Another factor further damaging the case for subsidies for dams

With the ongoing battle against the Ruataniwha Water Storage Scheme I have been doing research into other irrigation projects. I do this because there seems to be this cargo cult mentality of “build it and they will come”…and “because dairy” pervading decision making.

The RWSS proposed by the Hawkes Bay District Council is seriously flawed and is essentially a permanent subsidy for just a few farmers with no realistic or sensible business case. We know this because if the business case stacked up investors would be fighting to join the scheme and funding it instead of the ratepayers pouring millions of good money after bad.

The expected cost of running Canterbury’s Central Plains Water (CPW) scheme has risen 25 per cent in the past two years, a shareholder says.

CPW has asked Selwyn District Council (SDC) for a loan of $8 million so it can design stage two of its $375m water storage and irrigation network.

The council lent for CPW’s first stage and has been repaid. The council is not able to use the scheme’s vital resource consents as security for a further loan.

CPW’s bankers have a call on those consents in the event the project cannot be fully financed and finished.

Crown agencies are waiting for a strong show of private backing before giving CPW more grants or loans.  

Hororata beef farmer Franco Luporini opposed a second council loan.

CPW had gone to farmer shareholders in September 2013 to sell construction shares for stage one in Hororata and Te Pirita districts, south-west of Christchurch.

11 per cent of those shares were unsold, the offer had to be extended for a week “and eventually Fonterra had to subscribe the unsold shares”, Luporini said at an SDC public meeting on Monday.

This was despite a milk payout of $6.50 kilogram of milksolids at the time. The current milk price was less than $5.50kg – less than a break-even cost for many farmers.

The expected cost of the scheme to shareholders taking water had risen from $600/ha a year in September 2013 to $750/ha.

Luporini surprised some at the SDC meeting with a 2010 Treasury report, The Potential of Irrigation, which said the benefits of proposed irrigation schemes would be mostly from their construction.

The analysis of 12 schemes including CPW at that point found that when all costs were considered they would “constitute a loss-making investment” at the farm gate.

Boom, and there you have it. The Ruataniwha scheme is no different. In fact at the public meeting in Napier that I attended the benefits of the scheme were pitched on the basis of the CPW outlined above…which now seems hilarious given the problems that CPW is facing.

The business case has simply heroic assumptions like the milk payout being around $10 for the scheme to work for farmers. At less than $5.50kg it is never going to be economic and that is why the canny farmers aren’t signing up for the HBRC’s dodgy socialist dam that will wreck a river and flood DoC land.

If the private sector cannot see any returns they run for the hills. Don’t you just love the bureaucrat weasel words “constitute a loss-making investment”…in other words a dud deal.


– Fairfax

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As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.

To read Cam’s previous articles click on his name in blue.