Don't overlook the fact that the $40m investment is a one-off, never to be repeated, inflow while this $4m return is an annual ongoing sum for the duration of the consent period.
The starting point for operating costs, given the lack of access to actual numbers, might be the potential employment of people.
I have read a figure of 80 jobs being created so an average wage of $50,000 gives a staff cost of $4m, add 20 per cent for employment related overheads (leave, ACC, benefits), gives a total of $4.8m. Add management costs, say 50 per cent of the staff cost ($2.4m), brings us to $7.2m.
People costs could well be the most significant cost but allowing for unknowns we might estimate the other costs of producing the water for export such as transport, energy, maintenance, consumables and of course the depreciation of the plant to, at worst, equal the people costs which would give us a total cost of operating of $14.2m, rounded up to $15m for ease of calculation.
Remember the $4m return the investors wanted from our calculations about the value of the investment? We need to add that to the operating costs to give us $19m, say $20m, as the total estimated annual cost of processing the water.
How much water is being produced? The number I've seen for one consent is 5 billion litres, that's 5 with 9 zeroes after it.
And here's where the maths on my cigarette packet get tricky. The cost of a litre of water from the plant according to these numbers is $20m so if 5 billion litres of water can be produced for $20m that makes the cost per litre 0.4 of a cent.
Of course I might be out in my calculations by a factor of 10 but that would only make the cost per litre 4 cents.
This is where the missed opportunity comes in. I'm not concerned about the next step which is the transfer price that the New Zealand operation will sell the finished product to the overseas company for, rather I am concerned about the benefits that might have been available to the Hawke's Bay economy if there was an export levy for this water.
We need better infrastructure to help Hawke's Bay advance - roading, community facilities, any number of projects that would make Hawke's Bay a better place. Imagine what a 10 cents per litre export levy, $500m per year, could have done for the people of Hawke's Bay and that's just one plant. I understand there are four or more in operation.
Government and local bodies have been badly caught out by this and have made no attempt to rectify the situation.
A good example of taking up an opportunity was Sir James Wattie who, noticing all the fruit rotting on the ground, did something about it.
Instead our local businessmen and leaders have allowed this resource to pass into foreign ownership.
Hawke's Bay has created a "Matariki economic strategy" with some of those involved being part of these decisions to allow our water, our most valuable resource, to not be an effective contributor to that strategy.
By allowing our water to be the subject of political ideology and short-term commercial gain we have missed a very real and significant opportunity to improve the Hawke's Bay economy over the long term.
The benefits to our economy of the water exporting business are not as strong as they would have been if we had retained ownership of the plants or placed a levy on the export of the water. These opportunities don't arise very often and it behoves our political and business leaders to be more farsighted and innovative to take advantage of them.
- Kerry Marshall is a retired accountant and manager.
