Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


UPDATE TrustPower backs out of Ruataniwha water scheme

UPDATE TrustPower backs out of Ruataniwha water scheme

By Paul McBeth and Pattrick Smellie

(ADDS comment from HBRIC and Ngai Tahu)

March 27 (BusinessDesk) - Trustpower, the electricity company controlled by Infratil, has walked away from the $265 million Ruataniwha water storage scheme, the same day the Hawke’s Bay Regional Council set the timeline for public consultation.

The power company terminated its memorandum of understanding with the council subsidiary, Hawke’s Bay Regional Investment Company, and Ngai Tahu Holdings, which would have seen it invest between $50 million and $60 million of the total cost of the project. The council investment company this week recommended the local authority invest up to $80 million in the scheme.

“Trustpower has determined that it will not be possible to invest within its risk and return framework for a project of this nature,” the company said in a statement.

In a separate statement, HBRIC quoted Ngai Tahu Holdings as saying “ the project has a number of components that are key to its success, including commercial criteria and the involvement of the right investment partners.

“It is currently working these issues through with HBRIC and other parties. Participation will be dependent on these matters being satisfactorily addressed.”

HBRIC said in the statement it “remains strongly of the view that (the scheme) offers the Hawke’s Bay community both significant environmental and economic benefits and that subject to securing contractual commitments to take water that the scheme will prove financially viable.”

HBRIC continues to negotiate with Crown Irrigation Investments, the fund established with proceeds from partial privatisations to kick-start major new irrigation projects as part of the government’s approach to accelerating economic growth.

While there was clearly sufficient short term appetite for the scheme to justify its construction, the long term uptake by farmers and other irrigators was not strong enough for TrustPower to feel comfortable committing shareholders’ funds, the Tauranga-based company’s general manager, operations, Chris O’Hara told BusinessDesk.

“Projected cashflows were not meeting a rate of return that would meet shareholder expectations,” he said. While the project was politically contentious, that was not a factor in TrustPower’s decision.

O’Hara questioned the viability of any other proposed greenfields irrigation schemes, given the Ruataniwha scheme was “among the best greenfields opportunities in New Zealand.”

“If this one can be made to work, I’m not sjure there’s another one that will take its place.”

TrustPower also has irrigation schemes on the books on the Canterbury Plains, which would also generate hydro-electricity. However, they differed from the Hawke’s Bay scheme because they relied on the relatively large natural storage available in Lake Coleridge. The Ruataniwha scheme requires the construction of a storage dam.

TrustPower’s move comes less than three weeks after HBRIC issued a preliminary investment memorandum seeking expressions of interest from investors in the region to participate in the scheme, which will require the support of farmers and other irrigators in the catchment in order to be economically viable.

It coincides with the council’s release today of a timeline for consultations on the contentious scheme, which has sparked national debate over its potential impact on the Tukituki River and the growing intensification of dairy farming.

Last September Trustpower and Ngai Tahu’s investment arm said they might fund 30 percent to 40 percent of the project. The council said the scheme had the potential to supply water for irrigated farming and horticultural uses to between 25,000 and 30,000 hectares of land, and was expected to create about 2,520 jobs for the region.

The council today set the timeline for public consultation with a view to making a final decision on June 25, having released its 70 page business plan for the scheme yesterday.

The proposed dam became a political football last year when Conservation Minister Nick Smith was forced to deny he had tried to hose down his department’s concerns about potential water pollution or meddle with its submission.

The Labour Party’s water spokesperson, Whita Maitiri, launched a private members’ bill, dubbed the “Don’t Turn the Tukituki Toxic” Bill today on the banks of the Tukituki River.

Shares in Trustpower were unchanged at $6.49 today. The company is likely to brief in greater detail at next Thursday’s Infratil investor day in Wellington.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Internet: NZ Govt Lifts Target Speeds For Rural Broadband

The government has lifted its expectations on faster broadband speeds for rural New Zealand as it targets increased spending on research and development in the country's information and communications technology sector, which it sees as a key driver for export growth. More>>


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news