ANNUAL REPORT

Transcription

1 ANNUAL REPORT

2 FRONT COVER AND INSIDE FRONT COVER IMAGES: PEEL REGIONAL CANCER CENTRE, ONTARIO, CANADA. DESIGNED BY FARROW PARTNERS ARCHITECTS. The building uses computer-designed and manufactured glulam beams to create the tree-like shapes, reaching for the sky and natural light. The structure contributes to the feeling of wellbeing and hope amongst many patients at the centre. Rotorua has a goal of becoming a wood-first city, incorporating excellence in design and innovative use of timber materials that have a positive impact on our community. The peel regional cancer centre exemplifies the values in which we aspire to, as well as the use of cleverly engineered wood products. 2

3 CELEBRATING ROTORUA - LAKESIDE CONCERT INTRODUCTION Grow Rotorua s key purpose is to provide a sustainable future economic platform on which Rotorua, its people and its businesses can grow and prosper. Grow Rotorua is an independently governed Council Controlled Organisation that was formed in June 2012 for a three year term in order to implement the Rotorua Sustainable Economic Growth Strategy. Year one was about setting the vision and strategic direction for Rotorua, with the following year about researching and developing opportunities and initiatives. This past year has been about consolidating the work Grow Rotorua has been involved with to-date, implementing growth strategies and focusing on translating all the background work into investment projects. The vision for both Grow Rotorua and the Rotorua Lakes Council is to develop a vibrant economy which is attractive to visitors, business investors and as a place to live. This will be achieved through active partnerships between central and local government, the commercial sector, iwi and members of the community. Grow Rotorua s strategy direction is closely aligned with the Rotorua 2030 vision and 2016 goals. This Annual Report details the number of investment opportunities that exist for potential investors, particularly in the space of tourism, agribusiness, wood processing and education. Rotorua is a unique region on a world scale and there has been a renewed investment confidence in the district, particularly over the past year, underpinned by a local economy that has a reasonable level of diversity and exposure. This report is set out by the key sectors listed above, highlighting the work done to-date, what s in the pipeline, investment opportunities and the potential impact on the local economy. Geothermal is not included in this report as it is seen as more of an enabling resource, with a large body of information already developed and available on the Grow Rotorua website. Grow Rotorua will continue to focus on finding growth opportunities on a strategic scale that will create real change for Rotorua, by leveraging key assets and continuing to foster key industry and community partnerships. 3

4 CONTENTS Chairman/CEO reports Meet our team Goals Future Vision Economic Development Highlights for Statement of intent The Rotorua economy Megatrends Investment portfolio Maori economy overview Tourism Education and skilled talent Wood processing Activated Carbon Agribusiness Financials Director s Declaration Investment overview Reference Glossary of acronyms Grow Rotorua Limited GRL Bay of Plenty Regional Council BOPRC Nitrogen discharge allowance NDA Council Controlled Organisation CCO Statement of Intent Economic Development Agencies Education New Zealand Ministry for Primary Industries Ministry of Business Innovation and Employment SOI EDAs ENZ MPI MBIE Rotorua Lakes Council Primary Growth Partnership Fund Tourism Growth Partnership fund Hot Springs Alliance Group Foreign Direct Investment Engineered Wood Products New Zealand Trade and Enterprise RLC PGP TGP HSAG FDI EWP NZTE Closed Loop Dairy Systems Global Spa and Wellness Summit Australasian Spa Association Cross-laminated timber Young Enterprise Scheme Rotorua Chamber of Commerce Rotorua Sustainable Economic Growth Strategy CLDS GSWS ASPA CLT YES RCOC RSEGS 4

5 Definitions of economic development In the space of economic growth, there are overarching themes of increasing job numbers, capital investment, Maori participation and ongoing economic impact. Within that overall direction, there are three distinct categories Grow Rotorua works within relating to different activities and strategies. These include: BUSINESS ATTRACTION This strategy involves targeted and sustained marketing campaigns towards both specific companies/sectors as well as more generic exposure. The aim is to attract businesses to a region for competitive business advantages or to expand local networks, supported by lifestyle opportunities for staff. The key is to target sectors where the region has competitive advantages, as well as those that align with the region s vision. A Business Attraction strategy is currently under development by Rotorua Lakes Council in conjunction with local business leaders. ECONOMIC DEVELOPMENT This creates the most conducive platform and environment possible for further investment to occur. Several organisations have a role to play in this space, including central and local government, and economic development agencies. Often some form of intervention by these organisations will help unlock growth. The key is to identify the local and regional investable opportunities that would create scale growth and also the barriers that need to be overcome for that growth to proceed. It is also about understanding the underlying aspirations of communities. Grow Rotorua has been working on four key economic development sectors as outlined in this Annual Report with a focus on: tourism, education and skilled talent, wood processing and agribusiness. BUSINESS DEVELOPMENT This is about growing the financial performance of an individual start-up or established company. This could include increasing sales, developing new products or services, investing in new technologies, or adding to their expertise all in order to provide more value to the customer. Grow Rotorua believes the key to business development is working collaboratively with specialised development agencies including the Chamber of Commerce, Rotorua X, Export NZ and New Zealand Trade and Enterprise. Programmes Grow Rotorua supports include the Growth Acceleration Programme, Incubate and the Young Enterprise Scheme. ECONOMIC DEVELOPMENT CONCEPTUAL PIPELINE Discover Explore Deliver GROW Rotorua Year 3 & 4 Environmental Scan Opportunity Identifi cation Feasibility Assessment Business Case Development Obstacle Identifi cation Obstacle Removal Opportunity Marketing Investor Search Investor Identifi cation Project Consent Project Announcement Build Phase 5

6 Chairman s Report The real task for the Grow Rotorua Board is about looking to the future and realising the potential that Rotorua has. We have a national and international role to play in geothermal, education, forestry, agriculture and horticulture. Success in these sectors takes planning and strategic thinking but will deliver new and better incomes for our people, attract new money for our region and reward those who live, work and play here. Our ability to adapt to the changing demands of a sophisticated international tourism market will see more jobs available for our people and new investments that will help this sector grow. Rotorua has set an ambitious tourism target of $1 billion. We have encouraged investment in infrastructure, particularly focusing on the huge world-wide growth in the natural health, wellness and spa sectors. This includes the Lakefront Spa complex, thermal theme park development in Kuirau and we are delighted to see the planned redevelopment of QE2 Health. The change in tourism demographics from China has an impact on the type and quality of infrastructure and products demanded, including world-class golf courses, 5-star accommodation, and retail and night-life activities. Our focus on forestry has been to find investments which take current export logs and process them in Rotorua to add value and jobs. We have focused on engineered wood solutions and supported Rotorua Lakes Council in implementing its leading Wood First policy. Rotorua has achieved International Mountain Biking Association (IMBA) Gold Status, positioning the destination as one of six prominent ride centres in the world. We have helped establish the Rotorua Trails Trust to further develop this significant growth sector. GRL has worked closely with Iwi to identify and look at investment propositions and we expect the pipeline of Iwi investment to be a significant driver of the Rotorua economy in the future, as well as a creator of jobs. We have established the Education Rotorua International (ERI) group and gained funding support from Education NZ. We are partnering with the airport to see how the airport facilities could be further utilised for a flight training school. GRL has been involved with the BOP Regional Growth Study and encouraged the focus on key economic growth projects in the region and GRL has a lead role to play. Rotorua saw the highest GDP growth for the June 2015 quarter in NZ, with increasing investment and confidence support that. Rising interest in economic growth opportunities from Iwi, and local and external investors bodes well to see a number of exciting new investments come to fruition, particularly in the agribusiness and land use areas. Special appreciation and thanks go to the leadership of our shareholder the Rotorua Lakes Council. CEO Report Welcome to this Grow Rotorua Ltd Annual Report for 2014/15. Economic development generally follows a three-phase process that of discovery, exploration and delivery. In our first 18 months since establishment, our focus was mainly on the discovery and exploration, which included scanning the environment in each main sector, identifying opportunities, and understanding and addressing barriers to investment. This year has been about developing business cases and preparing investment memorandums, communicating those investment opportunities and identifying potential investors. We are now at the delivery phase, which involves working with the right investors for each project and convincing them of the nature and scale of the opportunities. In terms of return on investment, we managed to leverage the annual grant from Rotorua Lakes Council with a further $95,000 from third-party sources, as well as helping to attract $700,000 of funding into the district. Overall, the projects Grow Rotorua has delivered this year will add a further $50 million of economic value to the Rotorua economy and generate around 120 new jobs. Our theme for this year s Annual Report is, Rotorua is the opportunity for me. We aim to communicate our vision and progress to-date, detail the investment and job opportunities available, and illustrate the value created and potential future impacts. Mark Smith and I have worked incredibly hard across a wide range of projects, both to undertake the background work, but most importantly to build the critical relationships for success. I trust you enjoy this 2014/15 Annual Report and I look forward to continuing our great relationships to help grow the Rotorua economy and create exciting new job opportunities. Warm regards, Francis Pauwels CHIEF EXECUTIVE John Green, QSM CHAIRMAN 6

7 PHOTO: ADRIAN HODGE MEET OUR TEAM BOARD OF DIRECTORS Grow Rotorua has a highly commercial and connected board providing the governance, strategic direction and ideas for economic growth in the Rotorua district. The chair and five board members are highly proactive and propel investment opportunities through idea generation, brokering situations and influencing key partners and stakeholders. JOHN GREEN, QSM WARREN PARKER JANE NEES MICHAEL BARNETT, ONZM TONY MARKS GINA RANGI THE GROW ROTORUA TEAM Grow Rotorua has a team of two chief executive officer Francis Pauwels and commercial technology manager Mark Smith. This highly performing team leverages the effective use of consultants and experts locally and from around the globe for key parts of the Grow Rotorua projects to maximise progress and results in a cost-effective way. 7 FRANCIS PAUWELS MARK SMITH

8 GOALS The following table lays out the current Grow Rotorua projects, in alignment with the Rotorua Lakes Council 2016 priorities and 2030 goals. While these primarily address employment opportunities and business enterprise, all projects tick different boxes in terms of goals. Good examples are helping to achieve an unspoilt environment and resilient communities. Grow Rotorua - Project response to Priorities and Goals TOURISM FORESTRY AGRIBUSINESS TE ARAWA OTHER 2016 PRIORITIES Spa and Wellness Hotel Golf Course Biking Strategy Eng. Wood Products Activated Carbon Manuka Dairy Goats Caring Dairying Iwi Land Devel. F/water CoE Business Attraction Intl. Education Flight Training 1. Develop a vibrant city heart that attracts people and activity. 2. Develop our economic base by growing existing and attracting new businesses to the region. 3. Support residential renewal and the creation of healthy homes. 4. Sustainable infrastructure and affordable, effective council services. TOURISM FORESTRY AGRIBUSINESS TE ARAWA OTHER 2030 GOALS Spa and Wellness Hotel Golf Course Biking Strategy Eng. Wood Products Activated Carbon Manuka Dairy Goats Caring Dairying Iwi Land Devel. F/water CoE Business Attraction Intl. Education Flight Training 1. A resilient community. 2. Outstanding places to play. 3. Loved homes - meet everyone s needs. 4. Vibrant city heart, heritage, lakeside. 5. Business enterprise, diverse, sustainable. 6. Employment opportunities - growing education, training. 7. Unspoilt environment, global recognition. 8

9 FUTURE VISION Grow Rotorua has laid out a five-year vision of what the future could look like for Rotorua, both at an individual project level and also at a more comprehensive economy-wide level. This is our evolving vision for the Rotorua economy: By 2020 Rotorua will have: These investments will underpin a strong future for the Rotorua economy. 9

10 ECONOMIC DEVELOPMENT THE WIDER ECONOMIC AND INVESTMENT ENVIRONMENT There are three major initiatives underway championed and supported by central government to drive economic growth throughout the country, with an increased focus on the regions the Bay of Plenty being one. Initiatives include the Business Growth Agenda, the Regional Growth Study programme and the Investment Attraction programme. Grow Rotorua and the Rotorua Lakes Council are actively involved in these initiatives. The Business Growth Agenda (BGA) is central to delivering a more productive and competitive New Zealand economy. Lifting productivity and competitiveness is critical to creating business opportunities, more jobs, higher wages and the higher living standards to which New Zealanders aspire. Achieving the goal of building a strong competitive economy with increasing numbers of higher paid jobs will require ongoing and significant increases in business investment. International investment will be an important component in terms of sourcing capital. High-quality investment will assist with increasing national exports to 40% of GDP, help lift research and development intensity to 1% of GDP, and bring additional benefits to the economy. The Ministry of Business, Innovation and Employment s (MBIE) research suggests that $160 to $200 billion of additional business investment is required. Our domestic markets alone cannot service these capital demands and the country has not yet been as effective as it could be in attracting the type of high-quality investment needed. 10

11 ROLE OF INTERNATIONAL INVESTMENT High-quality international investment can bring a range of benefits, including: Financial capital Enhancing New Zealand s access to export markets, integration with global value chains and linkages with international knowledge networks Bringing new technologies, processes and know-how to domestic firms and industries, improving the economic infrastructure that underpins growth and productivity improvement in key industries Creating skilled jobs and lifting investment in human capital Increasing regional economic activity and competitiveness, especially in areas with unrealised economic potential. Due to awareness issues New Zealand is often off the radar for many international investors, presenting a barrier to investment. New Zealand is a small market and the costs of acquiring information can be a hurdle. MBIE, alongside New Zealand Trade and Enterprise (NZTE), Callaghan Innovation, the Ministry of Foreign Affairs and Trade (MFAT), the Ministry for Primary Industries (MPI) and the Treasury have prepared a draft New Zealand Investment Attraction Strategy in order to address this particular barrier. Grow Rotorua is working closely with those government agencies in positioning Rotorua Investment Opportunities (refer to Investment Portfolio section, page 18). This includes direct contacts on specific investment projects, involvement with the NZTE Capital Team and also the wider Bay of Plenty Regional Growth Study. REGIONAL GROWTH STUDY (RGS) PROGRAMME The RGS programme is jointly sponsored by the Ministers of MBIE and MPI. It is part of a Central Government programme to identify the economic growth opportunities in the regions on the premise that the New Zealand economy is made up of all the regional economies. By inference, the regional economy is a collection of all the economic drivers and sectors centred in those regions. The Bay of Plenty RGS is one of three studies, with Northland and Manawatu having also been completed. The Bay of Plenty study has been coordinated through the Bay of Connections and Rotorua is represented on both the Governance Group and the Action Group for the RGS. Virtually all the Rotorua key initiatives are listed as priority opportunities in the RGS, including tourism (spa, wellness, golf and cycling), geothermal resources, wood processing, afforestation and Maori land utilisation. The content has largely been a ground-up build of known opportunities at both a pan-regional and sub-regional level, including the Maori economy. This means decisions are being made closest to where the actions and investments are happening. Any policy needs that flow from that can then be elevated through appropriate regional and central government channels. Grow Rotorua and Council see Rotorua as aligning with different districts and regions depending on sector groupings. For example, we relate strongest with Taupo and Kawerau in the primary sectors (energy/geothermal, forestry, dairy, meat); we relate strongest with Western Bay around predominantly the services (financial, property, health, logistics); and in tourism with Auckland and Queenstown. 11

12 HIGHLIGHTS FOR 2015 Grow Rotorua has achieved a number of highlights Grow Rotorua helped to facilitate the Lakefront Spa complex development on the Rotorua Lakefront, providing international research information and access to industry expertise to inform its design. Once completed, it will contribute $35-$45m to the local economy and create 120 new jobs. Grow Rotorua is part of a joint venture partnership, along with Waikato River Trails Trust, Rotorua Trails Trust and Rotorua Lakes Council, that is looking to establish a multi-day 240km cycling trail, linking the South Waikato River Trail and Rotorua s Te Ara Ahi cycleway. A feasibility study is in progress. Grow Rotorua is partnering with the airport and making good progress to attract a new general aviation business to Rotorua. Grow Rotorua is helping to facilitate new investment into a major agribusiness plant in Rotorua. Grow Rotorua has helped attract $700,000 of funding into the district, with further funding programmes in the pipeline. Traction is growing in terms of implementing 13 economic development strategies from an initial target of five for the year. The Education Rotorua International (ERI) group has been established to attract international students to Rotorua, and has achieved nearly 20% growth this year. The next phase is underway to establish ERI as a stand-alone Incorporated Society. Marketing collateral has been developed and translated into 13 languages. The KORU Global Communication Study Programme has also been launched with a focus on Japanese school students. The Business Growth Acceleration Programme has been established with 11 companies going through the first programme. The Young Enterprise Scheme is ongoing and now has five Rotorua schools participating. A very successful Land Use Change Symposium was held, with over 200 attendees and 25 industry presenters showcasing new information including business cases developed by Grow Rotorua for new land uses. Grow Rotorua is supporting the Rotorua Lakes Council with its Wood First Policy and the first building (ACC building in Pukaki Street) is underway, with a further three in the pipeline. Grow Rotorua s Francis Pauwels with Mick Ross, editor of Flow Magazine at Crankworx Rotorua Education Rotorua International members Bay of Plenty Regional Council chair Doug Leeder opening the LUC Symposium Grow Rotorua has partnered with Council and Destination Rotorua in working with world-renowned Professor Terry Stevens on benchmarking Rotorua for best case destination development and management. Representing Rotorua economic development opportunities on the Bay of Plenty Regional Growth Study. Partnering with key government agencies on opportunities to grow the local economy including NZTE, MBIE, MPI, Tourism New Zealand and Education New Zealand. Facilitating investor interest in a new timber manufacturing plant and a new tourism facility. Supporting developers in attracting investment partners for a new accommodation development. Hosting high net worth investors from several Asian countries (Japan, China, Korea, Taiwan) interested in opportunities for investment in Rotorua. 12

13 STATEMENT OF INTENT This report sets out Grow Rotorua s progress against expectations of the shareholder, Rotorua Lakes Council, as set out in the 2014/15 Statement of Intent. Performance Targets TARGET MEASURE TIMING PROGRESS AS AT 30 JUNE 2015 That the company is operating effectively The business plan is aligned and approved with the budget by the board. June Done within timeframe. Budget for approved by board. Indicative project expenditure allocated across 11 projects. Compliance The audit of the company does not highlight any material issues. Annually Audit of company for the year ending 30 June 2014 completed. No material issues identified. Unmodified audit opinion received. Business operations Effective business strategies are in place to ensure the company operates within revenue and cash flow limitations. Reviewed annually Business strategies and expenditure policies in place. Financial reporting monthly at board meetings. Operating well within budget and cash flow limitations as per YTD accounts. Potential investment projects Six new projects announced for the district. June Three projects announced to-date, seven potential in the pipeline. Roles in attracting $795,000 funding. 13 economic development projects at various stages of implementation and advisory group establishment: Rotorua Trails Trust established International Education Group and funding established Koru Global / JTB programme launched Business Growth Acceleration Programme established Economic development project implementation Five projects being implemented including project oversight and advisory groups. June Young Enterprise Scheme support Land Use Change Symposium held Global Spa Summit bid submitted First Wood First building underway, three promoted. Terry Stevens Destination Management Benchmarking underway Business Attraction programme initiated Freshwater Centre project ongoing Maori Geothermal Group started Regional Growth Study Leads (3) Investment cases Seven cases developed and promoted to the target investment communities including offshore. By June Four investment cases currently under consideration by targeted investors. Three investment cases developed and into public realm. Two investment cases at various stages and costings: Kuirau Park, bottling plant. On NZTE FDI programme. Note: No prior year comparatives are available due to measures being rewritten as part of the development of a new Statement of Intent. 13

14 THE ROTORUA ECONOMY The past year has highlighted a renewed investment confidence in Rotorua, as well as a changing perception around Rotorua as a destination for travel and also to live, work, invest and play. Rotorua is no different than most of regional New Zealand, in that growth is not easy to achieve. However, the economy has a reasonable level of diversity and exposure, allowing it to ride the highs and lows well. There has been significant investment in the wood processing sector over the past 12 months, particularly at Red Stag and Pedersen s Lumbercube sites, as well as new capital into Verda, with combined investment approaching $100 million. This year commercial building consents in Rotorua hit the highest level in at least five years, with more than $65 million worth issued in the past 12 months, $25 million more than the previous year. This includes the $4.2 million Countdown supermarket development at Fairy Springs, a new $1 million vet clinic in Reporoa, as well as the $13 million Lynmore Junction entertainment development on Te Ngae Rd. House sales were also significantly higher than in previous years. Tourism figures are also taking off, with guest nights up 8% and hotel occupancy rates the best they have been for many years. Operators such as Skyline Rotorua have made significant investment into site developments, including its $2 million restaurant redevelopment and construction of its Mountain Bike Gravity Park, which hosted the world s largest mountain biking festival, Crankworx, in March this year. Crankworx is estimated to have brought around $3.7 million into the local economy, as well as displaying Rotorua to a world-wide audience throughout the festival, with a massive 1.7 million fans worldwide watching Crankworx Rotorua through digital channels. Mountain biking is a growing special interest sector for New Zealand tourism, and is approaching around $17 million in value annually for Rotorua. Rotorua also played host to the 2015 TRENZ tourism trade show, helping put Rotorua and its tourism offerings front and centre to an international audience. GDP in the Rotorua District was up 3.2% for the year to June 2015, while the June quarter showed 4.3% economic growth - the highest in New Zealand for the quarter. According to data from job search engine Seek, January to June 2015 listings in the Bay of Plenty were up 11% on last year. TradeMe figures for the April to June quarter also showed a 19.4% year-on-year increase in the average number of applications for Rotoruabased roles, reflecting the growing attractiveness of the region. With the likes of the NZ Animation College opening up its first regional hub in Rotorua earlier this year, more is in the pipeline for skills and education across the Bay of Plenty. International student numbers have also grown by nearly 20% over the past year. With the Government s BOP Regional Growth Study set to develop key industries throughout the region, the resulting support and collaboration at all levels of government will help to encourage further investment in Rotorua and the wider Bay of Plenty. 14

15 MEGATRENDS A megatrend is a pattern or movement which has a major impact on business and society, having both current and future impacts. These transformative global forces will define our future world and its increasing pace of change, with far-reaching impacts on culture and personal lives as well. There are a number of megatrends, with the following seen as critical for Rotorua. MEGATREND ROTORUA-SPECIFIC GROW-SPECIFIC 1. Water Global water scarcity will challenge food and energy scarcity. Water has often been referred to as the oil of the 21st century, affecting factors such as urbanisation, population growth and climate change. The United Nations estimates that by 2030 demand for water may be 40% more than supply and water shortages could affect almost 50% of the world s population. Rotorua is uniquely placed in terms of its relative abundance and quality of water. With a great deal of work having gone into water restoration projects over recent times, the district is well placed to address future water constraints, increased consents etc. Grow Rotorua is involved in advocating for land use change in the Lake Rotorua catchment to decrease nitrogen seepage into the lake, as part of a wider lakes restoration programme. Grow Rotorua is also working alongside industry to develop activated carbon for water purification. 2. Climate Change The earth s changing climate, its impact on food production and the need to reduce greenhouse gases is well documented. With the risk profile of economic growth changing as a result, alternative values need to be added to products and services. Challenges for business centre around how to operate in this changing environment and ensuring sustainability of land use and end products. Land use change opportunities and geothermal energy provide opportunities for Rotorua to contribute to options that could both mitigate carbon dioxide emissions and look to use more underutilised land for food production. Forestry and wood fibre is another key sector that, through careful management, can be used as a renewable energy source. Grow Rotorua is promoting a number of land use change alternatives. Work is also underway in developing a sustainable wood fibre industry, as well as activated carbon production. Finding new ways to add value to supply chains and products will be key, for example wood processing. 3. Youth Demographic With an ageing global population, young people are in short supply. This means New Zealand will increasingly compete for migrants, as well as attracting and retaining skilled workers, but we also need to provide opportunities to hold onto youth in rural economies. Despite an ageing population, Rotorua also has increasing numbers of youth, particularly Maori, providing both a challenge and opportunity. With a changing demographic and nature of work in terms of increased automation and technology, many industries and education will be impacted. Increased skills levels for youth will be key for future growth and Rotorua has a number of special-interest sectors in which to grow both economic and educational aspects, for example forestry and tourism. Grow Rotorua is working alongside a number of local and regional organisations, including local and regional government, in terms of developing skills and education in key sectors. An emphasis has also been placed on attracting international students to study in Rotorua, with the potential for encouraging them to stay in the district once their studies are completed. Grow Rotorua also develops skills through supporting programmes such as Incubate, Young Enterprise Scheme and the Growth Acceleration Programme. continued overleaf... 15

16 MEGATRENDS...continued: MEGATREND ROTORUA-SPECIFIC GROW-SPECIFIC 4. Health, wellness and wellbeing The world s population is ageing, requiring greater demand on healthcare, wellness and wellbeing. As a result, public healthcare will become increasingly unaffordable, with a move to more holistic solutions possible. Rotorua is well-positioned to exploit its natural advantages around spa and geothermal waters with different wellness characteristics. Combined with a focus on outdoor activities such as biking, walking, hiking etc, Rotorua offers unique possibilities in this area. Spa and wellness is a key special interest sector, with Grow Rotorua, Destination Rotorua, council, iwi and other investors/stakeholders working together on a number of developments, the most significant of which is the Lakefront Spa complex development on the Rotorua Lakefront and planning for further development of Kuirau Park. Grow Rotorua has also been involved with international research to spark spa growth. 5. Energy and raw materials A growing global population with higher spending power means a significant increase in the demand for natural resources such as crude oil, coal, natural gas, iron ore etc. Given these resources are limited, it is becoming more important to supplement and replace them with sustainable resources where possible. Growing demand and shifting supply are driving innovation, with Rotorua well placed to capitalise on this due to its abundance of natural resources such as geothermal energy and wood for construction as well as potentially biofuels. Rotorua also has relatively good sunshine hours for solar energy and heating. Grow Rotorua is focused on developing the engineered wood products sector, which includes partnering with local iwi to invigorate the Maori economy and utilise the significant land assets available for the likes of afforestation. Industrial Symbiosis is also being considered where one by-product becomes another feedstock. 6. Urbanisation and the growing middle class The growth of megacities in developing economies and the wealth being generated means more people will have the need and the means to travel to less-congested, more green vacation spots. Rotorua will be able to leverage its green reputation including clean lakes, outdoor activities and health and wellness opportunities to attract greater numbers of higher yielding tourists. Grow Rotorua is working alongside the council and Destination Rotorua with strategies and projects that aim to increase the value of tourism in Rotorua to $1 billion by

17 INVESTMENT OVERVIEW Grow Rotorua s mandate from Rotorua Lakes Council (RLC) has been to take a leadership role in the execution of the council s economic strategy, with a priority focus on four sectors: forestry and wood processing, tourism, geothermal and agriculture. Within those four priority sectors, the expectation is to attract and facilitate investment into tangible projects that would deliver new jobs, capital investment and ongoing economic contribution to the Rotorua economy. Where possible, Grow Rotorua is to ensure its priorities and goals are strongly aligned with those set down by the council, which have both a near-term (2016) and longer-term (2030) horizon. In developing key investment prospects, Grow Rotorua is also cognisant of global, national and regional trends which could present opportunities and/or major disruptions. Grow Rotorua strategy Identify and develop logically robust investment value propositions Communicate and promote new propositions to the investment community Facilitate private sector investment Identify and propose solutions for the barriers to creating investment wealth Understand and promote to the local education sector the capability and skills required How does Grow Rotorua help benefit investors? Grow Rotorua has five key roles: leadership, opportunity identification and facilitation, enabler issues and strategies, stakeholder relationships and organisation capability. LEADERSHIP: To provide leadership with council and its agencies, iwi, and other key stakeholders to ensure active and focused economic development initiatives are progressed for Rotorua. OPPORTUNITY IDENTIFICATION AND FACILITATION: To identify a portfolio of suitable projects and to facilitate the involvement of iwi and private sector investments in business development. ENABLER ISSUES AND STRATEGIES: To identify constraints and/or barriers to economic development and to develop strategy ideas for their resolution in conjunction with Council or other appropriate parties. STAKEHOLDER RELATIONSHIPS: To develop effective relationships with council and its agencies, regional iwi, Chamber of Commerce, potential investors and the community to understand the role of Grow Rotorua and to seek their input into project priorities and investment opportunities. ORGANISATION CAPABILITY: To maintain Grow Rotorua as a small and flexible organisation, using the resources of other groups to the fullest extent. Grow Rotorua is focused on finding growth opportunities on a strategic scale which create real change for Rotorua business, jobs and perception, by leveraging key assets and fostering key industry partnerships. Grow Rotorua is also focused on developing the connections, knowledge and big picture thinking to identify, refine and facilitate these opportunities. Grow Rotorua s mandate has been to find growth opportunities through holistic leadership and collaboration, with a focus on collating valuable project-level information for consideration, as well as gaining an understanding of the barriers to potential development and strategies to overcome them. Contact Grow Rotorua today to find out how they can assist you. W: P: Francis Pauwels, CEO E: francispauwels@growrotorua.com 17

18 INVESTMENT PORTFOLIO Virtually all projects being worked on have an investment requirement attached. The exceptions are areas such as International Education, where it is predominantly about utilising existing assets and resources more efficiently in order to achieve economic growth. As projects are developing there is always a view towards the final phase, meaning right from the early stages, potential investment partners are being identified. This is particularly the case where Maori interests are involved, such as access to geothermal resources. Grow Rotorua is systematically building a Portfolio of Investment Opportunities in Rotorua which are being loaded onto the Grow Rotorua website. Currently these are focused on Grow Rotorua-related projects, however, could well include those from other parties seeking investment capital and/or strategic partnerships. Below is a list of investment opportunities, with more details available on Grow Rotorua s website: OPPORTUNITY INVESTMENT REQUIRED STATUS PUBLIC/ PRIVATE FURTHER DETAIL TITOKI LUXURY TOURISM AND PROPERTY DEVELOPMENT $2 $50 million Investors, funding partners sought Private This is a prime location for a luxury tourism development on 472ha and includes opportunities for geothermal activities, a world-class golf resort, spa and wellness retreats and other tourism ventures. KUIRAU THERMAL WATER PARK DEVELOPMENT $10-$15 million IM stage, investmentready Public/ private The development will fill a key gap in the family hot springs market, combining food, mineral bathing, mud pools and theme park. It will provide strategic alignment with planned developments for the Aquatic Centre, Beppu Onsen Kitchen and wider public landscaping and amenities of Kuirau Park. Work is set to commence mid ARIKIKAPAKAPA GOLF COURSE $5-$10 million Concept designs available, funding partners sought Public/ private This will fill a key gap in the high-value NZ golf tourism market and will be the only golf course in the world on an active geothermal field. It is also in alignment with the government s goal of increasing the value of golf tourism to $400m by THE RING OF FIRE $3-$5 million Corporate sponsorship/ funding grants sought, concept designs available Public/ private A multi-day, multiple-access 240km trail linking the South Waikato River Trail with Rotorua s Te Ara Ahi cycleway has been proposed. A full trail scoping/feasibility study is underway and set for completion by the end of An investment proposal will be developed in early CROSS LAMINATED TIMBER (CLT) $20-$30 million Investors sought Private Engineered timber opens up excitng possibilities in architectural design, offsite precision manufacturing, and environmentally-friendly, fast construction solutions. NZTE is assisting with this project, including a major export focus. FLIGHT TRAINING SCHOOL $2-$10 Investors sought, IM stage Private Grow Rotorua is working with interested parties, Rotorua Airport and NZTE to establish a flight training centre at Rotorua Airport for international pilots, particularly for Asian students. Capacity is planned for 100 student pilots initially. AORANGI PEAK 5-STAR ACCOMMODATION $20-$30 million Proposed, investors sought Private This developments looks to combine a restaurant, chalets, day spa and wedding venue to fill an identified niche in the luxury tourism market. Grow Rotorua is working closely with NZTE s foreign direct investment team to promote the opportunity. DAIRY GOAT FARMING $5-$30 million Proposed, investors sought Private Land use change opportunity. There is the long-term potential for a co-operative structure amongst Rotorua and Bay of Plenty land owners, of particular interest to Maori land trusts. Discussions are underway with MPI and MBIE. Investment opportunities include expansion of processing, farm investment, supplier contracts, supply of stock and farm support. MANUKA HONEY AND OILS $2,000/ha Proposed, investors sought, business case available Private Manuka plantations for honey and oil have been identified as a viable land use alternative and research by Comvita identified Rotorua as ideal for plantation and riparian planting. This would also help protect and improve the water quality of the lakes and rivers. Support funding available and a $2.9 million Primary Growth Partnership-funded research project underway. CARING DAIRYING MILK BOTTLING PLANT $10-$20 million Investors sought, IM stage Private Caring Dairying is gaining premium prices in export markets due to its superior taste, qualities and consumer trust. Grow Rotorua is working to help Caring Dairying with plans to build a processing facility in Rotorua to grow the milk export business and to encourage farmers to take up Caring Dairying farming methods. OSPREY ENGINEERED BUILDING COMPONENTS $2-$5 million Investment ready, IM stage Private Osprey s high-tech building components include European-style windows, doors, flooring and complete off-site house construction solutions. Specialist plant already established, opportunity to up-scale manufacturing, sales and distribution for both the domestic and export markets. OHAAKI GEOTHERMAL INDUSTRIAL PARK Development stage, investment ready Private Ohaaki Geothermal Heat Industrial Park is centrally-located for transport, ports, forestry, dairy and skilled labour. The 50ha park also includes 10ha of geothermal reserve with possible tourism potential. Current timber kiln-drying business on-site, as well as existing supply agreements with Contact Energy. There are a range of commercial options available, including land lease/rent options, with or without thermal supply, joint venture options or outright sale. 18

19 PHOTO: ADRIAN HODGE MAORI ECONOMY OVERVIEW Māori interests are heavily involved in many of the region s economic growth opportunities. While there is a strong focus on better land utilisation, Maori trusts are also significant shareholders in geothermal developments, farming, forestry, fisheries and property. With recent settlements occurring, this is providing some of the much-needed capital to be able to explore further investments. Grow Rotorua supports the inclusive approach for He Mauri Ohooho representation (Bay of Connections Maori Economic Development Strategy). Grow Rotorua also supports the national Maori Economic Development Strategy and Action Plan, He kai kei aku ringa, which translates beautifully to: There is food at the end of my hands. Features of the local Maori economy: Māori land owners in the Rotorua district and wider Waiariki (Bay of Plenty) region have comparative and increasingly competitive scale and expertise in forestry, dairy, horticulture, property, fisheries and geothermal. There is significant existing sector, supply and value chain knowledge and experience in Māori collectives in the Waiariki region. Māori have a significant, young population available as a catalyst for change. There are significant existing Government co-funding programmes that can support Māori land utilisation and optimisation initiatives. There is also a political willingness to address systemic and regulatory issues with respect to Māori land. Virtually all Grow Rotorua projects involve Te Arawa interests in some form or other, and is one of the strengths of the future Rotorua economy that will help position us as world-leaders. Grow Rotorua recognises and engages with the established Waiariki and National Maori Economic Development advisory groups. Our focus is on the actual investment opportunities and business case development, working directly with interested trusts and their advisors, as well as the wider public. 19

20 TOURISM Tourism is a key sector in the New Zealand economy and has recently emerged as the number one export sector. Similarly, tourism is a cornerstone of the Rotorua economy and a significant employer across the district. The sector in Rotorua is currently valued at around $500 million and the district has set a target of growing this to $1 billion by This will require investment into existing facilities and attractions, sustained marketing campaigns and increasing the value yield from visitors. Achieving the goal also requires investment in new, innovative, game-changing products. These tourism goals firmly align with those of the Rotorua Lakes Council s (RLC) 2030 Vision and 2016 Priorities including a focus on spa and wellness, contemporary Maori culture and mountain biking. It will require a collaborative effort to achieve these targets, with the responsibility and roles shared across the district. RLC focuses on providing the regulatory and infrastructure environment, as well as iwi partnerships, to enable new investment to proceed effectively. Destination Rotorua is focused on promoting the destination, working in a public/private partnership with its industryfunding partners, while Rotorua Airport is focused on ensuring air-connectivity is optimised. Grow Rotorua s role is to focus on attracting investment into new, innovative and industry-leading products and facilities across the district. 20

21 PHOTO: ADRIAN HODGE Projects underway include facilitating investment into three new world-class spa/hot springs facilities, attracting funding to upgrade Arikikapakapa golf course, attracting funding to complete a 240km multi-day cycle trail and hosting investor inquiries into a range of opportunities across the district. If all current projects come to fruition in this sector alone, this will result in over $120 million being invested, 400 new jobs created and annual economic impact of around $140 million for Rotorua. The recent announcement of a Lakefront Spa development on Rotorua s lakefront, as well as growing mountain biker visitation, increased spending and growing visitor numbers are contributing significantly toward achieving those outcomes. 21

22 Arikikapakapa golf course redevelopment PHOTO: MILES HOLDEN Background Tourism New Zealand (TNZ) currently has a special interest inbound tourism focus on golf, with a goal of growing the sector from $180m to $400m in value, and promoting New Zealand as a premier golfing destination. In line with TNZ s special interest focus, Grow Rotorua has been working closely with the Rotorua Golf Club, Pukeroa Oruawhata and Rotorua Lakes Council to investigate the opportunity for development within Rotorua and its potential effect on the local economy. Grow Rotorua commissioned Greg Turner Golf to provide an analysis of the region s current golfing facilities and it was decided that the Rotorua Golf Club s Arikikapakapa course had the most potential for development. Arikikapakapa was identified due to its unique geothermal attributes, Maori history, proximity and synergy with the visitor attraction of Te Puia, as well as its position within the city boundaries. Golf visitation is currently experiencing considerable growth in New Zealand, increasing 30% annually particularly with North American and Chinese markets which fits in with Rotorua s focus on growing high-yield tourism offerings. The Arikikapakapa golf course development, once finished, would make it the world s only indigenous geothermal golf course. Achievements and impact Greg Turner Golf supplied Grow Rotorua with an initial analysis of current golfing facilities in Rotorua and once Arikikapakapa was selected for development, a renovation plan was proposed in order to bring the course up to an international standard. It is envisaged that this high-value product 1 10 will not only attract more international special interest visitors, but will also link to other high-value tourism offerings within the Central North Island linking from Ohope and Opotiki, through Rotorua and down to Napier such as food and wine in Hawke s Bay, and Rotorua and Taupo s adventure and wellness offerings. It is expected the development of the geothermal golf course would contribute $10 million to the local economy annually. Work is also currently underway in conjunction with New Zealand Transport Agency in relation to roading developments including the Hemo Rd Roundabout, which runs alongside the golf course. Arikikapakapa golf course would be the world s only indigenous geothermal golf course Special interest golf visitors to NZ increasing 30% each year particularly from North America & China markets 30 Development would contribute $10 million to Rotorua s economy Particular focus for TNZ, with a promotional campaign 400 $ TNZ goal to grow the sector from $180m to $400m in value In the pipeline Greg Turner Golf is currently assisting with the development of an economic business case to present to the Ministry for Business Innovation and Employment (MBIE), as part of a Tourism Growth Partnership (TGP) fund application. Tourism New Zealand is promoting golf internationally and once developed, Grow Rotorua and Arikikapakapa would work closely with TNZ to raise the profile and market the new high-end offering. Investment opportunities STATUS: Funding partners sought AVAILABLE: Concept designs INVESTMENT REQUIRED: $5 - $10 million Public/private partnership 22

23 LINKING THE SOUTH WAIKATO RIVER TRAIL AND ROTORUA S TE ARA AHI CYCLEWAY POTENTIAL TO INJECT $12 MILLION INTO LOCAL ECONOMY ANNUALLY Kuirau Park Background A geothermal water park development has been proposed at Kuirau Park, incorporating the existing Aquatic Centre, as well as the creation of water slides and thermal activity features, geothermal mineral bathing pools and a geothermal steam café. The proposed concept looks to strategically align four popular and attractive customer experiences into one multi-faceted facility, taking into account global hot springs research which strongly suggests diversity and uniqueness will appeal to a broad range of users. The development will also fill a key gap in the family market, while having the ability to morph into a backpacker attraction at night. The park development is in line with Rotorua 2030 s vision to increase tourism to $1 billion annually, through becoming the spa and wellness capital of the South Pacific. Achievements and impact Grow Rotorua has been working with relevant parties to facilitate a concept for the thermal water park in Kuirau Park. A business plan is also under development, including an investment memorandum. Once built, the thermal park will create 80 new jobs, as well as inject $8 million into the local economy annually. Kuirau Thermal Park $8m EVERY YEAR In the pipeline Work is set to commence mid Investment opportunities INVESTMENT REQUIRED: $10 - $15 million STATUS: Investment ready 80 NEW JOBS Public/private partnership IM stage Ring of Fire Background The Central North Island is a popular cycling destination for domestic and international special interest visitors, with many multi-hour trails. However, a key gap in the market has been identified in terms of multi-day rides that will attract longer-stay visitors. As a result, a multi-day, multipleaccess 240km trail linking the South Waikato River Trail with Rotorua s Te Ara Ahi cycleway has been proposed. Grow Rotorua is leading a joint venture between Waikato River Trails Trust and Rotorua Lakes Council. It offers a great opportunity to leverage off each region s combined strengths to create an important cross-region, high-value tourism asset. The initiative reflects a Destination Rotorua and Tourism New Zealand special interest focus on cycling, as well as a wider Central North Island initiative to promote inter-regional cycling connections to add further value to existing assets, through the likes of the Cycling and Mountain Biking Tourism Marketing Network (CMBTMN). Achievements and impact Two feasibility studies have been conducted by the Waikato River Trails Trust on behalf of the joint venture parties, with a 23 MULTI-DAY 240KM CYCLING TRAIL AND CREATE 120 JOBS full scoping/feasibility study currently under development. It is estimated that the potential economic impact of the multi-day trail will be around $12 million for the local communities of both Rotorua and South Waikato per year, and the creation of around 120 jobs (based on Otago Rail Trail figures). In the pipeline A full trail scoping/feasibility study is currently being carried out by the Waikato River Trails Trust. It is set for completion by the end of 2015, with an investment proposal to then be developed in early Investment opportunities INVESTMENT REQUIRED: $3 - $5 million SEEKING: Corporate sponsorship/ funding grants Public/private partnership AVAILABLE: Concept designs

24 Lakefront Spa PHOTO: CLAIRE TAKACS Background Rotorua has a long history of being a premier spa destination, but its 3.2 million yearly visitors only make 500,000 commercial spa visits. Grow Rotorua and Rotorua Lakes Council have set a goal of 1.5 million commercial spa visits yearly. Grow Rotorua joined the Hot Springs Alliance Group (HSAG) in January 2014 and since then, has been involved in an HSAGled 18-month global research project across 19 countries, to identify best spa commercial practices and trends. The project was completed in December 2014, having involved 120 facilities and 160 interviews. The information has helped form the basis of design concepts, business models and operational best practice for a new global spa complex called Lakefront Spa, which will be developed on Rotorua s lakefront. Grow Rotorua has forged relationships with the likes of Charles Davidson of Peninsula Hot Springs in Melbourne and James White of Methven, New Zealand, in order to work collaboratively towards a common vision. This has arguably given Grow Rotorua the world s best information, contacts and models of how to develop a range of spa and wellness facilities. From this knowledge, combined with the experience gathered through the global research, Rotorua should be able to treble the number of spa and hot springs visitors it currently has. Achievements and impact Rotorua s aspirations to become New Zealand s wellness capital ignited earlier this year with Prime Minister John Key announcing Tourism Growth Partnership funding of $350,000 for the new Lakefront Spa complex. The multi-million dollar development will be part of 11 hectares of prime lakefront property and is forecast to open in The spa and wellness complex aims to have a variety of spa-oriented treatments from around the world and will tap into the global trend of wellness spa treatments. It is also expected the spa development will attract and be supported by 4.5 to 5 star hotels to the region, filling a key gap in the market. Developers of the site are Pukeroa Oruawhata Group. It is estimated the potential economic benefit to New Zealand would be between $30-$40 million per year by 2020 and create 120 jobs. It is also envisaged the development of the complex would tie in with education providers in terms of creating skills and training opportunities for local young people. In the pipeline Development/building is set to begin in Set to help increase commercial spa visits from 500,000 to 1.5 million TGP (Tourism Growth Parntership) funding of $350,000 24

25 Destination management Background In order for Rotorua to achieve its ambitions of being a highly competitive, sustainable and internationally recognised tourism destination, Grow Rotorua, Destination Rotorua and the Rotorua Lakes Council have commissioned an international destination case study research project to identify ways in which Rotorua can adopt international best practice. The goals are to create economic, social and cultural wealth for residents and the business community. The destination development support project will provide Rotorua with information, insight and analysis of how comparative destinations around the world are succeeding in delivering sustainable growth, while remaining competitive in the international marketplace. The aim of the research project is that the council, Grow Rotorua, stakeholders and the wider community will gain a greater understanding of: How to create an environment that will ensure the sustainable development of tourism Encourage, stimulate and nurture investment in the wise development of the destination s natural, cultural and human assets. Achievements and impact The research project idea evolved through a meeting with award-winning international tourism consultancy Stevens & Associates managing director Professor Terry Stevens at a recent Global Spa Summit about his work with several leading tourism destinations from a wide-range of countries. The research project is being conducted by Stevens & Associates, and is set for completion in December Comparative destinations being looked at include cities in Slovenia, Austria, France, Switzerland, Canada and the USA. Each destination looked at relates as closely as possible to Rotorua s main characteristics, eg. tourism the main economic driver, minimum 90-minute drive from a major urban centre, inland with close proximity to lakes and highland, etc. As well as looking at international best practice, the project will also identify key tourism sector gaps that, if filled, would position Rotorua comparatively with world-class best practice. The study will help clarify Rotorua s vision as a tourism destination on its sustainable growth journey to achieve its $1 billion tourism value target. In the pipeline Once the project report is received, the information will be shared with the wider community, stakeholder groups and Te Arawa, with a resulting strategy developed and agreed for moving forward. An international destination case study research project will identify ways in which Rotorua can adopt international best practice The goals are to create economic, social and cultural wealth for residents and the business community 25

26 EDUCATION AND SKILLED TALENT A key objective for Grow Rotorua is to identify the skill and training requirements needed to drive existing and new investments. This spans from early start-up phase through to established businesses. Top-quality talent at the timing and numbers required, is essential to realise growth potential. It is also encouraging to see that the government has modified its immigration criteria to attract skilled migrants to the regions, with a specific focus on the IT sector. Grow Rotorua projects include developing the Education Rotorua International group and gaining funding which is focused on increasing the number of international students and their visiting friends and relatives to the district. The group has gained fast momentum, attending major agent trade fairs, developing marketing material, translating it into 13 languages and achieving growth rates approaching 20%. For the third year, Grow Rotorua has been the lead supporter in the Young Enterprise Scheme and this has been rewarded with five Rotorua secondary schools engaged in the programme. For existing businesses, Grow Rotorua is a key supporter of the Growth Acceleration Programme which provides existing business owners with skills and networks focused on trebling their growth rates. At the start-up end of the spectrum, Grow Rotorua is a partner with local professional firms and the Chamber of Commerce in the Rotorua X Incubate programme. In other key project areas such as agribusiness and spa/ wellness, Grow Rotorua maintains linkages with education providers to make sure they are aware of the numbers, timing and skills range that will be needed to operate and drive new investments. Grow Rotorua is also working with Rotorua Airport on opportunities to expand its commercial operations including identifying potential tenants for an industrial park and also 26

27 The interesting aspect of the education sector as an economic opportunity is that it has next to no environmental footprint and does not require a lot of new capital, yet results are significant in contributing to the local economy. utilising Airport facilities for new businesses such as a flight training school. The most exciting part of this work is that there is a strong value of wanting to create new, additional and meaningful job and career opportunities for our young people as well as attracting experienced talent to help drive growth. Grow Rotorua is involved with the KORU Global Communication Study Programme, which aims to bring Japanese students to Rotorua to build leadership skills and global thinking. If all current projects come to fruition, they will result in over $25 million being invested, 75 new jobs being created and annual economic impact of around $120 million. The interesting aspect of the education sector as an economic opportunity is that it has next to no environmental footprint and does not require a lot of new capital, yet results are significant in contributing to the local economy. $25 MILLION INVESTED ANNUAL ECONOMIC IMPACT $120MILLION $ 75 NEW JOBS CREATED 27

28 Growth Acceleration Programme Led by Grow Rotorua and the Chamber of Commerce, the Growth Acceleration Programme (GAP) provides a skills and mentoring programme for existing businesses, and is aimed at sparking business growth and improvement. The two hour fortnightly sessions, held over 10 months, are facilitated by McGarvie Business Coaching and have a large focus on sales and leadership skills. The goal of the programme is to triple the growth rate of the 11 participating businesses. Incubate Grow Rotorua is a key sponsor of the Rotorua X Incubate programme, which is a 12-week mentor programme for local start-up businesses and social enterprises. The most recent programme included nine businesses selected on their growth potential to learn vital business knowledge and skills, helping them to launch and accelerate their business while contributing to the growth of the Rotorua economy. Incubate has grown significantly from just two applicants in 2014 to 18 in The programme is generating savvy Rotorua business people who are equipped to achieve sustainable growth, while having the knowledge and ability to adapt to changing business environments. For the programme to continue growing, more financial sponsors and mentors are required for Young Enterprise Scheme Grow Rotorua is a proud supporter of the Lion Foundation Young Enterprise Scheme (YES) for the Rotorua region. YES is an annual programme which allows high school students to set up their own company, create real products or services, compile and implement a business plan and make real profit or loss. It also includes pitching their ideas to a Dragons Den (of which Grow Rotorua is on the judging panel) and provides the chance to compete at a national level. The Rotorua programme is operating in conjunction with Taupo and Tokoroa. Participation has grown over the past year, with five Rotorua schools currently involved in the scheme. The Young Enterprise Scheme gives students real-world business tools and social experience that they can take with them further in life. Incubate group Young Enterprise participants from John Paul College 28

29 Flight training Background Rotorua Airport has been identified as a perfect location for General Aviation and Flight Training, due to its accommodation of jet services (commercial and private) and fully controlled air space, fire safety crews and secure access. Rotorua is already home to a large and diverse range of international students who enjoy the ideal environment in which to study, while the government has specific targets to increase international education in New Zealand. Grow Rotorua is working with interested parties, Rotorua Airport and New Zealand Trade and Enterprise (NZTE) to establish a flight training school for international pilots, particularly for Asian students. The training school will offer the opportunity to achieve a Multi-Engine Rating and to fly an aircraft by instruments only (Instrument Flight Rating). This is a requirement for all pilots who wish to fly for an airline as a career. The New Zealand Civil Aviation Authority Instrument Rating is an International Civil Aviation Organisation (ICAO) recognised rating, so international students can convert this rating and continue to use it when they return home, if their country is also ICAO accredited. Achievements and impact A Heads of Agreement has been signed with an interested party and Grow Rotorua is working with the NZTE Foreign Direct Investment (FDI) team on promoting the investment opportunities. It is estimated the flight training school will stimulate around $20 million into the local economy in terms of students living costs, as well as fees. Capacity is planned for 100 student pilots initially. Investment opportunities Flight training INVESTMENT NEEDED: $5-$10 million Flight Training School IM stage STATUS: Private, investors being sought STIMULATE $20 MILLION INTO LOCAL ECONOMY CAPACITY FOR 100 STUDENT PILOTS INITIALLY Secure access Jet services (commercial/private) 29 Controlled airspace Rotorua Airport: Fire safety crew

30 International education Background International education is New Zealand s fifth largest export earner, currently bringing in $2.85 billion into the national economy, up 12% on last year. The government has set a target of increasing this figure to $5 billion by Due to Rotorua s close proximity to Auckland and the great many lifestyle and cultural benefits the city offers, it is looked upon favourably in terms of an international education destination by international agents. Education New Zealand estimates that each international student brings approximately $42,000 into the economy, taking into account fees, accommodation, activities, spending money etc. Based on this assumption, the current value of international students in Rotorua is around $36 million, with this number set to grow to $100 million by Achievements and impact In late-2014, Grow Rotorua and Action Group Ltd facilitated the creation of the Education Rotorua International (ERI) group, which grew out of an education project aimed at developing a 10-year strategy to treble the value of international education to Rotorua. ERI consists of a cluster of education providers in the high school, tertiary and English language sectors, but with further potential to include primary and intermediate educators as well. Current members include Waiariki Institute of Technology, Rotorua English Language Academy (RELA), Western Heights High School, John Paul College, Rotorua Lakes High School, and Rotorua Boys and Rotorua Girls High Schools. Grow Rotorua has been successful in obtaining funding from Education New Zealand, in order to support the government s 30

31 projected growth target. ERI has been working together collaboratively, sharing ideas to develop marketing material in order to attract international students to the region. This marketing material has already been translated into 13 languages. The ERI group also worked together to promote Rotorua at the Australian New Zealand Association (ANZA) Agents Fair held in Auckland. Market potential includes attracting students from Japan, China, Russia, Indonesia, Spain, South America, Korea, Vietnam, Brazil, Hong Kong and many more. Grow Rotorua and ERI set average target growth of 10% per year, however in the last year the growth achieved has been closer to 20%. In the pipeline Further ERI work is underway in terms of a market development strategy, as well as additional collateral and a multi-language interactive website. In terms of the primary and intermediate sector, there is potential for students to study in New Zealand who will be accompanied by a family member, which will provide a further boost to the economy. 31

32 WOOD PROCESSING The forestry and wood processing sector is one of Grow Rotorua s key priority areas. Work to date has focused almost exclusively on wood processing and the conversion of more export logs to value-add wood products in New Zealand. This is consistent with the focus of the Wood Council of New Zealand (WoodCo), the leading industry body. Grow Rotorua efforts have been focused on engineered wood products (EWP) and in particular, the opportunity with pre-fabrication and panelisation (off-site construction) using cross laminated timber (CLT). The WoodCo WoodScape analysis indicated that export logs are primarily A and K grade and the main opportunity is in the EWP space, including CLT, optimised engineered lumber (OEL) and laminated veneer lumber (LVL). There are currently three LVL plants and one CLT plant in New Zealand. The domestic market is small, approximately 100,000 cubic metres log in, and will not realise the extent of log conversions needed, which is around two million cubic metres log in. An export market play is necessary and this has been further reinforced by overseas investor interest in New Zealand recently. Grow Rotorua is in discussions with the world s leading CLT manufacturer and engineered timber solutions provider and is working closely with the NZTE Capital Team to assist with attracting investment. The objective is to establish an exportfocused plant in Rotorua. As part of the Rotorua Lakes Council s Wood First Policy, 32

33 RED STAG TIMBER SAWMILL PHOTO: NICK LAMBERT If all current projects come to fruition this will result in over $45 million being invested, 100 new jobs being created and annual economic impact of around $120 million. Grow Rotorua is providing assistance by identifying new building projects early and working with the developers to see if incorporating more timber, particularly EWP, is a viable alternative. Local developer Ray Cook of R & B Consultants, is taking the lead through a new design build for ACC, which utilises CLT panels and LVL. There are also three other developments in the pipeline to use this approach. We are fortunate to have many innovative firms in Rotorua, producing leading-edge wood products such as decking, weatherboards and appearance grade products that are finding acceptance in discerning export markets. Another innovative development is the utilisation of pine and veneers to manufacture European style three-way opening windows and solid doors. And finally, the human interest story Grow Rotorua is most proud of is the chainsaw story. This is where saying yes and working with Ocean Watch New Zealand to assist in the cleanup after Cyclone Pam has seen remote Solomon Islanders learn about using chainsaws for clean-up, but more importantly in making boards from wind-blown trees for use in housing construction. If all current projects come to fruition this will result in over $45 million being invested, 100 new jobs being created and annual economic impact of around $120 million. 33

34 Engineered wood processing Background Grow Rotorua has undertaken research over the past year to look at different approaches to increase domestic wood processing, and identified engineered wood products as the most viable option, in particular, cross laminated timber (CLT). Rotorua has the potential to become national leaders in the panelised prefabrication process using CLT and other engineered timber products, due to the forestry, wood processing, geothermal resources and research capability in the city. The objective is to establish an export-focused plant in Rotorua. Particular emphasis is placed on global trends and demand in terms of CLT, which include seismic and extreme weather resilience, low-carbon footprint, sustainable materials, fast recovery/build, clever design and affordability. Panelised prefabrication is an efficient form of off-site construction and enables the resulting CLT wall, floor and roof panels to be erected in a matter of days. Greater quality control, a higher level of safety and minimised waste are also achieved. Auckland has been identified as the immediate domestic target market, where prefabricated CLT would serve as a fast solution to the current lack of housing supply. However, the New Zealand market would probably not provide the volume required for a sustainable manufacturing plant, so research is being conducted to identify countries for future exportation, particularly those where New Zealand radiata pine is known. Achievements and impact Grow Rotorua organised a Wood First workshop in May 2015 where over 40 builders, architects and engineers came together with Offsite Design managing director Johann Betz. He spoke of the benefits of panelised prefabrication, how it can be adopted and the importance of engaging with the key professional services and integrating the various design elements into a single set of CAD/CAM/engineering files. R & B Consultants developer, Ray Cook, has been the first to lead the way in Rotorua with a prefabricated CLT building for the new ACC offices on Pukaki Street. CLT was chosen as the site had geotechnical issues which called for a lighter construction material and also enabled the building to be two-storeys as opposed to one built from concrete and steel. 34

35 Grow Rotorua undertook a study trip to Europe and the United Kingdom in June to meet with industry and potential investors, as well as to look at current CLT projects. Grow Rotorua has also been working with the NZTE Capital Team to help smooth the way for investment. Investment opportunities Prefabrication businesses are encouraged to start out small and achieve organic growth, making it a viable investment opportunity for anyone interested. Existing construction companies can also shift to prefabrication easily, however, must be mindful of the increase in collaboration. 35

36 Wood First Rotorua Lakes Council and Grow Rotorua are working alongside key local forestry businesses and stakeholders to firmly establish the district s position as New Zealand s leader in the forestry industry. The Wood First initiative recognises the economic, environmental, cultural and social significance of wood within the community by actively promoting wood as the first material of choice for construction, interior design and living developments within Rotorua. The council is endorsing this approach through its own projects, including the CBD Revitalisation Strategy, for example the Eat Streat development, inner city seating, and the new bus stop down Arawa Street. Grow Rotorua has also been working with an early-stage Rotorua company called Osprey, which utilises pine and veneers to manufacture European-style three-way opening windows, solid doors, flooring and complete off-site house construction solutions. Grow Rotorua is assisting with business planning and identifying sources of growth capital. Osprey s specialty is in precision weather-tight certified systems that have both architectural appeal and high-quality performance. With high-tech plant facilities currently in place, the company is looking to expand its operations in terms of design, manufacturing, sales development and export distribution. Grow Rotorua held a Wood First workshop in May on the benefits of panelised prefabrication. Rotorua is also set to host a wood innovation symposium later in 2015 and wood products are actively being promoted for future developments such as the Lakefront Spa development on the Rotorua Lakefront. Recognising significance of wood within the community Environmental Social Economic Cultural Social conscience Helping the Solomon Islands re-build After Cyclone Pam hit the Pacific in 2015, the little-known but badly affected Taumako Islands (also known as Duff Islands) were in dire need of help. With a population of around 500 people, most housing and buildings are made from semipermanent materials and a significant number of these were damaged in the cyclone, as well as many trees being knocked over. Through a connection with NGO Ocean Watch New Zealand, Grow Rotorua donated a Stihl chainsaw to the community in order to support the rebuild process and ongoing restoration and maintenance work. Part of the donation also involved training the locals how to use the chainsaw, as well as general safety and best practice. The donation of the chainsaw was an opportunity to start a conversation with people working in the Pacific, such as Ocean Watch, about the ongoing needs of the communities there particularly from a building perspective. With Rotorua s key focus area of manufacturing engineered wood products, there is the potential for an ongoing relationship which would allow for the manufacture and sub-assembly of pre-fabricated buildings that could then be shipped to Pacific communities where needed. 36

37 ACTIVATED CARBON Background Activated carbon is produced from many different carbonbased materials such as wood, lignite, coal, coconut husk and nutshells. It is typically produced and sold in one of three forms powder, granular particles or extruded as pellets. Activated carbon is a material that has been processed to have many small pores that increase the surface area, allowing chemicals to be trapped (or absorbed) onto its surface. In this way it acts as a very effective filter and has many diverse uses such as water purification, gas purification, sewage treatment, decaffeination, gold purification, air filters in gas masks and respirators, filters used in compressed air and so on. Unprecedented growth is expected in the US market, with the current market for wood-based activated carbon estimated at around 250,000 tonnes per year at a price ranging from US$1,000 to US$1,500 per tonne, depending on quality. Rotorua, with its strong forestry sector focus and increase in residues from planned mill developments and upgrades such as Red Stag and Pedersen s, offers an ideal location for processing wood residues such as chips, sawdust or shavings, into an activated carbon product. This is particularly so given greenfield and brownfield wood processing announcements in the district over the last year. Grow Rotorua s vision is for Rotorua to become the hub for this new technology and leverage off the well-established and growing forestry sector. Achievements and impact Traditional processes for manufacturing wood-based activated carbon are capital intensive and require significant focus around environmental management due to the nature of the chemistry. Grow Rotorua has been working with local investors to investigate new, alternative processes that address issues in terms of lower capital cost per tonne of activated carbon produced and more of a clean tech focus in terms of the technology used. Grow Rotorua has also identified that activated carbon could be effective for water purification and in highly intensive farming. This carbon acts like a giant sponge to lock onto free nitrates and gradually releases them as needed, like a slow release fertiliser. In the pipeline The indicative economics of the processes look encouraging and due diligence on these technologies is continuing largely around process engineering validation. Investment opportunities Knowledge, plant and technology development Investment needed: $15 million Planning stages Small to mid-sized activated carbon plant 40,000 to 80,000 tonnes of wood residue as feedstock 40-80K 5-10K 5,000 to 10,000 tonnes of product per year Due to its high degree of microporosity - just one gram of activated carbon can have a surface area in excess of 1,000 m 2 (about the area of four tennis courts) 1k 37

38 AGRIBUSINESS Agriculture is a major economic sector for the Rotorua economy. It is also the sector undergoing a number of current pressures, including the rapid decline in the dairy payout and resulting impact on land valuations, proposed nitrogen discharge rules, general economic viability and the desire for landowners, particularly Maori land trusts, to improve the economic performance and utilisation of their blocks. Against that background, the sector has seen a significant increase in the high UMF Manuka prices, increasing interest in non-lactose dairy products and a rapid uptake of fresh fullcream milk products (eg. Lewis Road Creamery), both in New Zealand and overseas (eg. ATA Milk). The established sectors are well serviced with farming and veterinary advisors, so Grow Rotorua s response has been to work with emerging industry players to look at the potential for alternative land uses. The focus has been on agribusinesses that have a reasonable level of history and route to market so that new entrants could relatively easily obtain the technical 38

39 Grow Rotorua is working with counterparts across the Bay of Plenty and relevant government ministries, including current funding mechanisms, to identify ways these new land uses and industry developments can be accelerated. knowledge and support required, plus obtain supply contracts for their produce. The agribusinesses selected to date are: dairy goats, biological dairy farming and Manuka plantations for honey and oil. Additional contact has been established with hazelnut and blueberry growers, plus a watching interest across research into cold-tolerant kiwifruit varieties. Presentation materials on all the above land uses plus business cases are featured on the Grow Rotorua website. These business cases have been developed with respected industry players and show various yield, payout and capital scenarios to give an indicative return on investment. Grow Rotorua is working with counterparts across the Bay of Plenty and relevant government ministries, including current funding mechanisms, to identify ways these new land uses and industry developments can be accelerated. 39

40 Land Use Opportunities Background When Grow Rotorua started operations in early 2013, a key sector of interest was agriculture. The three big drivers were the need to reduce nitrogen discharges into the lakes, to improve economic returns and, where possible, to diversify the income risks where farmers were highly exposed to a single commodity sector. In 2014, the Bay of Plenty Regional Council (BOPRC) also signalled a required 320 tonne reduction in nutrient discharges into Lake Rotorua to be achieved by In response, Grow Rotorua began a series of research into both pastoral and horticultural alternatives that had some level of proven performance in New Zealand and the Bay of Plenty, with a reasonably established route to market. This resulted in four substantial business cases being developed, which then required a public roll-out and dissemination of information. Grow Rotorua initiated a Land Use Opportunities Symposium which was held in June 2015, supported by BOPRC and the agriculture industries. Achievements and impact Over 200 land owners and agriculture industry members came to listen to 25 high-profile guest speakers at the symposium, who discussed environmentally sustainable farming, business innovation and opportunities for land use change. Grow Rotorua and some of the guest speakers have since been contacted by landowners and others with business interests to find out more about the opportunities presented. In the pipeline Understanding the difficulties that lie ahead for landowners, Grow Rotorua is working with various interested parties, as well as through the Bay of Plenty Regional Growth Study, to establish dedicated agribusiness investment support, including a strong focus on assisting Maori land utilisation objectives. Investment opportunities, including a bottling plant for highquality fresh milk and large-scale Manuka plantations, are also being followed through. In addition, discussions are underway with MPI s Primary Growth Partnership (PGP) programme to help support scale uptake of new agribusiness opportunities. Investment opportunities Dairy goats Biological farming Manuka plantations Closed loop dairy Sector and definition Dairy: Includes the effective pasture area in the milking platform, fodder and effluent but excludes run-off (e.g. dairy support) and forest. Drystock: Includes the effective pasture area in sheep, beef, deer, alpacas, horticulture, cropping and dairy support but excludes forest. N loss range kgn/ha/yr Average reduction from current N losses 30% 20% Forest: Includes native bush as well as forestry. 3 Nil 40

41 Dairy Goats Suitable for lactose intolerance Closest alternative to human milk infant formula Also used for milk, yoghurt and milk powder products Background There is a steady increase in demand for goats milk, as consumers become more educated about the nutritional benefits. Goats milk is suitable for those who are lactose intolerant and is also thought to be the closest possible alternative to human milk, making it easier to digest and assimilate in the human body. Because of this, it is ideal for infant formula, as well as fresh milk, yoghurt and milk powder. Identified as a viable land use alternative, particularly for land in the Lake Rotorua Catchment, the farming of dairy goats can reduce nitrogen discharge levels significantly. Goats require less space and food than dairy cows typically you can raise six goats on the same acreage as two cows. Dairy goats are also housed in barns which means run-off is more easily managed. The major New Zealand-based processor is the Dairy Goat Cooperative located in Hamilton, however due to tightly controlled supplier strategies, Grow Rotorua has identified other processor options available for Rotorua, which will be notified when details can be announced. Supply growth requires careful monitoring to maintain value. The target market for fresh products is domestic, while Asia is a focus for infant formula and there is also capacity in the Middle East and Europe. These new markets are currently being researched by Grow Rotorua. In the pipeline There is the long-term potential for a co-operative structure amongst Rotorua and Bay of Plenty land owners, of particular interest to Maori land trusts given the lower nitrogen impact, potential scale uptake and job creation opportunities. Discussions are underway with the MPI and MBIE Maori Development team. Investment opportunities Investment opportunities include expansion of processing, farm investment, supplier contracts, supply of stock and farm support. Achievements and impact A full farm business case has been developed and is being discussed with interested farmers. This was presented at the Land Use Opportunities Symposium in June, receiving a number of enquiries. While there is a multi-million dollar cost to converting or establishing a dairy goat farm, recent developments such as the Lakes Incentives Fund may encourage farmers to make the investment. 41

42 Manuka Honey and Oils 20+ UMF grade Manuka honey = $100/kg PHOTO: CREDIT TBC Background An insatiable demand across the world for high UMF grade Manuka honey in cuisine, medical and healthcare sectors is an opportunity Grow Rotorua is working to harness. Manuka plantations for honey and oil have been identified as a viable land use alternative and research conducted by Comvita identified Rotorua as the ideal candidate for plantation and riparian planting. This would also help protect and improve the water quality of the lakes and rivers. Three Manuka presentations were made at the Land Use Opportunities Symposium from Comvita, Manuka Bioactives and Kauri Park, discussing the entire Manuka process from planning to production. Achievements and impact The Manuka Research Partnership is an existing multi-year PGP-funded research programme, aimed at developing the necessary cultivars, husbandry and support tools to enable the commercialisation of Manuka plantations as a viable land use, including on marginal land. As a result of the farm business case work and presentations, Comvita has established a 20 hectare trial with a local landowner and a farming group is looking at establishing a 240 hectare plantation for both honey and oils. Support funding such as the Afforestation Grants Scheme ($1500/ha) are being accessed to assist with planting high UMF seedlings on new blocks. Investment opportunities INVESTMENT REQUIRED: $2,000/ha STATUS: Investors being sought Private AVAILABLE: Manuka Honey Business Case In the pipeline The Manuka opportunities for the Rotorua region are gaining traction, including incorporation into the Bay of Plenty Regional Growth Study. The next phase is to establish how these opportunities can be accelerated at scale, and working with a number of groups including Maori land trusts, and regional and central government. Opportunities for skills training such as bee-keeping are also under discussion. PHOTO: ROBERT TRATHEN 42

43 Fresh Milk Plant Caring Dairying Background Caring Dairying has been developed as a transformational project to lead change in the way we farm towards more ecologically friendly, sustainable farming methods and stronger, resilient rural communities. The concept of Caring Dairying came about as the Te Taiao result of a 2008 in-depth survey of 92 large herd dairy farms in New Zealand and other research into the needs and performance of dairy farms in New Zealand, Australia, Africa, Europe and the US. This research led to: The defining of good dairy farming practice The development of the Caring Dairy Protocol which defines sustainability Identified that good practice can improve output, quality and profitability Showed that more caring people working with cows on-farm can improve productivity and performance, while lowering environmental impact Identified the opportunity for dairying to lead the change to more resilient rural communities Identified that there are many consumers who are prepared to pay more for ethical fresh products produced under audited good practice standards. Good farming practice defines sustainability and provides benchmarks against which farms can be audited to assure the provenance of products derived from such farms. The benchmarks represent industry good practice in all elements of farming, defined in four key sectors of animals, people, ENVIRONMENTAL VALUES GOOD BUSINESS FARMING METHODS Te Kau Nga Tangata HUMAN VALUES GOOD MILK environment and business. Products from such farms can be differentiated in the market by the Caring Dairying mark and achieve premium returns. Caring Dairying is currently exporting wholesome, high-quality fresh milk differentiated by provenance to high-value markets in Asia. Te Miraka Farms following defined Caring Dairying good practice farm with low environmental impact, in particular nitrogen discharges are well below the targets set for Lake Rotorua. Edgecumbe farmer, Peter Berryman, who follows the Caring Dairying farming methods, has slashed the average discharge levels by more than 66% to less than 10 Kg N/ha. In doing so, he has also quashed misconceptions that biological farming is less profitable by being recognised as one of the most productive and profitable farms in New Zealand. PRODUCTION METHODS In the pipeline Grow Rotorua is working to help Caring Dairying with its plans to build a processing facility in Rotorua to grow the milk export business and to encourage farmers to take up Caring Dairying farming methods. This will contribute significantly to the reduction of nitrogen in Lake Rotorua and allow dairy farmers to continue to farm profitably in a sensitive environment. It provides a commercial solution to a difficult environmental and political issue. 43

44 FINANCIALS INDEX GROW Rotorua Limited /2015 Statement of Responsibility Entity Information Statement of Financial Performance Statement of Changes In Equity Statement of Cash Flows Notes to the Financial Statements Statement of Financial Position Statement of Responsibility FOR THE YEAR ENDED 30 JUNE 2015 The Directors of Grow Rotorua Limited accept responsibility for: The preparation of the Company s financial statements, and statements of expenses and capital expenditure, and for the judgements expressed in them; Having in place a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting; The accuracy of any end-of-year performance information prepared by the Company, whether or not that information is included in the annual report. In the Directors opinion: The financial statements fairly reflect the financial position of the Company as at 30 June 2015 and its operations for the year ended on that date. Director Director 24 SEPTEMBER SEPTEMBER 2015 Entity Information FOR THE YEAR ENDED 30 JUNE 2015 Legal Name Grow Rotorua Limited Type of entity and legal basis Grow Rotorua Limited is a limited liability company and is domiciled in New Zealand. The Company is a Council Controlled organisation as defined under Section 6 of the Local Government Act The company s purpose or mission The Company exists to facilitate economic growth in the Rotorua District in the Forestry/Wood processing, Tourism, Geothermal and Agricultural sectors. Structure of the Company s operations, including governance arrangements The Company comprises of a Board of Directors being; John Green QSM (Chairperson), Michael Barnett ONZM, Anthony Marks, Jane Nees, Warren Parker, and Gina Rangi (retired 1 July 2015), and two full time staff who support the company in delivering its objectives. The Company has designated itself as a public benefit entity (PBE). Main sources of the Company s cash and resources Operating grants received by the Rotorua District Council and other agencies are the primary sources of funding to the company. 44

45 Statement of Financial Performance FOR THE YEAR ENDED 30 JUNE 2015 Actual Notes Actual $ $ Revenue 800,000 Council funding 2 800,000 93,581 Other grants and income 3 95,750 4,039 Interest Received 4 4, ,620 Total Revenue 900,265 Expenses 18,314 Advertising, marketing and communications 5 27,906 16,205 Depreciation 13 11,210 80,000 Director Fee Remuneration 6 70, ,719 Personnel Costs 7 335, ,578 Projects 8 296, ,475 Other expenses 9 173,865 1,176,291 Total Expenses 915,347 (278,671) Surplus/(deficit) before tax (15,082) (5,698) Income tax 24 0 (272,973) Surplus/(deficit) after tax (15,082) The accompanying notes form part of these financial statements Statement of Financial Position FOR THE YEAR ENDED 30 JUNE 2015 Actual Notes Actual $ $ Assets Current assets 127,835 Bank accounts and cash 10 95,082 5,750 Receivables 11 49,753 1,150 Other current assets 12 1,060 2,619 Resident withholding tax 1, ,354 Total current assets 147,408 Non-current assets 36,920 Property, plant and equipment 13 25,710 36,920 Total non-current assets 25, ,274 Total assets 173,118 Liabilities Current liabilities 95,591 Payables and accrued expenses ,801 21,645 Provisions 15 22, ,236 Total current liabilities 131,162 Non-current liabilities 0 Total non-current liabilities 0 117,236 Total liabilities 131,162 57,038 Net Assets 41,956 Equity 56,938 Retained earnings 16 41, Share capital ,038 Total equity 41,956 The accompanying notes form part of these financial statements 45

46 Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2015 Actual Notes Actual $ $ 330,011 Balance at 1 July 57,038 (272,973) Surplus/(deficit) (15,082) 57,038 Balance at 30 June 41,956 The accompanying notes form part of these financial statements Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2015 Actual Notes Actual $ $ Cash flows from operating activities 7,883 Interest Received 4, ,508 Receipts from Grants and Sponsorship 868,076 (1,075,451) Payments to suppliers and employees (807,737) (85,985) Directors Remuneration Paid (69,442) 64,630 Goods and services tax (net) (29,271) (1,124) Resident Withholding Tax paid IRD 1,106 (189,539) Net cash flow from operating activities 17 (32,753) Cash flows from investing activities 0 Net cash flow from investing activities 0 Cash flows from financing activities 0 Net cash flow from financing activities 0 (189,539) Net (decrease)/increase in bank accounts and cash (32,753) 317,374 Bank accounts and cash at the beginning of the year 127, ,835 Bank accounts and cash at the end of the year 10 95,082 The accompanying notes form part of these financial statements 46

47 Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 30 JUNE 2015 ACCOUNTING POLICIES APPLIED BASIS OF PREPARATION The board of directors has elected to apply PBE SFR-A (PS) Public Benefit Simple Format Reporting Accrual (Pubic Sector) on the basis that the Company does not have public accountability (as defined) and has total annual expenses of less than $2 million. All transactions in the financial statements are reported using the accrual basis of accounting. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest dollar. The financial statements have been prepared on the assumption that the company will continue to operate in the foreseeable future. GOODS AND SERVICES TAX (GST) The Company is registered for GST. All amounts in the financial statements are recorded exclusive of GST, except for debtors and creditors, which are stated inclusive of GST. SIGNIFICANT ACCOUNTING POLICIES Revenue Grants Council, government, and non-government grants are recognised as revenue when the funding is received unless there is an obligation to return the funds if conditions of the grant are not met ( use or return condition ). If there is such an obligation, the grant is initially recorded as a liability and recognised as revenue when conditions of the grant are satisfied. Interest received Interest revenue is recorded as it is earned during the year. Advertising, marketing, administration and other expenses These are expensed when the related service has been received. Personnel costs Wages, salaries and annual leave are recorded as an expense as staff provide services and become entitled to wages, salaries and leave entitlements. Performance payments are recorded when the employee is notified that the payment has been granted. Superannuation contributions are recorded as an expense as staff provide services. Bank accounts and cash Bank accounts and cash comprise cash on hand, cheque or savings accounts, and deposits held at call with banks. Receivables Debtors are initially recorded at the amount owed. When it is likely the amount owed (or some portion) will not be collected, a provision for impairment is recognised and the loss is recorded as a bad debt expense. Property, plant and equipment Property, plant and equipment is recorded at cost, less accumulated depreciation and impairment losses. Depreciation is provided for on a diminishing value basis that will write off the cost of the assets over their useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows: Motor Vehicles 30% Office Equipment 50% Payables Creditors and accrued expenses are measured at the amount owed. Provisions The Company recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation as a result of a past event, it is probable that expenditure will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Equity Equity is the Shareholders investment in the Company and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified as shareholders funds. Commitments Commitments are future expenses and liabilities to be incurred on contracts that have been entered into at balance date. Income Tax Tax expense is calculated using the taxes payable method. As a result, no allowance is made for deferred tax. Tax expense includes the current tax liability and adjustments to prior year tax liabilities. Tier 2 PBE Accounting Standards applied The Company has taken advantage of the following Tier 2 Accounting Standards: Statement of changes in equity as per PBE IPSAS 1.21 (c) Reconciliation of Net Surplus/Deficit after tax to Net cash from Operating activities as per PBE IPSAS CHANGES IN ACCOUNTING POLICIES AND TRANSITION TO THE NEW PBE SFR-A (PS) STANDARD This is the first set of financial statements prepared using the new PBE SFR-A (PS) standard, and comparative information for the year ended 30 June 2014 has been restated to comply with the new standard. There are no significant adjustments arising on transition to the new standard. 47

48 2. COUNCIL FUNDING Actual Actual $ $ 800,000 Rotorua District Council 800, ,000 Total council funding 800, OTHER GRANTS AND INCOME $ $ 25,000 Bay of Plenty Regional Council 25,464 6,770 Young Enterprise Scheme 5,313 25,000 Education New Zealand 51,798 7,475 Pukeroa Lakefront Holdings Ltd 7,475 3,478 Enterprise Lake Taupo 3,000 10,000 Energy Efficiency and Conservation Authority 0 10,000 Ministry of Business, Innovation and Employment 0 3,000 Te Puni Kokiri Rotorua Energy Charitable Trust 2, MJC Legal EMA Northern BDO Rotorua Westpac 0 0 Waiariki Institute of Technology ,581 Total other grants and income 95, INTEREST RECEIVED Actual Actual $ $ 4,039 Interest received 4,515 4,039 Total interest received 4, ADVERTISING, MARKETING AND COMMUNICATIONS Actual Actual $ $ 18,314 Advertising, marketing and communications 27,906 18,314 Total advertising, marketing and communications 27, DIRECTORS REMUNERATION Directors remuneration was paid as follows: ,000 Michael Barnett ONZM 10,000 20,000 John Green QSM 20,000 10,000 Anthony Marks 10,000 10,000 Jane Nees 10,000 10,000 Warren Parker 10,000 10,000 Gina Rangi 10,000 10,000 James Rolleston (Retired with effect 1 July 2014) 0 80,000 Total remuneration 70,000 No other benefits have been provided by the Company to a Director or in any other capacity. No loans have been made by the Company to a Director nor has the Company guaranteed any debts incurred by a Director 48

49 7. PERSONNEL COSTS Actual Actual $ $ 333,719 Salaries and Wages 335, ,719 Total personnel costs 335,803 The total annual remuneration by band for employees as at 30 June was as follows: <$60, $60,000-$79, $80,000-$99, $100,000 - $199, Total Employees 2 8. PROJECTS Actual Actual $ $ 532,578 Consultancy and projects 296, ,578 Total project costs OTHER EXPENSES Actual Actual $ $ 7,652 Fees to Audit New Zealand for audit of financial statements 8,531 (750) Fees to Audit New Zealand for disbursements Accident Compensation Levy 1,861 46,120 Conference Expenses 5,890 9,973 Motor vehicle expenses 10,948 9,031 Printing and stationery 17,767 38,721 Travel and accommodation 44,310 83,883 Other Expenses 83, ,475 Total other expenses 173, BANK ACCOUNTS AND CASH Actual Actual $ $ 127,835 Cheque account 95, ,835 Total bank accounts and cash 95, ,835 Net bank accounts and cash for the purposes of the statement of cash flows 95,082 49

50 11. RECEIVABLES Actual Actual $ $ 5,750 Debtors (gross) 37,577 (0) Less provision for impairment (0) 5,750 Net Debtors 37,577 0 GST Receivable 12,176 5,750 Total Receivables 49, OTHER CURRENT ASSETS Actual Actual $ $ 1,050 Prepayments 960 (0) Less provision for impairment (0) 1,050 Net Current Assets Shareholder Current Account 100 Rotorua District Council 1,150 Total other current assets 1, PROPERTY, PLANT, AND EQUIPMENT Movements for each class of property, plant and equipment are as follows: Office Motor Total Equipment Vehicle $ $ $ Carrying amount at 1 July ,336 51,788 53,124 Additions Disposals (net of accumulated depreciation) Depreciation expense (668) (15,536) (16,204) Carrying amount at 30 June ,252 36,920 Carrying amount at 1 July ,252 36,920 Additions Disposals (net of accumulated depreciation) Depreciation expense (334) (10,876) (11,210) Carrying amount at 30 June ,376 25, PAYABLES AND ACCRUED EXPENSES Actual Notes Actual $ $ Payables 64,947 Creditors 100,937 30,644 Taxes payable (e.g. GST and PAYE) 7,864 95,591 Total Payables and accrued expenses 108,801 50

51 15. PROVISIONS Actual Notes Actual $ $ 21,645 Annual Leave 22,361 21,645 Total Provisions 22, EQUITY Actual Actual $ $ Equity 330,011 Balance at 1 July 57,038 (278,671) Surplus/(deficit) (15,082) 5,698 Taxation paid by Rotorua District Council losses offset 0 57,038 Balance at 30 June 41,956 57,038 Total Equity 41, RECONCILIATION OF NET SURPLUS/(DEFICIT) TO NET CASH FLOW FROM OPERATING ACTIVITIES Actual Actual $ $ (278,671) Net Surplus/(deficit) (15,082) Add/(less) non-cash items: 0 Total non-cash items 0 Add/(less) items classified as investing or financing activities 16,206 Depreciation 11,210 16,206 Total investing or financing items 11,210 Add/(less) movements in statement of financial position items 7,021 (Increase)/Decrease in receivables (44,003) 3,630 (Increase)/Decrease 90 in other current assets 56,501 (Increase)/Decrease in payables 13,210 0 (Increase)/Decrease in provisions 716 6,898 (Increase)/Decrease 1,106 in Resident Withholding Tax 74,050 Total net movement in working capital items (28,881) (188,415) Net cash flow from operating activities (32,753) 18. RELATED PARTY TRANSACTIONS Related party disclosures have not been made for transactions with related parties that are within a normal supplier or client/ recipient relationship on terms and conditions no more or less favourable than those that it is reasonable to expect the Company would have adopted in dealing with the party at arm s length in the same circumstances. Further, transactions with other government agencies (for example, government departments and Crown entities) are not disclosed as related party transactions when they are consistent with the normal operating arrangements between government agencies and undertaken on the normal terms and conditions of such transactions. 51

52 19. TRANSACTIONS WITH PARENT The Company entered into transactions with: Actual Actual $ $ 835 The company paid rent to Rotorua District Council (excl. GST) ,000 Received a grant from Rotorua District Council (excl. GST) 800,000 13,444 Accounts payable to Rotorua District Council 5, Accounts receivable from Rotorua District Council ,356 Tax losses transferred from Rotorua District Council by loss offset to eliminate tax liability 0 80,000 Paid directors remuneration (excl. GST) 70, EMPLOYEE REMUNERATION The following number of employees, who were not directors, received remuneration and benefits which exceeded $100,000 in value for the 2015 financial year are Two (2014: Two). 21. DONATIONS No donations were made by the company during the year. 22. CONTINGENT LIABILITIES At balance date contingent liabilities have been estimated at NIL (2014: NIL). 23. COMMITMENTS There were no commitments to projects as at balance date (2014 $NIL). 24. AUDITORS The Auditor General is appointed under Section 15 of the Public Audit Act Audit New Zealand has been appointed to provide these services on her behalf. Provision for audit fee for the year was $9,031 excl. GST (2014 $7,652 excl. GST). 25. INCOME TAX Actual Notes Actual $ $ Components of income tax expense 0 Current tax 0 (5,697) Adjustment to current tax in prior years 0 (5,697) Income tax expense 0 Relationship between income tax expense and accounting surplus (278,671) Accounting profit for the year (15,082) (77,804) Tax at 28% (4,223) Plus/(less) tax effects of: 0 - Non taxable income Non-deductible expenditure 0 (5,697) - Prior period adjustment 0 77,004 - Tax losses not recognised 4,223 (5,697) Total Income tax expense 0 Tax losses of $299,101 are available for carry forward and offset against future taxable income. 52

53 26. EVENTS AFTER BALANCE DATE There have been no significant events after the balance date. 27. CAPITAL MANAGEMENT The Company s capital is its equity, which comprise shareholders funds. Equity is represented by net assets. The objective of managing the Company s equity is to ensure that the Company effectively achieves its goals and objectives for which it has been established while remaining a going concern. The company is reliant for a large part of its revenue from its 100% parent Rotorua District Council (The Council). The Council has accepted the Company s Statement of Intent, which includes funding up to 30 June The funding agreeent indicates that support will be provided until 30 June The support provided to Grow Rotorua Limited shall include: 1. $700,000 + GST funding to support the necessary budgeted operating activities in a timely manner (and all obligations and liabilities incidental to such activities) The company has received a letter of comfort from Rotorua District Council which enables the directors to adopt the going concern doctrine for preparing these financial statements. The letter of comfort highlights that support will be provided by Rotorua District Council including sufficient funding to support the necessary budgeted operating activities. 28. INTEREST REGISTER The Company is required to maintain an interest register in which the particulars of certain transactions and matters involving the Directors must be recorded. The interest register is available for inspection at the registered office. INFORMATION USED BY DIRECTORS During the financial year, there were no notices received from directors of Grow Rotorua Limited as, or any subsidiary, requesting to use information received in their capacity as a director which would not otherwise have been available to them. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has not arranged policies of the Directors and Officers Liability Insurance and separate Director s and Officers defense costs insurance. The following transactions were entered into between entities listed in the Directors Interest Register and Grow Rotorua Limited. 1. John Green QSM is a Councillor for the Waiariki Institute of Technology. During the year Grow Rotorua Limited; a) Made a payment during the 2015 $NIL (2014 year of $4,000 excl GST to support the Engineered Wood Products Study Tour). 2. Jane Nees is a Councillor for the Bay of Plenty Regional Council. During the year Grow Rotorua Limited; a) Received a grant of $10,000 (2014 $10,000) excl GST for Economic Development work. b) Received a grant of $NIL (2014 $10,000) excl GST for Maori Economic Development work. c) Received a grant of $15,464 for Land Use Symposium. d) Made a payment to Bay of Plenty Regional Council of $NIL (2014 $10,000) excl GST for Lake Competition. 3. Warren Parker is the Chief Executive of Scion. During the year Grow Rotorua Limited; a) Made a payment to Scion of $11,250 (2014 $NIL) excl GST for the Industrial Symbiosis Project. 53

54 29. INDEPENDENT AUDITORS REPORT To the readers of Grow Rotorua Limited s financial statements and performance information for the year ended 30 June 2015 The AuditorGeneral is the auditor of Grow Rotorua Limited (the company). The AuditorGeneral has appointed me, Clarence Susan, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements and performance information of the company on her behalf. OPINION ON THE FINANCIAL STATEMENTS AND THE PERFORMANCE INFORMATION We have audited: the financial statements of the company on pages 45 to 53, that comprise the statement of financial position as at 30 June 2015, the statement of financial performance, statement of changes in equity and statement of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information; and the performance information of the company on page 13. In our opinion: the financial statements of the company: present fairly, in all material respects: its financial position as at 30 June 2015; and its financial performance and cash flows for the year then ended; and comply with generally accepted accounting practice in New Zealand and have been prepared in accordance with Public Benefit Entity Simple Format Reporting Standards Accrual (Public Sector). the performance information of the company presents fairly, in all material respects, the company s achievements measured against the performance targets adopted for the year ended 30 June Our audit was completed on 24 September This is the date at which our opinion is expressed. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and our responsibilities, and explain our independence. BASIS OF OPINION We carried out our audit in accordance with the AuditorGeneral s Auditing Standards, which incorporate the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial statements and the performance information are free from material misstatement. Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to influence readers overall understanding of the financial statements and the performance information. If we had found material misstatements that were not corrected, we would have referred to them in our opinion. An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial statements and in the performance information. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the financial statements and the performance information, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation of the company s financial statements and performance information in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the company s internal control. An audit also involves evaluating: the appropriateness of accounting policies used and whether they have been consistently applied; the reasonableness of the significant accounting estimates and judgements made by the Board of Directors; the adequacy of the disclosures in the financial statements and in the performance information; and the overall presentation of the financial statements and the performance information. We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and the performance information. Also, we did not evaluate the security and controls over the electronic publication of the financial statements and the performance information. We believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion. RESPONSIBILITIES OF THE BOARD OF DIRECTORS The Board of Directors is responsible for the preparation and fair presentation of financial statements for the company that comply with generally accepted accounting practice in New Zealand. The Board of Directors is also responsible for preparation of the performance information for the company. The Board of Directors responsibilities arise from the Local Government Act The Board of Directors is responsible for such internal control as it determines is necessary to enable the preparation of financial statements and performance information that are free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for the publication of the financial statements and the performance information, whether in printed or electronic form. RESPONSIBILITIES OF THE AUDITOR We are responsible for expressing an independent opinion on the financial statements and the performance information and reporting that opinion to you based on our audit. Our responsibility arises from section 15 of the Public Audit Act INDEPENDENCE When carrying out the audit, we followed the independence requirements of the AuditorGeneral, which incorporate the independence requirements of the External Reporting Board. Other than the audit, we have no relationship with or interests in the company. Clarence Susan AUDIT NEW ZEALAND On behalf of the AuditorGeneral Tauranga, New Zealand 54

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56 CONTACT DETAILS: Grow Rotorua Ltd 1061 Haupapa St Private Bag 3007, Rotorua