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Irrigation funding cut to spout millions

When the Government announces its “rebuilding” Budget today, expect tens of millions of dollars to flow from unspent irrigation funding. David Williams reports.

ANALYSIS: The Government turning off the tap of public funding for irrigation is set to pay off in today’s Budget.

In April, Finance Minister Grant Robertson announced a shift away from taxpayer funding for large-scale irrigation schemes through Crown Irrigation Investments Ltd, confirming a policy change from the previous, National-led Government. While Robertson confirmed funding for three advanced South Island schemes – Central Plains Water stage two on the Canterbury Plains, Kurow-Duntron, in North Otago, and Waimea Community Dam, near Nelson – other proposals were controversially cut off.

Today, much of the focus will be on Budget spending in high-profile areas like health, education and housing. But the Government might also crow about freeing up tens of millions of dollars, potentially, by winding-down Crown Irrigation funding. By Newsroom’s rough calculations, the unspent figure could be more than $50 million. (Of course, that’s real money. If it’s being tricky, the Government could argue it has saved a lot more by referring to the $400 million that was originally budgeted to be spent over many years.)

Running the numbers

A March 29 paper to Cabinet’s economic development committee – released to Newsroom under the Official Information Act – shows the last Government set aside a total of $239.2 million for irrigation scheme funding. That’s $183 million for capital investments and $56.2 million for development funding. (Capital investments into irrigation schemes are made through interest-bearing loans, while development funding is in the form of grants that have to be matched dollar-for-dollar.)

Already, $70.5 million of Crown Irrigation money has been spent. A further $23 million of capital funding will be paid for the second stage of Central Plains Water and $38.6 million is earmarked for capital works at Waimea Community Dam. That leaves about $107 million, in total, yet to be spent.

Crown Irrigation’s estimated capital loan to Kurow-Duntroon is redacted from the Cabinet paper – but it’s unlikely to eclipse Waimea’s $35 million figure. An Otago Daily Times story from last year put the Kurow-Duntroon scheme’s capital cost at more than $35 million. Under the Crown Irrigation agreement, the irrigation company’s shareholders have to stump up about 20 percent of that. Still, if the Crown Irrigation loan to Kurow-Duntroon reaches $35 million, that would leave the Government with $30 million in unspent capital funding.

According to the Cabinet paper, stage two of Central Plains, a gigantic scheme costing $200 million that will be able to service 20,000ha with water, has received $7.1 million in development funding since 2013. If Waimea and Kurow-Duntroon receive a healthy dollop of $6 million each, the Government will have leftover development funds of about $30 million.

Put the estimated underspend together and that’s $60 million. Allowing for other irrigation spending, as well as Crown Irrigation’s operating and wind-down costs, then having $50 million leftover isn’t out of the question. Newsroom wasn’t able to check the figures with Finance Minister Robertson’s office, which has foreshadowed big savings from the irrigation policy change.

“It’s not easy money and it’s not free money.” – Geoff Keeling

The Cabinet paper shows Crown Irrigation has signed construction funding term sheets with Waimea and Kurow-Duntroon. There are a series of hurdles the irrigation companies have to meet, including securing enough investment to reach what’s called financial close. Even then, investments have to be approved by the Crown Irrigation board.

A week after Robertson’s April announcement, Waimea Irrigators Ltd said it had raised $16.5 million in equity. That’s enough, the company said, to cover the initial share of the dam’s capital cost and unlock a low-cost Crown Irrigation loan. (The scheme, a joint venture with the Tasman District Council, is estimated to cost a total of $82.5 million.)

Things haven’t been as straight-forward for the Kurow-Duntroon Irrigation Company. It was targeting April for “financial close”, according to the Cabinet paper. A week later, a press statement from Robertson said it was aiming for May.

Now, company chairman Geoff Keeling, a Duntroon dairy farmer, says it’s aiming for mid-to-late June. He’s confident it’ll reach the necessary shareholder uptake and says it already has water-take consents and access agreements in place. “Our equity raising is on target.”

While the Kurow-Duntroon scheme covers roughly the same area as Waimea – between 4000 hectares and 5000ha – it’s mostly an upgrade of an existing scheme, established in the 1960s. Most of the initial 4000ha is already irrigated. In part, an open water race will be replaced with pipes while. In other areas, piped water from the dam will mean water takes from small streams can be retired.

Keeling says of the Crown loan: “It’s not easy money and it’s not free money.

“It comes with a number of strings attached and they’re not there for whole-of-life funding. They’re there to get these projects off the ground, get them on their feet, because there’s a lot of cost up front to actually set these things up and develop them.”

While Kurow-Duntroon is still in line for Crown funding, another scheme cut off by the Labour-led Government’s policy change was Hurunui Water Project. A controversial Hurunui District Council proposal to invest $500,000 in the $200 million irrigation scheme will be considered at a full council meeting today.

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