Payments to be funded by debt
Aurora Energy appears set to provide dividends for the Dunedin City Council from 2027, ending a decade-long drought.
However, any dividends from the Otago lines company would be funded through debt.
The situation has been laid out in a report for the council by Dunedin City Holdings Ltd (DCHL), which owns Aurora, as well as by the company itself in its draft statement of intent for the financial year ending June 2026.
Aurora is the largest business within the council’s DCHL group and there are no firm plans for the lines company to pay a dividend in 2025-26.
Aurora has not paid dividends to DCHL since 2017 and, if it resumes doing so in 2026-27, the amount is expected to be a material component of DCHL’s dividend payment to the council.
The council wants $9 million in dividends from the group in 2025-26, as well as $5.9m in interest on the shareholders’ advance.
This looks set to be funded mostly through a continued capital restructure of City Forests and increased borrowing by DCHL.
DCHL commented Aurora had not paid dividends in recent years, because of elevated capital expenditure requirements, as it focused cash on reinvestment in its network assets.
Lack of dividends was one of the subjects raised during an ultimately unsuccessful drive to put the company, worth hundreds of millions of dollars, on the market.
A statement of proposal last year said Aurora was unlikely to provide a dividend to the council in the short term.
"If it does provide a dividend, it is likely to be debt-funded."
In the end, the council decided to retain Aurora, after strong public opposition to a potential sale.
DCHL said in its report for the council’s finance and council-controlled organisations committee meeting today Aurora’s capital expenditure programme was driven by network growth requirements and decarbonisation.
This would "drive higher borrowings for the foreseeable future and any dividends will be debt-funded".
Aurora supplies electricity to more than 200,000 residents in Dunedin, Central Otago, Queenstown and Wānaka.
The company said in its draft statement of intent it planned to invest heavily in the network in the next decade.
The company’s board "expects to be in a position to consider the payment of a dividend in the next one to two years".
The council had been looking for $11m in dividends from DCHL for 2025-26, but this was cut by $2m when DCHL was directed to fund Dunedin Railways up to $2m for track maintenance.
Draft statements of intent for the DCHL group of companies are due to be discussed by councillors this afternoon.
Six-month reports for the companies, for the period until the end of December last year, are also on the committee’s agenda.
