Post by Humberside on Dec 12, 2011 14:13:03 GMT
www.thenorthernecho.co.uk/news/9412730.Councils_must_find___4_5m_to_keep_shares_in_airport/
CASH-strapped councils have been asked to find £4.5m to retain their influence at Durham Tees Valley Airport.
Majority shareholder Peel Airports Limited has told a consortium of councils that they must come up with the cash for the loss-making airport or face a reduction in their shareholdings.
Peel paid £500,000 for a 75 per cent share in the airport from the five Tees Valley authorities and Durham County Council ten years ago.
The company has been in secret negotiations to buy the remaining 25 per cent since 2009, but now bosses plan serve a “dilution notice” on the councils, which requires them to put in millions more or have their shareholdings cut.
Darlington, which owns 6.67 per cent of the business, was asked to pay about £1.147m.
A report considered by the council’s cabinet on Tuesday revealed the grim state of the business. It said: “In 2009-10 (the airport) recorded losses of circa £6m. Since then Peel has reduced the operational cost base, including introducing a passenger fee. Despite this, the 2010-11 loss was £2m plus. While the position has improved, it remains untenable.”
Darlington councillors decided that they could not afford to plough money into the airport. As a result, Darlington’s share in the business will be cut to 2.88 per cent.
Despite owning fewer shares, Darlington Borough Council leader Bill Dixon insisted that the council’s influence over the airport will not be compromised.
He said: “It was in our agreement with Peel from the start that over time the local authorities’ share options would decrease as they put more capital in.
“I will continue to sit on the board and, in real terms, our influence will not be affected.
“Even combined – the local authorities were minority shareholders, so we couldn’t really veto anything done by Peel. I am concerned for the future of the airport, but not in relation to this. It doesn’t matter who owns what, so long as it is running.”
Stockton, which owns 4.67 per cent of the airport and Hartlepool, which has a 2.47 per cent share, had not been been served with a share dilution notice.
Peel, which runs the airport and which lost more than £2m last year, claimed the move was normal business practice.
However, Stockton MP James Wharton said: “Why has Peel done this now? It had left the authorities with no choice. It knew that they could never come up with that sum.
“It has also said nothing constructive about it. If it came out and said ‘yes we have issued this notice but we guarantee the airport will remain open for the next decade’ then people would be more assured of its survival.
“The local authorities need influence at the airport. It is too important for the sub region.”
To avoid the dilution of their shares, Durham County Council will need to find £573,000, Hartlepool Borough Council will need £425,000 and Middlesbrough Council would need to pay £667,000.
Stockton Borough Council would need to pay £819,000 with Redcar and Cleveland owing £669,000.
Originally an RAF bomber base, Durham Tees Valley (formerly Teesside Airport) was operated under local authority control until 2002 when a majority share was sold to Peel Airports.
The company paid £500,000 plus £100,000 towards the cost of the transfer.
This was in marked contrast to the £194m seven local authorities received for a 49 per cent share of Newcastle airport. However, Peel agreed to invest £20m in Teesside over five years – a level of investment the authorities could not match.
Majority shareholder Peel Airports Limited has told a consortium of councils that they must come up with the cash for the loss-making airport or face a reduction in their shareholdings.
Peel paid £500,000 for a 75 per cent share in the airport from the five Tees Valley authorities and Durham County Council ten years ago.
The company has been in secret negotiations to buy the remaining 25 per cent since 2009, but now bosses plan serve a “dilution notice” on the councils, which requires them to put in millions more or have their shareholdings cut.
Darlington, which owns 6.67 per cent of the business, was asked to pay about £1.147m.
A report considered by the council’s cabinet on Tuesday revealed the grim state of the business. It said: “In 2009-10 (the airport) recorded losses of circa £6m. Since then Peel has reduced the operational cost base, including introducing a passenger fee. Despite this, the 2010-11 loss was £2m plus. While the position has improved, it remains untenable.”
Darlington councillors decided that they could not afford to plough money into the airport. As a result, Darlington’s share in the business will be cut to 2.88 per cent.
Despite owning fewer shares, Darlington Borough Council leader Bill Dixon insisted that the council’s influence over the airport will not be compromised.
He said: “It was in our agreement with Peel from the start that over time the local authorities’ share options would decrease as they put more capital in.
“I will continue to sit on the board and, in real terms, our influence will not be affected.
“Even combined – the local authorities were minority shareholders, so we couldn’t really veto anything done by Peel. I am concerned for the future of the airport, but not in relation to this. It doesn’t matter who owns what, so long as it is running.”
Stockton, which owns 4.67 per cent of the airport and Hartlepool, which has a 2.47 per cent share, had not been been served with a share dilution notice.
Peel, which runs the airport and which lost more than £2m last year, claimed the move was normal business practice.
However, Stockton MP James Wharton said: “Why has Peel done this now? It had left the authorities with no choice. It knew that they could never come up with that sum.
“It has also said nothing constructive about it. If it came out and said ‘yes we have issued this notice but we guarantee the airport will remain open for the next decade’ then people would be more assured of its survival.
“The local authorities need influence at the airport. It is too important for the sub region.”
To avoid the dilution of their shares, Durham County Council will need to find £573,000, Hartlepool Borough Council will need £425,000 and Middlesbrough Council would need to pay £667,000.
Stockton Borough Council would need to pay £819,000 with Redcar and Cleveland owing £669,000.
Originally an RAF bomber base, Durham Tees Valley (formerly Teesside Airport) was operated under local authority control until 2002 when a majority share was sold to Peel Airports.
The company paid £500,000 plus £100,000 towards the cost of the transfer.
This was in marked contrast to the £194m seven local authorities received for a 49 per cent share of Newcastle airport. However, Peel agreed to invest £20m in Teesside over five years – a level of investment the authorities could not match.