Three investors eyeing dam

The Ruataniwha Dam site in Wakarara Rd, Ongaonga. Photo / File

Two Australian investors are interested in the Ruataniwha Dam project, prompting the scheme's promoter to ask Hawke's Bay Regional Council if it should consider cutting a better deal for a third potential funder who is New Zealand-based.

The council has conditionally agreed to invest up to $80 million of ratepayers' money into the Central Hawke's Bay irrigation scheme and has charged its commercial arm, Hawke's Bay Regional Investment Company (HBRIC), to secure funding for the balance of the $275 million project.

In a business case published last year, HBRIC said it was seeking between $50 million and $90 million from institutional investors to fund the scheme. The third significant funder would be the government's irrigation project bridging agency, Crown Irrigation Investments.

"We're dealing with three institutional investors now and each of them would want to do the project on their own, in other words not split it with another investor," HBRIC director Jim Scotland told a meeting of the council yesterday.

Potential investors Ngai Tahu and Trustpower walked away from the project last year but having three corporates interested in the scheme ahead of a planned due diligence process appears to put HBRIC in a stronger position to negotiate a favourable financing deal.

"Having three is good news for us," Mr Scotland told yesterday's meeting.

He said one of the institutional investors was New Zealand-based and the other two were Australian, with one of the Australian businesses having a parent company in the European Union.

All three had requested their details be kept confidential and one was in "detailed discussions" with Crown Irrigation.

Mr Scotland said HBRIC suggested the council, at some stage, consider whether it had a preference for a New Zealand investor in the scheme, and if it did, whether it would be prepared to accept a lower rate of return from the scheme to achieve that preference.

"Is there a trade-off in terms of the rate of return and the domicile of the investor?"

HBRIC chairman Andy Pearce said councillors would be briefed on the potential investors as negotiations proceeded, but that briefing would need to be done behind closed doors if HBRIC was to disclose the "fullest possible amount of information about the parties and the terms" being negotiated, due to the commercial sensitivities.

Asked if an investment in the Ruataniwha scheme by either of the Australian potential funders would require the approval of the Overseas Investment Office, the HBRIC directors told councillors it would not, because the deal would not involve them buying New Zealand land.

A board of inquiry is currently working towards a court ordered reconsideration of part of its decision to grant consents for the dam and issue a related environmental plan change for the Tukituki catchment.

HBRIC managing director Andrew Newman said the process of signing farmers up to take water from the scheme was steady but slower than the company would like, reflecting uncertainty around the consenting process plus the lack of an ability to set a "drop-dead deadline" for sign-ups due to the ongoing legal action.

"Sentiment doesn't always translate into signed contracts but the sentiment remains strong. Provided we have regulatory security, the deal is there to be done."