Crown Irrigation invests $6.5m in Canterbury scheme
Crown Irrigation Investments Ltd has agreed the draft terms of a $6.5 million investment in Canterbury's Central Plains Water scheme.
Crown Irrigation will partner with Central Plains Water Ltd for five years to provide subordinated debt finance. Subordinated debt ranks below other loans or debt should a company fall into liquidation or bankruptcy.
Central Plains Water, made up of farmer shareholders, last month announced lead contractors for the three-stage project that could eventually cost $375m.
The cost of the first stage is about $140m.
Crown Irrigation said the investment would enable excess capacity that was needed for later stages of the scheme to be built in the headrace during stage one construction.
Crown Irrigation chief executive Murray Gribben said the scheme would distribute reliable water to about 60,000 hectares on the Canterbury Plains once all three construction stages were complete.
"Consistent with our requirements for investment, this is off-farm infrastructure of a regional scale that will contribute to the region's economic growth by unlocking the productivity gains that come from irrigation," Gribben said.
"This scheme would not be developed to the scale required for the long term without our short-term financial support."
A Fulton Hogan-John Holland joint venture and Downer Group have been named as the lead contractors by Central Plains Water.
The Fulton Hogan-John Holland joint venture will do the construction of the headrace canal and bridges for stage one of the development, and Downers the pumping station and pipe distribution network taking water onto farmland on the Canterbury Plains.
Gribben said Crown Irrigation was looking forward to a "prosperous relationship" with Central Plains Water and would consider the potential to fund some capacity in stages two and three of the scheme when the time came.
Crown Irrigation was established to help harness the potential of irrigation to accelerate New Zealand's economic development by making targeted, bridging investments in larger, regional-scale irrigation schemes.
The Government has signalled its willingness to invest up to $400m through Crown Irrigation to achieve this goal.
Gribben said Crown Irrigation would look to invest in irrigation schemes to assist in mitigating "demand shortfall" in the early stages of scheme development.
Before Crown Irrigation can consider investing in schemes it needs to satisfy a series of investment requirements. This includes having demonstrated technical feasibility, having consents in place, established water pricing that is fair, and having sound governance and management structures in place.
Crown Irrigation's board chairwoman Alison Paterson said the decision to invest in the Central Plains Water scheme was consistent with its investment objective. This was to support irrigation development through to financial viability, where investment from other sources of capital had been exhausted.
"This first investment by Crown Irrigation will allow the Central Plains Water scheme to be optimally sized for the long term, providing increased returns to agricultural producers on the Canterbury Plains," she said.
Financial close for the investment is expected to be reached before mid-2014. This would allow for comprehensive due diligence to be carried out by Crown Irrigation.