Crown Irrigation controls flow of capital support

Only about 2 per cent of the rainfall in New Zealand is stored for irrigation use, with the rest running out to sea.

Crown Irrigation Investments Ltd asserts that the case for capturing this resource and using it to help New Zealand's economic growth and the health of our waterways cannot be underestimated. For instance, studies by the New Zealand Institute of Economic Research suggest additional irrigation has the potential to increase agricultural exports by more than $4 billion per annum by 2026.

Crown Irrigation Investments was established to harness the opportunity that water and its use in irrigation can provide.

Managed properly, water has the potential to improve productivity within our primary industries, create jobs, increase export earnings and allow water flow management to support environmental sustainability.

"Looking forward, irrigation scheme developments that have the greatest potential benefits for New Zealand will be larger and more complex than those developed to date. They are also likely to have huge challenges associated with raising the significant capital required," said Crown Irrigation chief executive officer Murray Gribben.

The Government has announced it is willing to invest up to $400 million in irrigation scheme development.

Crown Irrigation's job is to manage this investment and make the most of the capital through targeted bridging investments to help schemes get off the ground.

This investment enables schemes to be optimally sized right from the start for the long-term, and to accelerate time to market, so they can fulfil their economic development potential.

Gribben said: "We only invest in off-farm infrastructure and in schemes that are of a regional scale. Our investment decisions are not taken lightly.

"Before Crown Irrigation will invest, schemes need to be 'investment ready'.

"This means consents are in place; a fair amount of customers have signed up; the scheme has a construction contract and a capital structure, and has engaged with the local community."

Schemes needed to demonstrate they had exhausted other sources of funding so that Crown Irrigation was taking only the slice they could not raise elsewhere.

"We also need to be satisfied that other investors will receive no more than a fair return at face value. We are prepared to accept a less than commercial return but we expect to cover operating costs and preserve our capital through the returns we receive," Gribben said. Crown Irrigation expected to be the last capital in a scheme, and the first investor to exit, but wanted to engage early with scheme sponsors to discuss the circumstances under which it could invest.

Last month, Crown Irrigation reached an exciting milestone with the announcement of its first investment. It is set to provide $6.5m of subordinated debt finance to the Central Plains Water scheme, for a period of up to five years. The purpose of this investment is to support the construction of excess capacity in the headrace to be built during stage 1 that will be needed for later stages of the scheme.

"The key to the investment, as it will be for all our investments, is that the scheme could not be developed to the scale required for the long-term without our short- term financial support," Gribben said.

"Our role is to support public benefits, not private benefits, and ensure New Zealand Inc reaps the benefits of sustainable productivity increases in horticulture and agriculture and improved water management practices.

"Our role is to ensure that we make the most of what we have got."

The Press