ruataniwha water scheme hb today public meeting 6 august 2015 hbric is a subsidiary (cco) of...
TRANSCRIPT
Ruataniwha Water Scheme HB Today Public Meeting
6 August 2015
HBRIC is a subsidiary (CCO) of
Hawke’s Bay Regional Council
HAWKE’S BAY REGIONAL
INVESTMENT COMPANY LTD
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
What we’ll cover
• What is the RWSS?• What the RWSS will do for Hawke’s Bay?• How is the environment protected?• Signing up farmers to the scheme• Who’s building the dam?• Who’s looking to invest in the scheme?• The process to a final decision
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
What is the Ruataniwha Water Storage Scheme?
This irrigation scheme will give our region the lift it needs to
hold its own in regional New Zealand
• A long term sustainable water supply solution for Central
Hawke’s Bay• It will insulate the community from the progressive
effects of climate change• In the combination with Plan Change 6, it will improve
the rivers and streams in the Tukituki catchment
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
What will RWSS do for Hawke’s Bay?
This irrigation scheme will give our region the lift it needs to
hold its own in regional New Zealand
• Create more than 2,000 ongoing jobs• Breathe life into Waipukurau & Waipawa• Inject at least $200 million a year into the region’s GDP• Strengthen the social fabric of our rural communities• Give us a better Tukituki River
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
How is the environment protected?
The irrigation company will meet and in some areas exceed its
responsibilities to protect the environment
• The Board of Inquiry has granted the scheme consents
for 35 years• A wide range of farming systems are viable within the
consents• The framework ensures continued environmental
improvement• Aquatic life will improve
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
How is the environment protected?
We will focus on the broad ecological health of the river
through strategies such as:
• Farm Environment Plans• Nutrient Management• Stock exclusion• Riparian planting• Ecological health monitoring and response • Minimum, augmented & flushing flows in rivers
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
Signing up farmers to the Scheme
The irrigation company will provide leadership to the
regional rural sector.
• We need to sell a minimum of 45 million cubic metres of
water for the scheme to proceed• There’s potential to irrigate around 27,000 hectares of
land.• The more farmers who sign up the better it is for
everyone.
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
How much water have we sold?
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
What kind of farming will we see?
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
Who’s looking to invest in the scheme?
The scheme will be a mix of public and private ownership
• HBRC – subject to conditions will invest up to $80million• Government – potentially through Crown Irrigation
Investments Ltd• Private investors – some are currently undertaking due
diligence• Local investors also have the opportunity
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
Who will own the scheme?
The irrigation company will create an asset that will eventually
come into community ownership once it’s paid off.
• The scheme is being set up as a BOOT – Build, Own,
Operate, Transfer. • Example -Transmission Gully in Wellington
• It will revert to public and local ownership in 70 years at
no cost• This asset and the community are protected through a
concession deed
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
Who’s building the Scheme?
OHL/Hawkins will build the dam and distribution network•They are experts in building dams•It’s a fixed time/fixed price contract.•It will take around three years to build.
Dam type: Central core rock fill dam
Dam height: 83 metres high
Reservoir length: 7 kilometres long
Storage volume: 93 million cubic metres
Does the Project Stack up?
At full uptake, does the project stack up?
For a long term infrastructure investment without demand risk (full uptake), project return (WACC) of circa 9% has been benchmarked against other NZ and global BOOT projects.
At the current water charge, project economics work.
Page 13
Operating Cash Flows:
Water Distribution Revenue $27,040,000.
Generation Revenue & Spot Sales $3,600,000
Operating Costs ($5,900,000)
Operating Cash Flow $24,740,000.
Financing Cash Flows:
Bank debt payments
(75%*6.5%*$275m)
$13,406,250
Equity Dividends
(25%*16.0%*$275m)
$11,000,000
Total Payments $24,406,250
Project WACC (return) ~9%
Let’s assume:
-Project cost of $275m;
-75% bank debt, 25% private sector investment;
-Interest rate of 6.5%;
-Equity return target 16.0%
-Water charge of 26c/m3;
-104* million m3 contracts sold; and
-Generation, spot sales and operating costs as per the Deloitte Report.
* on average there is 200Mm3 of water each year, so this still leaves plenty to improve summer river flows and flush the river to benefit aquatic life
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
Where are we at right now?
• Consents are granted for the scheme - HBRC has
signed this off as a condition met• Good momentum on water uptake with farmers –
deadline mid Nov to sign up for the scheme to proceed• Investors undertaking due diligence – announcement
end of Sept • Revalidating the construction price – completed Sept
Aim to have all conditions met by the end of Nov
HAWKE’S BAY REGIONALINVESTMENT COMPANY LTD
The process to a final decision
HBRIC Ltd Chairman Andy Pearce will outline the process
from here after the panel discussion.