$6m loan requested

Monday 18 February 2013

The Hurunui Water Project Limited (HWP) has asked Hurunui District Council for a suspensory loan of $6 million over 3 years ($2 million per year from 1 July 2013).

HWP wants to develop an irrigation and hydro scheme for up to 58,500 hectares of dry irrigable land in the Hurunui district. The scheme could lead to a $160m increase in GDP in the district. It will cost approximately $400 million for the infrastructure. Money raised to date by HWP shareholders ($8 million) is only a contribution towards the initial feasibility costs, and large scale finance (debt and equity) will ultimately be required for detailed design and construction.

HWP’s request for financial support is to help meet the feasibility costs for the project’s design. The funding request is subject to HWP getting phase one resource consent. The resource consent hearing is scheduled for 18 March 2013 and a decision is expected before July 2013. HWP is hoping they will receive a favourable decision and then want to move ahead with geotechnical and engineering feasibility in the second half of 2013. HWP has proposed that the loan and accrued interest be repaid in 3 annual installments, commencing after 5 years (possibly sooner) when commercial funding is in place. Alternatively the loan and interest could be converted to equity, should it prove economic for Hurunui District Council to invest in the scheme for township and/or rural water supply.

Hurunui District Council CEO, Andrew Dalziel said that while the Council was not unsupportive, it was also not about to leap into making a decision without first taking all due consideration. This includes consideration of the recently reworked ‘purpose of local government’ and the decision making criteria required by the Local Government Act. Mr Dalziel said that the Council wanted to satisfy itself about whether the level of risk and security offered in relation to the loan was acceptable or not.

“The Council is concerned at the size of the request and the risk involved. It has asked HWP to provide additional information to our Audit and Risk Committee about the security being offered. If the Council does decide the risk is worth taking it will put a HWP funding assistance proposal in its next Draft Annual Plan and will seek feedback from ratepayers and residents about whether they support the Council assisting HWP with funding of this magnitude. It’s a big decision, essentially adding 1% to an average rates increase of over 5% from 1 July 2013.”

The public consultation process will get underway in April.