasks) and incorporates a proposal for preparation of a “Regional Oil and Gas Exploration and Renewable Energy Strategy” into the 2015-25 Long Term Plan development process.

HBRC Appointment and Remuneration of Directors Policy

6. Confirms that the membership of the Council Appointments Committee which will recommend to Council the appointment of Directors to the permanent Board of HBRIC Ltd will be determined in accordance with the Policy; that being:

“The Council will establish a Council Appointments Committee after the triennial Council election to recommend to the Council the appointment of Council and independent directors to HBRIC Ltd. This committee will be comprised of four members who are not seeking appointment to the HBRIC Ltd Board. Where possible the committee members will include the current chair of HBRIC Ltd, a Councillor, a recently retired Councillor and an external experienced director.”

Local Governance Statement 2013-15

7. Adopts the Local Governance Statement as amended in response to feedback provided and agreed at the Corporate and Strategic Committee meeting, and notes that the Statement will be made available to the public by 11 April 2014.

HBRC Wairoa Office

8. Agrees to proceed with improvements of the HBRC Wairoa office at an estimated cost of $225,000, with construction work not committed to until HBRC has a long term lease with Department of Conservation for them to share the property, including office accommodation and storage.

9. Notes that the following reports were received at the Corporate and Strategic Committee meeting:

9.1 Follow-ups From Previous Corporate and Strategic Committee Meetings

9.2 Nga Marae o Heretaunga – Presentation

9.3 HBRC Health and Safety

9.4 HB LASS Half Yearly Report

9.5 Provisional Timeline - RWSS Consultation.

HBRC Appointment and Remuneration of Directors Policy

10. Adopts the final Policy following.

Hewitt/Pipe

CARRIED

HAWKES BAY REGIONAL COUNCIL

Policy on appointment and remuneration of directors

ADOPTed 26 MARCH 2014

Purpose

1. The purpose of this policy is to set out, in accordance with Section 57(1) of the Local Government Act 2002 (“the Act”), an objective and transparent process for:

(a) The identification and consideration of the skills, knowledge and experience required of directors of a Council organisation.

(b) The appointment of directors to a Council organisation.

Principles

2. The following principles underlie this policy:

(a) Appointments will be made on the basis of merit.

(b) The Council will follow corporate governance best practice.

(c) Directors of Council-controlled trading organisations will be appointed on the basis of the contribution they can make to the organisation, and not on the basis of representation.

(e) All Council appointed directors must comply with the Council’s Code of Conduct for Directors.

(f) Where organisations are subsidiaries of the Hawke’s Bay Regional Investment Company Ltd (HBRIC Ltd) or companies directly owned by HBRC, then HBRIC Ltd will act as the interface and monitoring body between the Council and those subsidiaries.

(g) All appointments of directors to the Board of HBRIC Ltd and to any Council Controlled Trading Organisation must be ratified by the Hawke’s Bay Regional Council.

Definitions

3. The term “Council organisation” (“CO”) is used as defined in Section 6 of the Act.

4. The Act also creates two sub-categories of COs – “Council-controlled organisations” (“CCOs”) and “Council-controlled trading organisations” (“CCTOs”).

5. The Council has interests that fall in each of these 2 sub-categories.

6. The following statements used in this Policy are provided for guidance purposes only. Fuller definitions are provided in Section 6 of the Act.

Meaning of “Council organisation”

7. In broad terms, a CO is an organisation in which the Council has a voting interest or the right to appoint a director, trustee or manager (however described). This is a wide-ranging definition, covering a large number of bodies.

Meaning of “Council-controlled organisation”

8. A CCO is a CO in which one or more local authorities control, directly or indirectly, 50% or more of the votes or have the right, directly or indirectly, to appoint 50% or more of the directors, trustees or managers (however described).

Meaning of “Council-controlled trading organisation”

9. A CCTO is a CCO that operates a trading undertaking for the purpose of making a profit.

10. For the purpose of this document only:

(a) Hawkes’ Bay Regional Investment Company Ltd (HBRIC Ltd) is excluded from the definition of a CCTO (there is a separate section in this Policy (page 3) for the appointment and remunerations of directors to HBRIC Ltd).

(b) Napier Port (Port of Napier Limited) is considered for the purpose of this Policy only to be a CCTO, notwithstanding specific exemptions for port companies under Section 6 of the Act.

(c) All associate and subsidiary companies of HBRIC Ltd are consdired to be CCTOs irrespective of whether HBRIC Ltd has a controlling interest in the company.

11. Pages 3- 6 sets out the policy for the appointment and remuneration of directors to the Board of the Hawke’s Bay Regional Investment Company Ltd.

12. Pages 7-11 contains the policy for other Council Controlled Organisations, including CCO’s and CCTO’s currently subject to this Policy. These CCOs are listed in Appendix 1. Any new Council organisations in which the Council will have a voting interest or the right to appoint a director, trustee or manager will be subject to this Policy.

13. On page 12 is the policy for Council Organisations, that are not Council Controlled Organisations, that are currently subject to this Policy. These COs are listed in Appendix 2. Any new Council Organisation will be subject to this Policy.

14. On pages 13-14 is the HBRIC Ltd Chairperson Succession Planning Policy.

HAWKES BAY REGIONAL INVESTMENT COMPANY LTD

Introduction

15. HBRIC Ltd is 100% owned by the Council, and holds shares in the Council’s CCTOs. It monitors the performance of all CCTOs, whether owned directly by HBRIC Ltd or the Council, and recommends new director appointments for these organisations for the Council’s approval.

HBRIC Ltd Director appointment process and Identification of required skills, knowledge and experience

16. The HBRIC Ltd constitution provides for a maximum of seven directors and it is intended that it comprises a mix of Council and independent directors. It is critical to the success of this board that it has a composition which is capable of maintaining the confidence of both the Council and the subsidiary companies.

17. The Council will establish a Council Appointments Committee after the triennial Council election to recommend to the Council the appointment of Council and independent Directors to HBRIC Ltd. This committee will be comprised of four members who are not seeking appointment to the HBRIC Ltd Board. Where possible the committee members will include the current chair of HBRIC Ltd, a Councillor, a recently retired Councillor and an external experienced director.

18. In the process of selecting Council and independent directors the Council Appointments Committee will first determine the required skills, knowledge and experience which is necessary for an effective board. In general terms, the committee will apply similar criteria to potential candidates to those used by HBRIC Ltd in its assessment of candidates for other CCTOs. However, where necessary the committee will also take into account a candidate’s potential to quickly acquire business and financial skills, as well as his or her existing skills and experience. The candidates’ skills must be relevant to the requirements of HBRIC Ltd in terms of its governance and provide as far as possible that there is a suitable cross- section of skills available at the board table which is capable of meeting the normal criteria of good governance.

19. The committee may use the services of a specialist consultant in making an assessment of the suitability of candidates for a Council Director position.

Council Directors of HBRIC Ltd

20. The HBRIC Ltd constitution provides that Council directors must resign on a date specified by the Council being no later than three months after the triennial Council elections, although they may offer themselves for re-appointment. The date selected will be chosen to allow time to select Council directors for appointment as replacement directors in accordance with this policy.

21. Only a Councillor may be appointed as a Council Director of HBRIC Ltd.

22. The Council Appointments Committee will, after the triennial Council elections, interview all Councillors expressing an interest in appointment to the HBRIC Ltd Board. This includes existing HBRIC Ltd Council directors retiring and offering themselves for re-appointment.

23. Following the interviews, the Committee will make its final recommendations in a report to the Council. This report will be considered in the public part of the agenda. The Council will consider the report and make its decision.

24. Public announcement of the appointments will be made as soon as practicable after the Council has made its decision.

25. It is important that the selected Council directors will be able to gain the confidence of the Council and the subsidiary company boards, given the confidential and commercially sensitive nature of much of the business being considered.

Independent directors of HBRIC Ltd

26. The HBRIC Ltd constitution provides that the independent directors will retire by rotation with at least one retiring each year.

27. The HBRIC Ltd governance committee or full board (excluding any retiring director) will give consideration to whether a retiring independent director should be reappointed by rotation and make a recommendation to the Council regarding reappointment where the term of that director will be within the policy for tenure for CCTO directors as provided in this policy.

28. In the case of a vacancy for an independent director appointment, whether it be a casual vacancy or arising from the non reappointment of a retiring independent director, the same procedures will be followed as applies to the appointment of a director to a CCTO.

29. Independent directors will be selected according to the same criteria as used by HBRIC Ltd in its assessment of candidates for other CCTOs. In making appointments every endeavour will be made to ensure that a range of good governance skills will be available to the HBRIC Ltd board as a whole.

30. An independent Director of HBRIC Ltd may be a person who is neither a Councillor nor an employee of the Council.

Chairperson

31. The Council shall nominate who will be the chair of the HBRIC Ltd board and take account of the experience and appropriate skills of the existing board. This nomination will be made in accordance with the policy adopted by Council on 26 March 2014 regarding HBRIC Ltd Chairperson succession. The policy is to ensure that there can be continuity of knowledgeable and capable leadership of the HBRIC Ltd Board. The policy envisages that work commences to identify a successor to the chairperson at least a year before the planned retirement of the incumbent and that in making any replacement board appointments that consideration be given to whether there is sufficient potential on the board for a replacement chairperson should that be needed unexpectedly.

32. The Council Appointments Committee is responsible to make a recommendation to the Council on the nomination of the HBRIC Ltd Chairperson.

All directors of HBRIC Ltd

33. It is expected that all appointees to the HBRIC Ltd Board will undergo, or already have undergone, formal corporate governance training, or have the requisite experience in this area. HBRIC Ltd will generally pay for at least part of any such training.

Length of tenure

34. Independent directors will normally be appointed for periods of three years. Subject to a review of the director’s performance after each three year period, the normal tenure for a director will be six years. Following six years of service, a director may be re-appointed for a further three years as decided by Council.

Remuneration of HBRIC Ltd directors

35. Periodically, normally every three years but more frequently if considered appropriate, HBRIC Ltd will review the level of remuneration being paid to the boards of the CCTOs.

36. As part of this function, an independent panel will also review the levels of fees considered appropriate for the HBRIC Ltd board after the triennial Council elections.

37. The fees for HBRIC Ltd directors will be assessed using the same methodology that is used for other CCTOs, with no distinction made between independent and Council directors. It is expected that an element of public service should be reflected in the final agreed fees.

38. HBRIC Ltd will then report to the Council with a recommendation with regard to the level of fees for the HBRIC Ltd board. When the Council considers this issue, those Councillors who are directors of HBRIC Ltd or any other CCTO may not take part in discussions or vote on the issue except where a declaration permitting Councillors to discuss and vote on the issue has been granted by the Auditor-General.

39. HBRIC Ltd will arrange and pay for directors’ liability insurance, and indemnify each of the directors.

Removal of a director

40. The HBRIC Ltd Constitution provides that any director of HBRIC Ltd may be removed from office at any time by notice in writing from the majority shareholder (Council).

41. Without limiting the right of the Council in the constitution, the likely reasons which would justify removal of a director would be where a director:

(a) No longer has the confidence of the board or the Council

(b) Has breached ethical standards and this reflects badly on the board and/or Council

(d) Breaches the confidence of the board in any way including speaking publicly on board issues without the authority of the board

(e) Does not act in accordance with the principles of collective responsibility.

42. Where the HBRIC Ltd board has concerns regarding the behaviour of one of its directors it shall be considered first by the board and where necessary the board may recommend the removal of the director to the Council.

43. HBRIC Ltd may remove a director from any of its subsidiaries for similar reasons as set out above following referral to, and approval by, the Council.

Council Controlled Trading Organisations

Introduction

44. The Council has significant shareholdings, direct and indirect, in a variety of CCTOs. These all operate at arm’s length from the Council on a commercial basis.

45. The Council may establish further CCTO’S during the life of the Policy.

46. HBRIC Ltd has been charged by the Council with monitoring and recommending new director appointments for Council approval in respect of the CCTO’s in which HBRIC Ltd directly holds shares.

47. No directors will be appointed to CCTO boards other than through the process described in this policy.

Identification of required skills, knowledge and experience of CCTO directors

48. The required skills, knowledge and experience for director appointments to a CCTO board are assessed in the first instance by the Governance, Appointment and Remuneration Committee of HBRIC Ltd, in consultation with the Chairperson of the relevant CCTO. Reference is made to current governance best practice in this area, as encapsulated in the Institute of Directors’ Principles of Best Practice for New Zealand Directors and other relevant material. External assistance may be used by HBRIC Ltd in some cases.

49. The mix of skills and experience on the CCTO board will be taken into account, and consideration given to complementing and reinforcing existing skills and reducing known weaknesses where necessary.

50. In general terms, the following qualities are sought in directors of CCTOs:

(a) Intellectual ability.

(b) Commercial experience.

(d) Sound judgement.

(e) High standard of personal integrity.

(f) Commitment to the principles of good corporate citizenship.

(g) Understanding of the wider interests of the publicly-accountable shareholder.

51. As a general principle, the Council would seek to appoint a person who, while meeting all of the above criteria, has particular strengths in terms of attribute g).

52. It is expected that all appointees to CCTO boards will undergo, or already have undergone, formal corporate governance training, or have the requisite experience in this area.

Appointment process for CCTO directors

53. When a vacancy arises in any CCTO, the HBRIC Ltd Governance, Appointment and Remuneration Committee, having identified the skills, knowledge and experience required for the position (in consultation with the CCTO Chairperson), will then follow the process set out below:

Search

(a) HBRIC Ltd will maintain a database of potential candidates for appointment to CCTO boards. This will be updated on a regular basis, utilising contacts with the business community and other relevant sources. The database and its detail will be confidential to the Board of HBRIC Ltd. A Councillor is eligible to be included in this database on merit.

(b) The database will be the first point of reference in the search process. However, in most cases, a specialist consultant will also be contracted to assist with the provision of names of possible candidates and the initial evaluation. In most cases, the vacant CCTO board position will not be advertised, as this would not normally be expected to add any significant value to the process.

(d) If the HBRIC Ltd Governance, Appointment and Remuneration Committee, after consultation with the chairperson of a particular CCTO board, determines that there is a need for a Councillor on the board of that CCTO to bring the specific skills and relationships of a Councillor Director to the board, then the process of selection of candidates will be varied in the following manner:

i. The HBRIC Ltd Governance, Appointment and Remuneration Committee, assisted by a specialist consultant, will call for nominations from all interested Councillors and will interview all Councillors expressing an interest in an appointment to the CCTO and make an appointment in a manner which is consistent with this policy in all other respects.

ii. If the term of appointment for a Councillor who is appointed under this clause is due for reconsideration in terms of the constitution of the CCTO they may be considered for reappointment by HBRIC Ltd without further consultation with Council under a process consistent with clauses 52 to 55.

iii. Appointments of any Councillor appointed under this clause by HBRIC Ltd shall expire 31 March in the year following a triennial election.

iv. If following the triennial local government election the appointee is not re-elected as a Councillor HBRIC Ltd will commence a process for selection of a new appointee to the board, which may or may not be a Councillor.

v. HBRIC Ltd will re-assess in consultation with the CCTO at no less than three yearly intervals whether there remains a need for a person to be appointed to the board who is specifically an elected Councillor.

vi. If the HBRIC Ltd Governance, Appointments and Remuneration Committee determines there is an ongoing need for a Councillor on the board of that CCTO, the committee shall carry out a process consistent with paragraphs 15 – 22 of this policy to recommend the appointment of a Councillor to the CCTO.

vii. This clause does not apply to appointments where a Councillor is appointed other than in accordance with this sub-clause.

Interview

(a) Following the search process, the HBRIC Ltd Governance, Appointments and Remuneration Committee will draw up a short list of candidates.

(b) Where appropriate the committee will co-operate with other shareholders in the selection process.

(c) Each candidate will be interviewed by the committee. The committee will then decide its preferred candidate, check all references and report back to the full HBRIC Ltd Board for ratification.

Appointment

(a) The HBRIC Ltd Board will then make a recommendation to the Council. The report will be “public excluded” in order to protect the privacy of the individual concerned. The Council will consider the report from HBRIC Ltd and make its decision.

(b) Public announcement of the appointment will be made as soon as practicable after the Council has made its decision.

Reappointment

54. Where a director’s term of appointment has expired and he or she is offering him/herself for reappointment, a representative of the HBRIC Ltd Board (normally the Chairperson) will consult on a confidential basis with the Chairperson of the CCTO with regard to:

(a) Whether the skills of the incumbent add value to the work of the board.

(b) Whether there are other skills which the board needs.

55. The HBRIC Ltd Governance, Appointments and Remuneration Committee will consider the information obtained and, taking into account the director’s length of tenure (see below), form a view on the appropriateness of reappointment or making a replacement appointment.

56. Where reappointment is considered appropriate then the HBRIC Ltd Board is authorised to approve it without further reference to the Council.

57. Where it is not intended to reappoint the existing incumbent, the appointment process outlined above will apply.

Length of tenure

58. CCTO directors will normally be appointed for periods of three years. Subject to a review of the director’s performance after each three year period, the normal tenure for a director will be six to nine years. Following nine years of service, a director may be re-appointed for a further three years in special circumstances.

Chairpersons of CCTOs

59. It is the responsibility of the board of each CCTO to appoint its own Chairperson. However, normally the CCTO board will consult with HBRIC Ltd on the person to be so appointed, and where HBRIC Ltd considers it appropriate, it will give its view on who it considers to be the appropriate person to fill the Chairperson's position.

Napier Port

60. For the purposes of this policy only, Napier Port is defined as a CCTO notwithstanding anything in the Local Government Act or the Port Companies Act.

Remuneration of CCTO directors

61. HBRIC Ltd has been charged with monitoring and, where appropriate, recommending to Council for approval changes in remuneration levels for the boards of CCTOs.

62. Periodically HBRIC Ltd will review the level of remuneration made available to the boards of the CCTOs for distribution amongst directors on each board.

63. The fees will be reviewed on an overall basis for each CCTO, leaving the board of that CCTO to apportion the fee between board members as it sees fit. Under exceptional circumstances, HBRIC Ltd may approve an application from a CCTO for additional fees, for a special project.

64. In performing its review of remuneration, HBRIC Ltd will take account of the following factors:

(a) The need to attract and retain appropriately qualified directors.

(b) The levels of remuneration paid to comparable companies in New Zealand.

(d) Any other relevant factors.

65. In general, it is intended that boards of CCTOs will receive a level of remuneration that is competitive with the general market, while recognising that there will be differences from time to time, particularly in the period between reviews. Professional advice will be sought where necessary.

66. In the event of a Council or HBRIC Ltd staff member being appointed to a CCTO board, the fees for that appointee shall either not be paid or be paid to the Council or HBRIC Ltd, unless there are special circumstances. This reflects the employee being appointed as part of their existing position.

67. The Council also supports the payment by CCTOs of directors’ liability insurance and the indemnification of all directors.

Council-Controlled Organisations

Introduction

68. The Council has an interest in CCOs which are not trading organisation. These CCO’s are Hawke’s Bay Local Authority Shared Services and. These are not-for-profit bodies and, in contrast with the section that deals with CCTOs, Hawke’s Bay Regional Investment Company Ltd has no involvement in monitoring or the director/trustee appointment process.

69. Appointments to a CCO are generally for a three year term, and are made after the triennial Council elections.

Identification of required skills, knowledge and experience of CCO directors, and appointment

70. The Council will determine the required skills, knowledge and experience for each appointment to these Council Controlled Organisations and make its appointments accordingly.

71. In general, the attributes required for directors of CCTOs will be applicable, but the weightings given to each attribute may vary according to the nature of the appointment.

72. In most cases, Councillors will be the appointees, but there may be instances where it is appropriate to appoint external directors or Council staff.

Remuneration of CCO directors

73. After each triennial Council election, the Council will determine whether there are any CCOs that may more properly be classified as CCTOs for the purposes of determining an appropriate level of remuneration. If any CCOs are so classified, the remuneration of their boards will be determined by HBRIC Ltd in accordance with the policy for CCTOs set out on page 6.

74. In all other cases, CO directors appointed by the Council will receive the remuneration (if any) offered by that body. Council staff members appointed to such bodies will not accept any remuneration.

Council Organisations

Introduction

75. The Council has non-controlling interests in numerous COs. These are not-for-profit bodies and, in contrast with CCTOs, Hawke’s Bay Regional Investment Company Ltd has no involvement in monitoring or the director/trustee appointment process.

76. Appointments to COs are made for a number of reasons. These include:

(a) To provide a means of monitoring where the Council has made a grant to that body.

(b) To enable Council involvement where the CO’s activity is relevant to the Council.

(d) Statutory requirements.

77. Appointments to a CO are generally for a three year term, and are made after the triennial Council elections.

78. The Council will endeavour to minimise the number of appointments where the benefit to the Council of such an appointment is minimal.

Identification of required skills, knowledge and experience of CO directors, and appointment

79. The range of reasons for the appointment of Council representatives to COs results in a wider range of desired attributes for appointees to these bodies.

80. The Council will determine the required skills, knowledge and experience for each appointment. Candidates are not restricted to Councillors – in some cases, it may be more appropriate to appoint Council staff or external people with affiliations to the Council.

Remuneration of CO directors

81. CO directors appointed by the Council will receive the remuneration (if any) offered by that body. Council staff members appointed to such bodies will not accept any remuneration.

HAWKE’S BAY REGIONAL INVESTMENT COMPANY LIMITED

CHAIRPERSON SUCCESSION PLANNING POLICY

(This policy is specifically for the HBRIC Ltd Board Chair)

ADOPTED 26 MARCH 2014

Introduction

In line with best practice, and in conjunction with the development of the policy on the appointment and remuneration of directors, this policy has been developed and is presented to Council for consideration and adoption.

Rationale for a succession plan:

To provide for:

· Smooth transition through a planned approach

· Knowledgeable leadership of the board in the event of planned or unexpected retirement of the incumbent Chairperson

· Recognition that the term of any chairperson in that role is limited

· A Chairperson’s desire to step down at any time, knowing that there is a person who is prepared to take over the role

· Appointment of a new Chairperson who should generally have knowledge of the Company.

Principles:

· Directors would generally not be appointed for more than two (3 year) terms on a board

· A person appointed as Chair in their second term may be appointed for a maximum of six years as Chairperson unless in exceptional circumstances as agreed by the Council.

· Council and HBRIC Ltd will generally consider the need for a potential successor as they make each director appointment

· The selection process for all HBRIC Ltd board members, including the Chair, is the prerogative of Hawke’s Bay Regional Council under the appointment policy.

Process:

The Council Appointments Committee (refer Council policy on the Appointment and Remuneration of Directors) will work through succession planning for the Chair of HBRIC Ltd using the following process:

· Ensure that planning starts at least one year before planned retirement

· Discuss with current Chairperson their views on the date of their retirement and who would be a good successor

· Compose a list of required skillsets for the position following discussion (as appropriate) with the Chairperson and individual Board members and ascertain whether there is any obvious leader amongst the existing board

· Agree a timeframe of the new appointment allowing a bedding-in time of at least one year is the newly proposed Chairperson is new to the Board

· Interview/discussions with the preferred candidate to ascertain their availability for the Chairperson role

· Preliminary discussions will not guarantee appointment but give an indication that all things being equal, they will be the next Chair

General Skillsets Required:

· Ability to maintain the trust of the Council

· Ability to maintain close, but independent working relationship with CEO

· Ability to harness the collective skills of the board and executive team to achieve the business objectives and maintain the confidence of the shareholders

· Ability to encourage all directors to have full participation in Board deliberations

· Ability to lead Board evaluation process

· Ability to demonstrate leadership and good interpersonal skills

· Ability to efficiently conduct Board meetings

· Ensure timeliness and relevance of information to the Board

· Ability to be the spokesperson for the company

· Integrity and credibility within the business community

· Ability to retain the confidence of the region and be able to build relationships within the region’s networks.

APPENDIX 1

HAWKES BAY REGIONAL COUNCIL CONTROLLED ORGANISATIONS

As at 26 March 2014

1. Companies in which Hawke’s Bay Regional Council directly owns the shares

· Hawke’s Bay Regional Investment Company Ltd

2. Council Controlled Trading Organisations in which HBRIC Ltd holds shares*

· Napier Port (Port of Napier Ltd)

3. Council Controlled Organisations in which HBRC appoints Board members by virtue of a Company Constitution

· Hawke’s Bay Tourism Ltd

· Hawke’s Bay Local Authority Shared Services Company

· Note that if the Ruataniwha Water Storage Scheme goes ahead Ruataniwha Water Management Ltd will be added to section 2 of Appendix 1, noting however that HBRIC Ltd will not have a controlling interest in that company.

APPENDIX 2

COUNCIL REPRESENTATION ON OUTSIDE BODIES

COUNCIL APPOINTMENTS AS AT 26 MARCH 2014

Hawke’s Bay Sports Council

TB Free Hawke’s Bay Committee

Hawke’s Bay Drought Committee

The meeting adjourned at 12.00pm and reconvened at 1.33pm, with Mr Mohi absent.

10.

Adoption of the Draft 2014/15 Annual Plan

Mr Paul Drury provided an overview of the process to this point, in development of the Draft Annual Plan.

Discussions traversed:

· In relation to page 90 and the $22.2M advance to HBRIC Ltd – it was suggested that there needs to be an explanation of where this is funded from.

· It was suggested that the Notes to the financials needed cross reference checking.

· GMO Free HB appears in the table of Strategic Goals as it was a significant issue brought to Council through the LTP submissions.

· Gravel accumulation and how significant negative impacts in CHB are addressed through this annual plan.

Mr Mohi joined the meeting at 1.45pm

Discussions continued, and traversed:

· Rating – suggestion to include some indicative $ amounts representing the % of the increase under several circumstances

· Suggestion that the Passenger Transport ‘good news’ should be included in the Summary in ‘Our Place’

· Water User Groups, efficient water use practices and initiatives such as Global consents to be further developed and highlighted during the LTP process

· Suggested for inclusion in the Introduction section – explanation of what Council’s investment in RWSS would mean, and an explanation of the sale of leasehold land cash flows.

· Councillor Dick provided a history of the Napier Gisborne railway and events leading up to now before providing an update on the proposition being put forward in the Annual Plan and providing a suggested ‘insert’ for the Annual Plan to provide for the possibility that this investment would be delayed and not occur this financial year.

· There is a new rating scheme for Opoho, and it was confirmed that the review of the funding for Makara Dam repairs has not commenced yet.

· Suggestion that specific mention of Climate change be included in Performance measures for Flood & Drainage and Coastal management activities. Also – something about the Coastal Strategy under development.

· Coastal Plan resolution of appeals complete, only Minister’s approval outstanding. Statutory Advocacy – include issues proactively managed or resolved as a benefit in performance measures.

· Table 5 Investment Company Risks – needs amending and updating with current levels of risk where development has occurred since inclusion in the LTP 2 years ago.

RC45/14

Resolutions

That Council:

1. Confirms that the Draft Annual Plan 2014/15 will be subject to a special consultative procedure as required by section 95 (2) and 85 of the Local Government Act 2002.

2. Adopts the proposed scale and schedule of charges as set out in the “Resource Management Charges” section of the Draft Annual Plan 2014/15 included in Part 3 of that Plan, that these be part of the special consultative process as set out in section 85 of the Local Government Act 2002 (in conjunction with the Draft Annual Plan) and be part of the overall Statement of Proposal in accordance with section 36 (2) of the Resource Management Act 1991.

3. Agrees to fund the underlying deficit shown in the Plan from cash operating balances which are estimated to be at a level which is sufficient to provide such funding.

4. Adopts the Draft Annual Plan 2014/15 incorporating the changes initiated by Council on 11 February 2014 and 26 February 2014, and any changes made by Council at its meeting held on 26 March 2014, under sections 85 & 95 of the Local Government Act 2002 for the purposes of initiating special consultative procedure and that the Draft Annual Plan, as adopted, will be the Statement of Proposal.

5. Resolves that where special consultative procedures are required for any significant decisions that are included in the Draft Annual Plan 2014/15, that the Statement of Proposal as required under section 83(1)(a)(i) of the Local Government Act 2002 is the Draft Annual Plan 2014/15.

6. Resolves that the summary of information as required by section 83(1)(a)(ii) in section 89 will be in the form of the Draft Annual Plan Summary and will be issued in the April 2014 issue of the ‘Our Place’.

7. Resolves that the public notice pursuant to section 83(e), (f) and (g) of the Local Government Act 2002 be given to notify the adoption of the Draft Annual Plan with a closing date of submissions of 12 May 2014.

Councillor Barker moved an amendment, seconded by Councillor Hewitt, being an additional resolution 8:

8. Confirms that staff will, in the interim, continue to work to identify internal savings as an offset to the proposed rate increase and report progress to Council.

Barker/Hewitt

CARRIED

The amendment was CARRIED and therefore became part of the substantive motion.

Scott/Belford

CARRIED

11.

Communications Strategy for the Draft Annual Plan 2014/15

Mr Broadley provided an overview of the proposed consultation to be undertaken.

RC46/14

Resolutions

That Council:

2. Endorses the proposed promotion and community engagement programme for the Draft Annual Plan 2014-15.

Dick/Pipe

CARRIED

12.

HBRC Submission on Transport Funding Assistance Rates Review

Ms Codlin explained the funding which reflects the contribution that the government will make, through NZTA to the costs incurred by local authorities in delivering transport outcomes. The main change proposed through the review, is to have a single rate of subsidy for all transport activities. The Regional Transport Committee is also lodging a submission representing the wider view of the Committee members.

RC47/14

Resolutions

That Council:

2. Receives the report titled HBRC Submission on NZTA Funding Assistance Rate Review and considers the draft submission prepared by staff.

3. Adopts the submission, including any amendments agreed, for serving on the New Zealand Transport Agency by 28 March 2014.

Scott/Dick

CARRIED

13.

Public Transport - Update and Route 12 Capacity Issues

Mrs Megan Welsby provided an overview of the update on public transport in the region before highlighting the capacity issues on route 12 during peak times. One of the options for consideration is the addition of 2 buses to run during peak times only. The option staff are proposing Council approves, is to cancel under utilised services on route 10 and redirect those resources to route 12.

RC48/14

Resolutions

That Council:

2. Receives the report titled Public Transport Update and Route 12 Capacity Issues.

3. Agrees to cancel the Route 10 Express Service between Hastings and Napier via the expressway effective 5 May 2014.

4. Agrees to extend services on Route 12 effective 5 May 2014, being two extra buses during peak morning and afternoon periods (7.00am – 9.00am and 2.30pm – 4.30pm) between Hastings and EIT and Napier and EIT.

5. Notes that the above changes can be made within existing budgets.

Dick/Graham

CARRIED

14.

Monthly Work Plan Looking Forward Through April 2014

It was suggested that the paper would be of more value if it looked forward rather than looking back, and could include events coming up at which Council staff or Councillors are going to be participating in. In relation to plan change 5, Ms Codlin advised that significant progress was made at recent mediation and is optimistic about the outcomes of the process; and stated that there are no ‘material’ changes to the plan change expected.

RC49/14

Resolution

1. That Council receives the Monthly Work Plan Looking Forward Through April 2014 report.

Beaven/Barker

CARRIED

15.

Minor Items Not on the Agenda

Item	Topic	Councillor / Staff
1.	Nimmo-Bell – update on status of report Staff have received the draft report and have provided some suggested amendments in response. The final report is scheduled to be presented to the Environment and Services Committee meeting on 9 April.	Cr Belford
2.	Transport facilities for local businesses Expressed concern about capacity building at Napier Port with potential increased production by the Region’s primary industry. Suggested that Chairman raise concerns with Napier Port.	Cr Barker

16.

Chairman's Monthly Report

The Chairman tabled his report and provided additional detail in relation to the Te Tira Whakemi o Te Wairoa powhiri, hearings and presentations relating to iwi grievances, and meeting Council’s new Auditor.

RC50/14

Resolution

That the Chairman’s monthly report for March 2014 be received.

Dick/Beaven

CARRIED

The meeting adjourned at 3.20 and reconvened at 3.30pm

17.

Port of Napier Ltd (Napier Port) Director Appointment

RC51/14

Resolutions

1. That Council excludes the public from this section of the meeting, being Agenda Item 17 Port of Napier Ltd (Napier Port) Director Appointment with the general subject of the item to be considered while the public is excluded; the reasons for passing the resolution and the specific grounds under Section 48 (1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution being as follows:

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
Port of Napier Ltd (Napier Port) Director Appointment	7(2)(a) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of the information is necessary to protect the privacy of natural persons.	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.

2. That Dr Andy Pearce, HBRIC Ltd Chairman be present for this item as the representative of the Board of Directors making to the recommendation to Council.

Hewitt/Scott

CARRIED

18. Confirmation of the Public Excluded Minutes of the Regional Council Meeting held on 26 February 2014

RC52/14 That Council excludes the public from this section of the meeting, being Agenda Item 18 Confirmation of the Public Excluded Minutes of the Regional Council meeting held on 26 February 2014 with the general subject of the item to be considered while the public is excluded; the reasons for passing the resolution and the specific grounds under Section 48 (1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution being as follows:

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
Confirmation of the Public Excluded Minutes of the Regional Council meeting held on 26 February 2014	7(2)(i) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of the information is necessary to enable the local authority holding the information to carry out, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.

Hewitt/Scott

CARRIED

The meeting went into public excluded session at 3.35pm and out of public excluded session at 3.55pm.

Closure:

There being no further business the Chairman declared the meeting closed at 3.55pm on Wednesday, 26 March 2014.

Signed as a true and correct record.

DATE: ................................................ CHAIRMAN: ...............................................