HBRC sells almost $20m of work on Ruataniwha at pennies in the dollar
By Jonathan Underhill
July 2 (BusinessDesk) - Three Hawkes Bay businessmen have acquired rights to almost $27 million of local and central government-funded research and development work on the Ruataniwha Water Storage Scheme for $100,000, gaining access to long-life resource consents that will still be live in the next parliamentary term.
Former Prime Minister Bill English had promised a review of the Department of Conservation's legislation last year after DOC and the Hawkes Bay Regional Council failed to challenge a court ruling against a land swap deal that was crucial to the water storage dam. DOC chief executive Lou Sanson has been pushing for an update of his department's governing laws, having been knocked back on Ruataniwha (actually on behalf of the former minister Maggie Barry) and says much of the law was framed in the 1960s.
But the new government has taken a hands-off approach to the conservation estate and NZ Forest & Bird, which was the victor in the Ruataniwha legal battle, celebrated it as a landmark win. Conservation Minister Eugenie Sage this month rejected an application to mine for coal at Te Kuha near Westport and said last November there would be no new mining on DOC land and the government has announced an end to Crown subsidies for new irrigation schemes.
"The non-governmental sector is very wary that this is the thin end of the wedge for development across the DOC estate," said James Palmer, chief executive of Hawke's Bay Regional Council (HBRC). "The government will not be in any hurry to move on this. It will look at this cautiously." Any law change would likely be "quite highly prescriptive to ensure that proposals that have some broader impact might be off the table."
However, there were other options. The Central Hawke's Bay District Council has powers under the Public Works Act to appropriate land but for new owners of the scheme are just as likely to be playing a long game because the resource consents run for 10 years - twice the usual 5-year term under the RMA, he said.
"So they've got until 2025 to exercise those consents. We could see a change of government in that time - a case of bank the assets and see what happens," he said.
As a result of the sale, HBRC will write down the value of its investment in Ruataniwha to $100,000. As an investment, it was a bust for the council, which wrote off a $14 million loan to its investment arm Hawke’s Bay Regional Investment Co (HBRIC). In the council's own accounts it took an intangible asset impairment of $11.7 million, leaving a recoverable value of $7.8 million, suggesting it spent at least $19.5 million of the $80 million it had planned to commit. The council voted last year to withdraw support for the scheme and restructured HBRIC.
The scheme was also the recipient of $7 million of central government funding. The sale price announced today compares with the full costing of Ruataniwha, put at $275 million and with a target to irrigate 25,000 hectares of farmland in central Hawke's Bay.
The council today announced the sale of the Ruataniwha scheme's intellectual property and assets to Water Holdings CHB, a newly formed company owned by the director of a plumbing and irrigation company in Waipawa, and an orchardist and a farmer from the central Hawkes Bay.
Gavin Streeter, a director of Water Holdings, says the company has acquired about a 40-ft container full of paperwork and samples related to the scheme.
"It's a time for us to stand back and take stock," he said. "What we have purchased, obviously the model will change, it will be a community project."
Streeter, whose other business is Waipawa-based Isaac's Plumbing & Electrical, is a long-term advocate of the scheme for the benefits it would bring to Hawke's Bay and his own business, having been quoted in an in-house article on the HBRC website as saying he would take on more staff if the scheme went ahead.
"Water storage is just a sensible idea," he said. Water Holdings would be more nimble in finding a way to push the project forward. "Without having to worry about votes we can get on and do the job. Community support is massive and not just for irrigators."
HBRC's Palmer says irrigation schemes in the Ruataniwha basin "are inevitable in the longer term" and a number of on-farm schemes are already underway.
"The challenge for water storage in New Zealand is that water has been allocated free of charge on a first-come, first served basis," he said. "As the value of water grows, the willingness to pay will grow. There's value in pricing scarcity in terms of getting efficient and best use."
The report HBRC considered before pulling finance for Ruataniwha last year said there were operational costs associated with the scheme estimated at $100,00 a year, the same as the sale price.