Government to wind down irrigation funding
Hon Grant Robertson
Minister of Finance
5 April 2018
Government to wind down irrigation funding while honouring existing commitments
The Government has begun winding down public funding for large-scale irrigation through Crown Irrigation Investments Limited (CIIL), in line with the Coalition Agreement and the Confidence & Supply Agreement.
“The decisions announced today are the result of an extensive review of how to wind down funding through CIIL while honouring existing commitments, as provided for in the agreements signed on the formation of the Government. The decisions will provide certainty to the individual schemes which had applied for Government funding alongside private investment,” Finance Minister Grant Robertson says.
“This represents a shift in priorities to the previous government. Large-scale private irrigation schemes should be economically viable on their own, without requiring significant public financing. We must also be mindful of the potential for large-scale irrigation to lead to intensive farming practices which may contribute to adverse environmental outcomes.”
All existing CIIL commitments for development contracts will be honoured to the close of the current phase of each contract. In addition, three schemes will be funded for their construction phases due to their advanced status, subject to meeting the normal requirements of the fund. One is already under construction and the two other schemes have signed term sheets with CIIL.
The three commitments are for:
• Completion of Central Plains Water Stage 2: situated on the Canterbury Plains
• Construction of the Kurow-Duntroon scheme: situated in Kurow, South Canterbury
• Construction of the Waimea Community Dam: situated in Nelson/Tasman
“The funding for these projects can be met within the current appropriations, should Waimea and Kurow Duntroon reach financial close within their allowed timeframes,” Grant Robertson says.
“I recognise that this decision will be disappointing for proponents of projects that won’t be considered or progressed. However, a decision had to be taken on how to put into practice the agreements made on formation of the Government. It is important to remember that schemes may be able to continue, but the Government believes that public subsidies for large-scale private irrigation can instead be better directed to other areas of need.
“We recognise that year-round water availability is important for drier areas of New Zealand. Smaller-scale, locally run and environmentally sustainable water storage projects could be considered on a case-by-case basis through the Provincial Growth Fund, due to the importance water plays in growing our provinces. Smaller local schemes will help more of our vital regions better prepare for increasingly recurring climatic events such as drought.
“Any proposed water storage projects would be expected to meet criteria demonstrating strong alignment with the objectives of the Provincial Growth Fund, and in particular must be environmentally sustainable and deliver benefits across a community.”
Minister of Agriculture Damien O’Connor says access to water is vital to New Zealand’s farmers, growers and rural communities, which provide the grunt for our economy.
“My vision is for a resilient primary sector striving for value over volume and this means large-scale irrigation schemes must be environmentally and economically viable, with vital regional infrastructure supported by the Government. This will provide a good balance to ensure better outcomes for all New Zealanders.”
Notes to editors on the three schemes which will be funded for their construction phase due to their advanced status, subject to meeting the normal requirements of the fund:
Central Plains Water Stage 2:
CIIL currently has one investment, a $65m loan facility to fund construction of Central Plains Water Stage 2 (CPW2), a $200 million project. The construction for this is well underway and due to be completed in August 2018. CIIL is contractually bound to honour its commitment to CPW2.
CIIL currently has signed a construction funding term sheet with the Kurow Duntroon scheme in South Canterbury.
The Kurow Duntroon scheme incorporates replacement of existing aged open-canal to piped irrigation infrastructure as well as an expansion to the size of the existing scheme. The infrastructure upgrade should increase resilience in the community against drought. The project will retire water abstraction from small streams which are currently allocated via Mining Rights which expire in 2021.
Without the scheme, abstraction from these streams will need to be significantly reduced from 2021, which will adversely affect current farming outputs. The scheme serves a mix of dairy, sheep and beef, viticulture and other sectors. The Kurow Duntroon scheme is targeting financial close in May 2018.
CIIL currently has signed a construction funding term sheet with the Waimea scheme in the Nelson region.
The Waimea scheme is primarily targeted towards the horticulture and viticulture sectors in the Nelson region and potentially aids the regional council with their local water supply issues by increasing minimum flows in the Waimea River. The Waimea scheme is targeting financial close in June 2018. CIIL’s potential capital funding commitment for Waimea is $35m.