Liverpool refuses to back airport investments
The city council will not participate in a capital call to fund a pair of projects at Liverpool John Lennon Airport, claiming that contributing to a cash raise is not in line with its divestment strategy.
Liverpool City Council owns a 10% stake in the airport while Peel L&P and Ancala each own 45%.
The majority shareholders wish to raise £7m to fund two projects:
- Taking over and upgrading an existing fuel farm previously operated by Shell
Peel and Ancala plan to raise the cash needed for the project through an issuance of new shares priced at a discounted rate of £1 per share.
As a 10% stakeholder, the city council is obliged to contribute 10% of the cost, equating to £700,000.
However, Liverpool’s cabinet is expected to vote not to participate in the capital raise next week as it is not in line with the authority’s long-term strategy, which is to dispose of its stake at best value, according to a cabinet report.
Not participating in the capital raise will see the council’s ownership share effectively diluted from 10% down to 5.6%, according to a council report.
In addition, the report stated that if the council does not participate, then the notional value of its position would be impaired by 31% or £900,000.
The council ultimately wants to dispose of its stake, citing environmental concerns and the council’s need for capital receipts. Having an ownership stake in the airport is also not considered a “strategic priority for the council”, according to the report.
Alongside Peel, Liverpool City Council helped to recapitalise the airport when it became overleveraged and ran into financial difficulties in 2015.
The council invested £2m for a 20% share of the equity in the company and Peel invested £8m for an 80% share.
In September 2019, the city council sold half of its stake to infrastructure investor Ancala for £10.2m, retaining a 10% stake.
Liverpool City Council’s decision not to invest in the airport energy schemes follows steps taken in January towards “removing financial support” for the airport amid concerns about its proposed £100m expansion and the impact that it would have on the environment and surrounding Green Belt.
The airport hopes its expansion strategy will boost passenger numbers to 7.8m by 2030 by facilitating an increased number of flights.
The airport currently contributes £250m to the Liverpool economy annually. This could rise to £625m if the expansion goes ahead, the airport claims.