Press Release: Fitch Affirms Hauraki District Council at 'AA-'; Outlook Stable

The following is a press release from Fitch Ratings Fitch Ratings-Sydney-06 October 2026 Fitch Ratings has affirmed New Zealand's Hauraki District Council's Long-Term Local-Currency Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook, and Short-Term Local-Currency IDR at 'F1+'. The affirmation reflects Fitch's unchanged assessment of Hauraki's Standalone Credit Profile (SCP) at 'aa-'. This reflects our expectation that strong operating balances will mitigate debt accumulation for capital purposes over the medium term. The ratings are derived solely from the district's SCP, without any other factors affecting the rating.

KEY RATING DRIVERS Standalone Credit Profile 'aa-' SCP: Hauraki's SCP is based on a 'High Midrange' risk profile and a financial profile in the 'aa' category under Fitch's rating-case scenario. The SCP positioning also reflects a peer comparison. Risk Profile::'High Midrange' The assessment reflects Fitch's view that there is a low risk of the issuer's ability to cover debt service with the operating balance weakening unexpectedly over the scenario horizon (2026-2030) due to lower revenue, higher expenditure, or an unexpected rise in liabilities or debt-service requirements.

Revenue Robustness::'Stronger' Hauraki's strong revenue base is underpinned by its property tax (rate) revenues, which accounted for almost 71% of total revenue in the fiscal year ended June 2025 (FY25). This revenue stream tends to be extremely stable and insulated from economic shocks when compared to other forms of tax revenue. Another key revenue source for the district comes from central government operating transfers, which generally fund road infrastructure and maintenance and comprised less than 10% of total revenue in the same period.

Revenue Adjustability::'Stronger' Hauraki has unfettered power to adjust its property rates according to budgetary requirements, enabling it to manage expenditure pressures or offset potential revenue declines. This is also the case for other New Zealand councils. In practice, rates typically account for less than 5% of household income, indicating comparative affordability. A cap that is under consideration, with an exemption for water charges, could constrict revenue adjustability, but has not yet been passed into law.

Expenditure Sustainability::'Midrange' The council's primary responsibilities are predictable, local services. These include water and waste management, road maintenance and other community services. Spending is overall well-planned, despite moderate volatility from occasional weather-related remediation. Demand for capital spending is typically driven by continued population growth and development, which Fitch expects will persist.

Over FY21-FY25, Hauraki's operating expenditures (opex) roughly kept pace with the related revenues. 1%. Opex increases in this period included growth from cyclone-recovery related road maintenance, inflation and cost pressures from rising demand for increased service levels. Capex represented 47% of total expenditure in FY25, driven by outlays for key infrastructure projects.

Expenditure Adjustability::'Stronger' Hauraki has the flexibility to adjust its spending levels as necessary, but must adhere to the sector requirement to balance its budget each year. Certain expenses, such as staff costs (21% of total expenditure in FY25) and mandatory expenditure related to minimum service levels, are relatively inflexible. However, Fitch estimates these costs to be less than 70% of total expenditure, providing sufficient spending flexibility. Significant adjustability exists for capital spending, for which councils can defer, reprioritize or cancel when needed.

Hauraki typically executes between 60% and 80% of its annual capital budget, which allows for adjustments without material service disruption. Liabilities and Liquidity Robustness::'Stronger' Hauraki's debt and liquidity management is prudent, with well-planned borrowings and the use of swaps to mitigate interest rate risk. Borrowings are wholly sourced from the New Zealand Local Government Funding Agency Limited (LGFA, AA+/Negative), which has strong access to domestic and international debt markets and provides a suite of facilities for its borrowers.

Access to LGFA provides the council with a low-cost and stable source of debt and mitigates refinancing risk, in our view. Hauraki's contingent liability risk is currently low. Liabilities and Liquidity Flexibility::'Midrange' The 'Midrange' assessment is based on the lack of a formal emergency liquidity support mechanism within the sector, particularly compared to international peers. In practice, the council's liquidity is adequate, with diverse financing options and robust cash levels sufficient to meet short-term needs.

The bulk of funding needs are met with short-term internal liquidity sources. At end-FY25, the council had an unrestricted cash balance of NZD29 million, comprising cash and term deposits, and had an undrawn bank facility of NZD12 million. Financial Profile::'aa category' We expect Hauraki's financial profile to reflect stable performance over the medium term. We continue to consolidate Hauraki's water and wastewater operations into our scenario analysis.

Continued rate increases will enable the council to bolster its operating balances and support the development of key capital works, including the Paeroa Wastewater Treatment Plant. This in turn will mitigate overall debt accumulation. 2x. This reflects an improvement in operating balances to NZD21 million in FY30 from NZD14 million in FY25, which will support the council in offsetting its debt burden of NZD188 million by FY30.

3x in FY30 and the fiscal debt burden (net adjusted debt/operating revenue) of 202%, in the 'bbb' and 'bb' categories, respectively. The positioning of the primary metric within the 'aa' category and 'bbb' and 'bb' category secondary metrics leads to the 'aa' category financial profile. Other Rating Factors Neutral Additional Rating Factors: Fitch does not apply any extraordinary support factors to Hauraki's Long-Term Local-Currency IDR. The ratings also do not reflect any additional risk factors.

Short-Term Ratings The Short-Term IDR is 'F1+' because the Long-Term IDR lies between 'AAA' and 'AA-', according to Fitch's International Local and Regional Governments Rating Criteria. Peer Analysis Hauraki has a 'High Midrange' risk profile, similar to its domestic peers. Its financial profile is at the weaker end of the 'aa' category, leading to an 'AA-' rating that is weaker compared with Fitch-rated domestic peers. Hauraki's rating positioning is most comparable to councils such as Waipa District Council (AA-/Stable) and Timaru District Council (AA-/Stable).

Issuer Profile Hauraki District Council is the local government authority for the Hauraki district in the Waikato region of New Zealand. The council is responsible for a range of local services and infrastructure, including water supply, sewage treatment, road maintenance and public facilities.

Key Assumptions Risk Profile::'High Midrange' Revenue Robustness::'Stronger' Revenue Adjustability::'Stronger' Expenditure Sustainability::'Midrange' Expenditure Adjustability::'Stronger' Liabilities and Liquidity Robustness::'Stronger' Liabilities and Liquidity Flexibility::'Midrange' Financial Profile::'aa' Asymmetric Risk::'N/A' Support (Budget Loans)::'N/A' Support (Ad Hoc)::'N/A' Rating Cap (LT IDR)::'N/A' Rating Cap (LT LC IDR):'N/A' Rating Floor::'N/A' Quantitative assumptions - Issuer Specific Fitch's rating case is a 'through-the-cycle' scenario, which incorporates a combination of revenue, cost and financial risk stresses.

It is based on FY21-FY25 actual figures and FY26-FY30 projections. Fitch's financial profile assessment is based on the following assumptions. 1%), driven by steadily diminishing increases in rates revenue, given rising concerns around affordability and potential for a rates cap. This is counterbalanced by ongoing local growth.

8%), reflecting moderate inflation alongside population-driven service demands. 2% in FY26-FY30. We continue to consolidate Hauraki's water services into our analysis of the council's financials, regardless of the decision to novate water-related operations, assets, and liabilities to Waikato Waters Ltd on 1 July 2027 (FY28). Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A weakening of Hauraki's SCP could lead to negative rating action.

0x in our rating case scenario. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade An upward revision of Hauraki's SCP could lead to positive rating action. 0x. VS screener did not indicate an elevated risk for Hauraki District Council.

ESG Considerations (MORE TO FOLLOW) Dow Jones Newswires October 06, 2026 22:45 ET (02:45 GMT) The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.