Stuff - Waimea Irrigators Ltd revises its prospectus for Waimea dam project

Written by Cherie Sivignon

Dam proponent Waimea Irrigators Ltd is revising its prospectus for the Waimea dam project.

Adjustments to the product disclosure statement (PDS) Waimea Irrigators Ltd (WIL) published in February for the sale of water shares in the dam project come after changes were made to the financial model for the multimillion-dollar proposal.

WIL strategic adviser John Palmer on Monday said the revised PDS was still being finalised. It was expected to be released during October.

Tasman District Council and WIL are likely joint-venture partners in the project, earmarked for the Lee Valley, near Nelson. Changes to the financial model for the dam come after it was revealed estimates for the project had blown out. Once finalised, the updated pricing took the remaining capital costs for the project from an estimated $75.9m to about $99m, leaving the council and WIL to find an additional $23m between them.

The hike in expected costs derailed plans temporarily when councillors voted in August to effectively end the project. However, in September they agreed to revoke that  August decision and proceed. The U-turn came after a revised funding proposal was presented that would the lower the expected additional costs for ratepayers associated with the blowouts.

Initially presented and discussed by the council behind closed doors on September 6, the confidential section of the agenda for that meeting was later made public. It outlines how the $23m funding gap will be filled.

The council's share, of $11.5m, is tipped to come from the Local Government Funding Agency – $5.75m as a loan to the council and another $5.75m that will be on-lent to a proposed council-controlled organisation (CCO), which will operate the dam.

Of the $5.75m to the council, $3.44m is to be covered by increased costs to urban water users, which is estimated to be about $25 a year for a "typical urban household". The remaining $2.31m is to be loan funded over 30 years with repayments covered by income from the council's enterprise activity, predominantly forestry, which will also be used to repay a $10m interest-free loan to the council from Crown Irrigation Investments Ltd (CIIL). As part of the changed funding model, the term of that CIIL loan was extended from 10 to 20 years. With the repayments spread over a longer period, payment of the $2.31m loan can be accommodated without taking more annually from the enterprise activity than planned before the $23m funding gap.

WIL is expected to service the $5.75m loan to the CCO up to a limit of $375,000 a year. Council finance boss Mike Drummond said a 30-year table loan at 4.2 per cent would require annual repayments of circa $342,000 a year.

Both Drummond and Palmer confirmed the servicing of the loan to the CCO of $375,000 did not mean WIL's potential shareholders had to pay more. The move is being made possible without increased payments from WIL shareholders because CIIL has reduced the interest rate on a proposed $22m loan to the CCO for WIL.

The bulk of WIL's $11.5m share of the $23m funding gap is to come from an external New Zealand investor, which has not been identified. A WIL position statement, dated August 30, says a term sheet has been agreed with the investor for the issuance of 2000 convertible preference shares for a subscription of $11m to yield net capital of $10.5m.

Palmer declined to make any further comment about the investor as negotiations were "still progressing".

Other questions about the possible implications for people who had made commitments for 3000 WIL water shares would be answered when the revised PDS was finalised "and those updates are under way right now", Palmer said.