Synlait expansion independent of scheme

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Synlait Milk says a planned $100 million factory expansion does not depend on milk growth in Canterbury or on an irrigation scheme to encourage dairying.

Synlait chief executive John Penno says ramping up irrigation is a "common sense" initiative for the economic benefit of Canterbury. "However, the plans for the plant are in no way based on ensuring that goes ahead."

This week Synlait announced that Chinese dairy giant Bright Dairy & Food Co would invest $82m for a controlling 51 per cent stake in the milk processor, allowing its Dunsandel factory to double in size.

The company's separate tie-in with irrigator Central Plains Water (CPW) was driven by its belief in sustainable irrigation development, Penno said.

"Water is Canterbury's most important resource, and we're very confident it will be sensibly developed through time."

Asked if Synlait was concerned about getting milk given potential competition from a proposed $150m Fonterra plant near Darfield, Penno said: "No, we're not. Canterbury is the fastest-growing milk-supply base in New Zealand with compound average growth rates [that have] been over 10 per cent for the past decade."The Government again today is talking about supporting irrigation initiatives in this area so there's a lot more land that can be brought into dairy farming here."

Last month, Synlait announced it had transferred its proposed Rakaia irrigation proposal to CPW, in which it holds a 4.5 per cent stake.

"As part of that deal we actually put quite a lot of money into Central Plains by way of a shareholder loan, and by buying shares in the company, and putting the water on the table," Penno said.

Synlait's scheme taking water from the Rakaia, called the Te Pirita irrigation scheme, will likely be developed in conjunction with CPW's plans based around the Waimakariri river.

Malvern Hills Protection Society spokeswoman Rosalie Snoyink raised questions on how much water would be required for the Bright Dairy-Synlait factory and how it would be sourced.

She also asked if there was anything to prevent a future Bright Dairy takeover of the Synlait dairy farms, which remain 100 per cent-owned by Synlait Milk parent Synlait Ltd.

"Is there anything to prevent a Bright Dairy takeover of CPW, if alternative funding can't be found to build the irrigation scheme should consents be granted?" Snoyink asked.

In response Penno said Synlait Milk already had resource consents for the new factory and was able to use groundwater before that was returned to pasture at a nearby farm.

- © Fairfax NZ News