Trust Power pulls plug on Rutataniwha

Trust Power has pulled the plug on a potential investment in the Ruataniwha Water Storage Scheme.

. . . The power company terminated its memorandum of understanding with the council subsidiary, Hawke’s Bay Regional Investment Company (HBRIC), and Ngai Tahu Holdings, under which it would have invested between $50m and $60m of the total cost of the project.

“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.

HBRIC said 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 would continue to negotiate with Crown Irrigation Investments and recommended this week that council should invest up to $80m in the scheme. It was also looking for expressions of interest from investors in the region to participate in the scheme.

Trustpower’s general manager, operations, Chris O’Hara, said 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.

“Projected cashflows were not meeting a rate of return that would meet shareholder expectations,” he said. . .

Irrigation schemes have long term returns, they don’t usually generate much in the way of cash flow

The loss of a potential investor of that size is a setback but it does provide other opportunities:

Farmers and businesses in the Hawkes Bay need to act quickly to fill the investment gap opportunity left by TrustPower’s exit from the Ruataniwha Water Storage Scheme.

“There’s a wonderful opportunity here for Central Hawkes Bay farmers and businesses to get behind the dam to make it work. The Central Hawkes Bay community is now able to be a significant investment partner and take ownership of this project to really drive it forward,” says IrrigationNZ CEO Andrew Curtis.

While some parties may naively present TrustPower’s withdrawal in a negative light, Mr Curtis says it was very common for irrigation schemes to have changing investment partners in the development stage and that TrustPower had only signed a memorandum of understanding.

“The benefit is that the withdrawal allows more local farmers and businesses to buy into the scheme and we know from history that local people driving local solutions always turn out to be the best for the community in the long run,” says Mr Curtis.

“The Hawkes Bay really needs this scheme to proceed as there’s nothing else of significance on the table that would have the ability to reinvigorate the Central Hawke’s Bay economy, create jobs and generate new business opportunities. You only need to look at the looming drought in the Waikato and Northland to see how the provinces suffer when rainfall is low in consecutive years. This is why it is so important to have the right irrigation infrastructure in place to mitigate environmental impacts. The flow-on effects are felt by everybody, not just those working in agriculture.”

“The Ruataniwha scheme is exactly the sort of irrigation scheme New Zealand needs to bring new life to regions like the Hawkes Bay, allowing many of its rural towns to thrive again,” says Mr Curtis.

“IrrigationNZ encourages all potential investors in the Ruataniwha scheme to come to our conference being held in Napier for the first time in just over a week’s time (7th-9th April). You’ll find out everything you need to know about the benefits of investing in water management and how other regions in New Zealand have progressed their water schemes. It couldn’t be timelier to bring an irrigation expo and global irrigation experts to the Hawkes Bay as we’ll be discussing Ruataniwha within a wider debate looking at the future of irrigation in New Zealand.”

Hawkes Bay is drought-prone.

The RWSS would provide very effective insurance against dry weather with significant economic, environmental and social benefits.

The long term pay off from irrigation is immense but it takes a big commitment up-front to get it off the ground.

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