Hutt Mana Charitable Trust [a registered charity with the Charities Commission] could end up losing $2.5 million over the liquidation of EnergySmart [Ltd] and the sale of its [Lower Hutt] Railway Ave building.
A preliminary creditors’ report by liquidators Shephard Dunphy records an estimated shortfall of assets over liabilities of $1.63 million.
The creditors’ list runs to more than three pages.
Questions are being asked why a company with 11 per cent of the insulation and energy efficiency retro-fitting market under the Government’s Warm Up NZ subsidy scheme, and with tax-free charitable status, went bust.
http://www.stuff.co.nz/dominion-post/news/local-papers/hutt-news/5763872/Why-did-EnergySmart-go-bust Hutt News 11 October 2011
HMCT chairman Ian Hutchings told Hutt News on Friday that trustees “will also be asking those questions in due course”.
“We’ll do some forensics on it but we have to wait for the liquidators to do their job.”
While the trust’s ownership afforded EnergySmart and three associated companies charitable status, the company was expected to pay what it would have paid in tax as a dividend to the trust. But only two such dividends were paid over five years.
EnergySmart, which has more than 70 staff in seven branches around New Zealand, is still trading as Shephard Dunphy look to sell it as a going concern.
HMCT, which looks after investments of more than $35 million on behalf of people in the Hutt Valley, Porirua and North Wellington, bought EnergySmart for about $800,000 five years ago. It injected another $750,000 in 2009.
We asked Mr Hutchings on Friday if there had been a subsequent capital injection or guarantee of further funds. Mr Hutchings would not confirm or deny this while the liquidator was still in preliminary stages assessing the company’s finances.
“I don’t want to make any comment on the company in that regard that may or may not contradict him.”
He said the potential loss for the trust is “heading towards $2 million”.
“Clearly the share capital is at risk and is probably gone, but who knows [whether EnergySmart can be sold].”
HMCT paid $2 million for the EnergySmart building in Railway Ave. It was recently sold for $1.25m after another tenant moved out.
We asked why it was sold now, when HMCT had no pressing need for the money, and whether an independent valuation was sought.
Mr Hutchings said trustees took the advice of selling agents Baileys. The site needed redevelopment, and trustees decided they were not in that business.
While there was no independent written valuation, “the three tenders were all remarkably close”.
Mr Hutchings agreed they could have tried to find replacement tenants, and that commercial property prices would rise again “over time . . . [but] how quickly that might happen is crystal ball gazing country really”.
“I don’t know that our crystal ball is any better than others.”
EnergySmart’s directors used to include several trustees, but there was criticism about conflict of interest. For a year or more the directors have been Peter Crow, Vaughan Renner and Pat Waite.
Mr Hutchings said HMCT had concerns about EnergySmart during the year. “That’s why we were having directors report to us regularly.
“They were making changes – no question they were doing good work. But whether they were doing enough work, fast enough . . . maybe they weren’t.”
Whatever else the trust may do in terms of its own future, it has filing with the Companies Office to tidy up. Former trustee Roger Styles is still listed as a director, even though the Charities Commission records he resigned last year.
– Hutt News. Story by Simon Edwards