Issuer profile: Auckland Council 2022

Auckland Council

About Auckland Council

Auckland Council was established on 1 November 2010 under the Local Government (Auckland Council) Act 2009, through the amalgamation of eight councils in the Auckland region. The council is New Zealand’s largest local authority. It is responsible for the regulation, management and direction of the Auckland region and has a range of related mandatory and discretionary functions. Auckland is New Zealand’s leading economic region, generating more than a third of the nation’s GDP.

The council is responsible for issuing permits and consents for building activity within the Auckland region and the enforcement legislation concerning parking, licensing and the environment.

The authority and its subsidiaries provide and maintain infrastructure, such as transport networks, and essential public services such as water, sewerage, refuse collection and street lighting. The council also operates libraries and community facilities, and provides and maintains parks, reserves and sports fields.

Under the Local Government (Rating) Act 2002, Auckland Council has flexible powers to set, assess and collect rates to fund its activities. The council’s bond investors have security over rates revenue under a debenture trust deed.

Debt position

The Auckland Council group had NZ$10.7 billion of debt outstanding at the end of June 2021. It has issued debt in a range of maturities up to 30 years. The main funding sources are the domestic retail and wholesale markets, New Zealand Local Government Funding Agency (LGFA), and offshore markets through an EMTN programme and an Australian dollar debt-issuance programme. The council has issued debt in Swiss francs, Australian dollars, Norwegian krone and euros. Approximately 43% of the council’s debt has been issued in foreign currency.

SECTOR	SUBSOVEREIGN
CREDIT RATINGS (S&P/M) LONG-TERM NZD	AA/Aa2 (both stable)
CREDIT RATINGS (S&P/M) LONG-TERM FOREIGN CURRENCY	AA/Aa2 (both stable)
FOREIGN-CURRENCY PROGRAMMES	US$10BN secured MTN A$3BN MTN US$2BN secured ECP
FOREIGN-CURRENCY ISSUANCE SINCE JAN 2020	€500M 10-year green bond
TERM FUNDING REQUIREMENT (NZ$BN)	FY22 FY21 FY20 2.1 1.4 2.1
RBA REPO ELIGIBLE	NO
RBNZ REPO ELIGIBLE	YES

Funding strategy

In its 10-year budget 2021-31, Auckland Council has plans for NZ$32 billion in capital investment. It expects debt to grow to NZ$16.3 billion during this period. Domestic investors, including the LGFA, may not entirely meet these funding requirements. Therefore, the council has focused recently on developing a strategic presence in offshore markets.

The council seeks to spread its debt maturities and looks to offshore markets for the majority of its longer-dated funding requirements. It is agnostic as to the currency in which debt is issued provided it meets acceptable New Zealand dollar pricing levels, as all debt is swapped back to New Zealand dollars.

Over the past few years, the council has developed its green-bond programme and has in excess of NZ$2.7 billion in eligible green assets. The council has issued NZ$2 billion equivalent in green bonds to date. Its most recent issue, in November 2021, was a €500 million transaction with 10-year tenor. This was the council’s first foreign currency green-bond issuance.

Auckland Council expects to have annual funding requirements of NZ$1-2 billion in most years up to 2031, including the refinancing of existing debt. The remaining debt requirement for the year to the end of June 2022 is expected to be NZ$750-950 million, depending on the impact of COVID-19 related lockdowns on the capital programme. The council raised NZ$1.2 billion of debt over the first six months of FY22.