Port Otago can finally look forward to getting some dividends from its controversial 15.5% stake in listed rival Lyttelton Port of Christchurch (LPC).
Port Otago's stake - now standing at about $46.66 million - is up more than 25% in value on what it paid six years ago.
In an update by LPC directors on its ongoing battle with its insurers, they said they would be reviewing the payment of dividends at the end of the 2013 year.
Dividend payments had been suspended since October 2010 because of earthquake-related costs.
''It is anticipated that the payment of dividends will resume in the first half of 2014,'' the directors said in their statement on Friday.
Port Otago, 100% owned by the Otago Regional Council, purchased the 15.5% stake of LPC in 2007 at $2.30 per share, which cost it $37 million, but had only received an estimated $2.7 million in dividends before the suspension.
The 15.5% holding formed a blocking stake against majority owner the Christchurch City Council and its plans to sell LPC in 2007, but also later raised questions about Port Otago retaining its stake, given it had tied up $37 million and was not providing dividends.
LPC shares were up slightly after the insurance update was announced late on Friday, at $2.95, valuing Port Otago's stake at $46.66 million.
Craigs Investment Partners broker Peter McIntyre said the resumption of dividends would ultimately be ''positive'' for the Otago Regional Council, which had during the past 24 years got more than $114 million in dividends from Port Otago.
''LPC will be cautious about the [level of dividend] payout. They will want it to be stable, and want to hold cash back for further earthquake repairs,'' he said.
He cautioned that while ''typical'' listed New Zealand companies returned 80% to 90% of their net profit after tax back to shareholders in the form of dividends, LPC's need to fund ongoing earthquake repairs meant it was ''likely'' its payout ratio would be lower, around 50% to 60%, of total after-tax profit.
Port Otago executives have expressed their repeated frustrations with LPC on the lack of information from the company on the extent of likely insurance payouts. LPC's majority shareholder, at 80%, is the Christchurch council.
LPC's statement said its insurers had agreed to pay, ''as a non-specific progress payment'' under the material damage section of its policy, a further $17.4 million, plus GST, towards the physical loss and damage suffered as a result of the earthquakes - taking total progress payments to about $53 million, plus GST.
''Insurers have agreed that a number of key assets are destroyed for insurance purposes, which has enabled LPC to proceed with greater confidence in progressing design work on rebuilding those assets,'' the directors said.
As LPC reinstated its infrastructure, funds were expected to flow as costs were incurred in line with the ''pay-as-you-go'' policy, the directors said.
LPC was developing cost estimates on that basis, but there was ''uncertainty over the extent to which this programme of works will be fully funded from insurance proceeds''.
The directors said the insurers believed there was a limit on their liability per asset, albeit in certain circumstances they reserved the right to contend that cover was on an indemnity basis.
''LPC does not accept either position,'' the directors said. The full extent of the issue would not be known until the designs were fully developed and costed, the directors said.
