Television New Zealand’s refurbishment of its Auckland headquarters is now up to 39% over budget; up to $60 million in total for a project originally cost at $36.6 million.
Documents released last week by Treasury show that Ministers over ruled its objections to the refurbishment for which TVNZ did not provide a business case.
This raises the question whether the whole TVNZ refurbishment project is a payioff for it selling land to allow the International Convention Centre to go ahead.
TVNZ got a good deal.
As part of the refurbishment it also stopped paying dividends to the Crown estimated at $36.7 million.
The whole proposal to refurbish the building came after TVNZ agreed to sell land adjacent to the centre to Sky City for the International Convention Centre — the brainchild of Economic Development Minister Steven Joyce.
The land was sold in 2013 for $10.6 million but Sky City.
Critics considered that a low figure; the CV of the land alone was $8.25 million meaning that the commercial buildings on the site were valued at only $2.35 million, an improbable valuation in Auckland.
The Treasury documents reinforce the suggestion that TVNZ was compensated for the land sale by getting approval for its refurbishment at the same time as it was allowed to withhold the dividends.
Treasury could find no business logic to support the refurbishment.
Shortly after the land sale and the proposal for the refurbishment and dividend holiday, a report from the Crown Ownership Monitoring Unit in Treasury to four Ministers was critical of the proposal.
“For a capital project of this type, we would normally expect it to be supported by a full business case, setting out the costs and benefits of the project including a Net Present Value (NPV) calculation.
“A project would only be expected to proceed if it had a positive NPV, unless there were compelling intangible benefits.
“We have not been provided with a full Business Case, and nor have we been provided with an NPV calculation.
“Therefore, Treasury does not support the refurbishment project or TVNZ’s request for dividend relief.”
In other words, TVNZ provided no evidence to support its claims to spend its capital on the refurbishment and to pay no dividends.
But it appeared it didn’t need to.
The Treasury document went on: “ However, we understand shareholding Ministers are willing to consider TVNZ’s request.”
Initially, the refurbishment was expected to cost $36.6 million; then it escalated to $43.3 million and is currently $60.3 million.
In an aide-memoire to Finance Minister Bill English last year about the project, Treasury said: “We can form no view as to the appropriateness of the final price (of the refurbishment) but note that the Project’s CapEx (capital expenditure) was never going to produce income nor reduce operating cost to the extent of meeting TVNZ’s cost of capital. “
The $60.3 million that TVNZ has spent on the refurbishment would have bought 73 hour long episodes of a drama like “Westside” or over 450 hours of hour-long documentaries (calculations based on recent NZonAir funding decisions).
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