The regional council is being asked by its own investment company to pony up even more cash, beyond the $80 million-plus it has already set aside for the Ruataniwha dam.

Tomorrow, Hawke's Bay Regional Investment Company (HBRIC) will put a water user agreement in front of councillors, asking them to sign up to the scheme for 35 years.

This "offer" made by the investment company would be in place of the current Foundation Water User Agreements whereby the council has an option but no obligation to buy up to 4 million cubic metres water per year.

The council is being asked to sign up under a separate agenda item to HBRIC's monthly update.


The recommendation is being made under Item 10, which deals with Hawke's Bay Regional Council environmental flows.

"A letter has been received from HBRIC in relation to a proposal previously traversed at a Council workshop on HBRIC accessing additional flows from the Ruataniwha Water Storage Scheme for environmental purposes," council chief executive Liz Lambert reports.

"The forecast water uptake curve developed by HBRIC indicates that there is substantial surplus water stored in the early years of the scheme."

Ms Lambert said council staff have undertaken a high-level initial assessment of the possible use of surplus water.

"This assessment is initially a qualitative one but it is envisaged that, should council agree to the proposal, that a more detailed quantitative assessment of environmental benefits and environmental projects would be developed," she says.

Environmentally beneficial options identified by council staff include augmenting flows in small streams, increased flushing flows for rivers, and enlarging river mouths.

In addressing the affordability of the scheme HBRIC chief executive Andrew Newman said in his letter that the investment company has undertaken detailed analysis of the financial model base case for the HBRIC Group from its investment in the scheme and its payments for environmental flows.

"This demonstrates that on a net basis the HBRC Group-level investment in the RWSS is still significantly cash flow positive for HBRC/HBRIC Ltd after paying for the environmental flows from year 10," he said.

As such: "HBRIC believes there is a sound environmental and financial case for removing the provision of [the council] flows from the Concession Deed.

"And entering into a conditional water user agreement with HBRIC subject to the scheme proceeding."

When asked for further comment about this, Mr Newman said this offer was an alternative option for the councillors to consider, that according to the forecast water uptake curve developed by HBRIC indicates there is substantial surplus water stored in the early years of the scheme and access to it will have environmental value to the region.

"This is a proposal HBRIC Ltd has put to council, it will be up to the council to decide if it wishes to accept the proposal," he said.

"Under the proposal council would have access to a substantial volume of water for environmental use from day one of the scheme at no cost until year 10.

"At that stage forecast cash flows show [the council] would be in a position to pay for the 4 million cubic metres of water and still receive a substantial return on its investment in the scheme."

He denied that this offer was being made so the investment company could meet its water sign-up condition precedent, or that this was the reason why this particular work stream is in a holding pattern.

"This is simply an opportunity to offer [the council] surplus water for environmental benefit," he said. "The water uptake work stream is in a holding pattern awaiting sufficient clarity from the financing work stream before gearing up again."