News | 2 December 2016

Earthquake doesn’t impact WCC’s strong credit rating

The 14 November earthquake hasn’t affected Wellington City Council’s Standard and Poor’s (S&P) global credit rating – which has been maintained at AA.

The rating agency says: “We consider that any significant damage resulting from a natural
disaster such as an earthquake has a small likelihood of affecting the council's debt levels, given that the council has comprehensive insurance policies.”

S&P goes onto say: “We view Wellington City's stand-alone credit profile to be higher than the New Zealand sovereign; however, we do not believe any council in New Zealand, including Wellington City, can maintain stronger credit characteristics than the sovereign in a stress scenario.

“Wellington's key credit strength is anchored on its very strong financial management. The highly qualified and experienced management team manages internal and external risks through an extensive and credible framework.

“The council has progressed its capital expenditure program, focusing on various projects including transportation initiatives, upgrading the civic campus and town hall, and finalizing plans for the development of a film museum and associated convention centre.

“Our expectation is that, over the next two years, the stand-alone credit quality of Wellington City will remain very strong, and that the council will continue to manage its financial position prudently.”

Wellington’s Mayor, Justin Lester, says this shows the city is well placed to respond to the earthquakes and prepare for the future.

“Wellington has one of the strongest balance sheets of any city in the country, and it’s good to see that reflected in such a strong credit rating. While the earthquake presents real challenges for the city, this gives us the ability to respond well,” he says.

“Our strong financial position also means we will be able afford to invest in projects to make our city more resilient. In response to the earthquakes, I have asked Council officials to pull together a list of investments in disaster preparedness that we can fast-track. This will mean we can do more to make sure our city is safe for the future.”

Councillor Andy Foster, the Council’s Finance, Audit and Risk Management Subcommittee Chair, says while the last few weeks have been a difficult and testing time for the city, he’s pleased the ratings agency understands the Council is financially prepared for natural disasters.

“The Council has comprehensive insurance policies for large-scale natural disasters. In addition to these policies we have a self-insurance fund with about NZ$10 million to take off the excess payments. I’m pleased S&P acknowledges we are well prepared financially for the possibility of a disruptive natural disaster. I would like to think S&P’s assessment also reflects the 25 years of work the Council has undertaken to continually improve the resilience of our infrastructure, which has come through the earthquakes with flying colours.”

As well as maintaining its AA long-term credit rating, Wellington City Council has also kept an A-1+ short-term issuer credit rating.