Hawke's Bay Regional Investment Company's announcement that the Ruataniwha dam was cash flow positive was "factually incorrect and grossly misleading", an economist claims.
Last month the HBRIC reported to its owner, the Hawke's Bay Regional Council, that it had enough water users signed up to make the scheme "cash positive", with the investment company signing more than 42 million m3 of water. The company's target was 45 million m3 of water.
Economist Peter Fraser disagreed, saying 45 million m3 of contracted water volumes did not achieve financial break-even.
"It is my professional opinion HBRIC's claim that 45m m3 of contracted water volumes represents 'financial break-even' for the RWSS is both factually incorrect and grossly misleading," Mr Fraser said.
"Given the revised RWSS has a higher construction cost ($333 million rather than $275 million) it necessarily follows that the financial close number should be revised also - and HBRIC have not done that.
"For transparency and governance purposes, this needs to be rectified as a matter of urgency."
When questioned about this, HBRIC chief executive Andrew Newman said the company had written advice from its financial advisers confirming that the RWSS was cash positive at 42.8 million m3 with the current mix of groundwater and stored water.
"HBRIC and the other investor and financing parties have modelled base case, upside case, downside case and severe downside cases for water uptake.
"The different cases deliver different financial returns for HBRIC, which are better in the base and upside cases and less good in the downside and severe downside cases," he said.
Mr Newman said council had commissioned Deloitte to give it an independent view of the scheme financials.
The regional council's chief executive, Liz Lambert, said council expected to see the Deloitte report later this month or in June. She said the council's deliberations would be made public.
Hawke's Bay Today ran its own calculations (right) using the figures issued to the public by HBRIC.
These figures found that a total of 87.6 million m3 of water would be needed to break even - that is, to cover running costs and loan interest repayments, but also to deliver the return of investment of 6 per cent required by the regional council.
As the current figures stand, the project will run at a forecasted $2.085 million yearly loss for the first five years and a $1.19 million loss from 2024 onwards, presuming no more water has been sold.
Mr Fraser looked over the numbers and said while he got similar figures in his breakdown, he believed the above numbers were conservative.
"The problem is while we don't know their model, this isn't very hard and we already know the key numbers - and the math doesn't lie," he said.
Mr Newman was asked for a copy of the model HBRIC was using but declined to provide one, saying "this remains commercially confidential to financiers".
"In regards to the financial model however, Deloitte has had access to it under confidentiality so as to be able to undertake its work," he said.
As it stands, HBRIC has signed up 8.4 million m3 of deep water users - people who are already drawing water from bores in the Ruataniwha aquifer - to transfer over to the scheme.
The company offered these users water at a vastly discounted price of 10c a cubic metre on a five-year contract.
After the five years are up, these users can either sign up to the scheme at the contracted 27.5c per m3, or they can walk away from the scheme altogether.
Mr Newman said a number of parties who were contracting deep water were now also forward contracting to convert this water to standard contracts.
When asked how many deep water contracted parties were forward contracting, and what percentage of the 8.4 million m3 those contracts represented, Mr Newman responded: "Significant volumes."
Transparent Hawke's Bay spokeswoman Meg Rose said it was time for HBRIC to stop hiding behind commercial sensitivity and speculative financial assumptions that did not stand up to independent analysis.
"As potential investors and the scheme's largest water user, ratepayers have a right to demand to see the genuine facts behind HBRIC's claims; not more hired spin," she said.
"Trust and transparency are needed now if the public are to have any faith in this project succeeding.
"If HBRIC refuses, ratepayers won't have to look far for liability when it does."