Big Nelson irrigators line up to complete finance for Waimea Dam as private investor pulls out
By Pattrick Smellie
Oct. 15 (BusinessDesk) - Large-scale Nelson-based agricultural interests have stepped in to provide the final $11.5 million needed to finance the Waimea dam project, after an unnamed private investor pulled out of the deal.
The irrigators, who had previously said they had no resources of their own to complete the project, appear to have found the money and stepped back in, after deciding the private investor's demands were becoming greedy.
BusinessDesk understands the Waimea Plains water users, including dairy farmers, horticulturalists and winemakers, became more comfortable about putting up their own capital when they realised they could use the same convertible notes financing formula for reducing their investment risk as the private investor had been proposing.
"We have replaced that investor on very similar terms with a number of inter-generational family businesses who use water on the plains already," Wairoa Irrigators Ltd chair Murray King told BusinessDesk, indicating that negotiations with the investor had broken down because of the investor's demands.
"We were being asked to protect an investor's downside but without benefitting in upside. It had to be on acceptable terms. That's the reality," said King.
Among controversial elements of the original convertible notes proposal was a $500,000 up-front fee that would have been paid to the unnamed investor for putting in the $11.5 million.
A new product disclosure statement is expected to be issued today, giving other backers of the controversial water storage project 30 days to reconfirm their involvement or withdraw. Qualifying investors will need to have at least 2000 hectares of irrigable land worth a minimum of $2.5 million and annual turnover of $5 million or more annually.
The TDC and the government-backed Crown Irrigation Investments Ltd will stump up the majority of the funding for a project that is estimated to cost just under $100 million.
The Tasman District Council (Waimea Water Augmentation Scheme) Bill was introduced in Parliament last month by local National Party MP Nick Smith, with strong cross-party parliamentary support. Select committee hearings on the bill begin on Wednesday this week, for report back to Parliament on Nov. 7.
Before the unnamed private investor appeared, cost escalation seemed to have killed off the Waimea Plains initiative. An early September vote by TDC councillors narrowly voted the project down. Three days later, on Sept. 6, a fresh vote saw the plan endorsed, thanks largely to the commitment from the new investor.
But critics fear the dam will cost still more. They have asked the Ombudsman for access to an independent consultant's report that they believe shows costs could grow to $140 million.
"Who pays for cost over-runs, which could be many tens of millions of dollars?" said Lew Solomon, a retired engineer and a representative of the Water Information Network, a local lobby group that opposes the scheme.
The project's backing rests on a combination of anticipated environmental benefits from ensuring the Waimea River has higher flow rates during droughts, improving the resilience of urban water supply, and giving irrigators access to water.
Opponents believe the dam is expensive relative to the acreage to be irrigated, stacked in favour of local private agricultural interests, and that its environmental benefits are both unproven and overstated, particularly if agricultural intensification worsens nitrate leaching issues that exist on the Waimea Plains.
Asked about the potential for cost over-runs, King said Wairoa Irrigators Ltd (WIL) had been "95 percent sure we had it right last time", but there were always risks of further increases "for things we haven't identified".
"It's designed for 100 years of capacity demand. Part of the problem has been meeting the cost of overbuilding now," he said. "You only get one shot at these things."
Among local agricultural interests expected to back the scheme are chairman King's dairy farming operations, grape-growers and winemakers Seifried's, market gardeners Appleby Fresh, and berryfruit and horticultural interests associated with WIL director Julian Raine, who runs businesses headquartered at the same address in Companies Office records as WIL.
While not a landowner in the dam zone, the project also has the backing of John Palmer, a former chairman of both Air New Zealand and the failed state-owned coal-miner Solid Energy. Palmer has lobbied for water access in the Motueka area, where he has agricultural interests.