Rex Graham: Farmers' doubts hinder dam plan

Rex Graham

I have worked on the land in Hawke's Bay all my life and know the value of good, reliable irrigation. I absolutely understand why the promoters and supporters of the Ruataniwha dam project don't want to give up, it's been a long journey for them and they passionately believe in this project.

But don't we need to ask ourselves why the farmers in Central HB are not lining up to buy this water?

I also understand that recent letter writers, Mr Kirton and Mr Krebs, have asked that we keep to the facts and that is fair enough and perhaps I can help with this.

Only 15 per cent of the water is sold (refer HBRIC report March 25) and those contracts are still conditional on the dam having a workable consent, so why aren't they signing up?

In fact, farmers representing only 29 per cent of the available water from the dam (including the 15 per cent under signed contract) have requested a copy of the water user contract, so reaching the 46 per cent required for the project to reach a positive cashflow in any timeframe is now a tough ask.

To put this another way, Farmers representing only 87 properties out of 378 properties in the irrigation footprint of the proposed dam have requested a contract.

We have now committed $18.5 million of our ratepayers' capital to this project and not a "sod of soil has been turned".

The "financial close" date has been moved five times and is now euphemistically described as the time when all the "Conditions Precedent" are achieved.

There has been considerable disagreement amongst councillors over the last 14 months, mostly around transparency and information sharing and the council is essentially divided into two entrenched voting blocks.

On March 26, 2014 the council voted 5/4 to confirm the investment of $80 million in the dam project subject to the "Conditions Precedents" being met. I was concerned about several things

1. The only reference to a project cashflow that any of us had seen was a one-pager overhead of a summary cashflow commencing in 2022

2. None of us had seen a project profit and loss budget or profoma balance sheet

3. We had not seen a farmer supply contract, although we were told that they were in some farmers' hands

4. One of the two investors, Trust Power, had just pulled out of the deal with rumours the other would as well; that investor being Nga Tahu, who did pull out in May.

I was especially concerned about the withdrawal of these two investors as they were both industry experts, had more information than us and clearly much more industry experience and expertise.

I have always believed that Central HB farmers will decide whether this particular water storage project will go ahead or not. It is quite a tough deal whereby the farmer is contracted to buy the water every year for 35 years whether they use it or not. And it is relatively expensive with a CPI adjustment over a long time frame, committing the farm to a multi-generational commitment.

But on the flip side of this, the principal security on these contracts is only a two-year bank guarantee which I have never thought adequate from an investor or banking viewpoint.

Once again we are told that there are investors waiting in the wings but they can't be revealed to councillors. No surprises there.

Last week the council agreed by 5/3 (one opposing councillor was absent) for HBRIC to borrow another $2 million with another $2 million held over, to be secured against the council's cash reserves and assets which is essentially the Napier Port. We asked for the council to delay the decision for two months and get some risk analysis advice but this was labelled as "kafuffle" by the chair and rejected by the same five councillors.

But can it really drift on like this, with five councillors seemingly happy to continue advancing money on an open-ended time frame, happy with the numbers, happy with the risk, happy with the lack of water sales progress, happy with security provisions in the water users contract, happy not to have secured other investors and happy to continually move the "financial close" date.

Is it really sensible to continue promoting a project that doesn't seem to work for enough of the Central HB farmers to make it financially viable for all parties?

We retreated from the disasters of Gallipoli and still won the war and we can do that again. Just because this particular business model might not work it doesn't mean we can't regroup and take a fresh look at water storage and win the battle for economic development in our region.

-Rex Graham is a Hawke's Bay regional councillor.

-Business and civic leaders, organisers, experts in their field and interest groups can contribute opinions. The views expressed here are the writer's personal opinion, and not the newspaper's. Email: editor@hbtoday.co.nz