The directors of Invercargill City Holdings Ltd (Holdco) have warned the dividends it pays the Invercargill City Council annually may be reduced from next year.
The ICC uses the dividends to offset rates and help pay for new works.
In a report to the council last week, Holdco forecast operating surpluses of $14.6 million-$16.7 million over the next three years.
The directors said they expected to be able to pay a dividend of $3.9 million for the 12 months to June next year, $4.1 million by June 2016, and $4.3 million by June 2017. They also forecast a special dividend of $300,000 each year.
But they said having to pay for the new passenger terminal at Invercargill Airport meant they could not guarantee the level of dividends from 2015-16 onwards.
Holdco is borrowing $13 million to meet almost all the cost of building the new terminal. Construction will begin soon and is expected to take about 18 months. Its contribution is expected to be repaid by the airport company over 20 to 25 years, but it is not known whether the airport company will have the income to sustain those payments.
In the report, Holdco said supporting the airport upgrade was not economic as a business model.
''As the airport is a strategic asset to the region, the ICHL board has received direction from the city council to invest in the upgrade ... This will not have an effect on the dividend in 2014-15 but may have an impact in future years.''
Invercargill City Holdings Ltd
• Council-controlled organisation wholly owned by the Invercargill City Council (ICC).
• Manages the ICC's trading companies.
• Owns 100% of Electricity Ltd, Invercargill City Forests Ltd and Invercargill City Property Ltd, and 97.2% of Invercargill Airport Ltd.
• Directors are Cr Graham Sycamore (chairman), Cr Alan Dennis, Cr Lindsay Thomas, Tim Loan and Cam McCulloch.
