Ruataniwha Water Storage Scheme
Presentation to Irrigation New Zealand Conference
8 April 2014
Presentation outline
1. Freshwater in Hawke’s Bay
2. Tukituki catchment issues & the Ruataniwha Water Storage Scheme
3. RWSS business model
–
A few basic stats
4. Delivering the proposition
–
Regulatory security
–
Design & construct procurement and the infrastructure offer
–
Water access & uptake
–
Finance & structuring
5. Summary
–
Scheme development approach
–
Hurdles, risks, challenges & opportunities
Hawke’s Bay
Catchments
The Water Challenge
Hawke’s Bay has plenty of water
•
Hence extensive flood protection infrastructure assets
But is summer dry
•
Has significant seasonal limits when the water is most needed and has highest value
•
Long-term drying trend
•
Very low river flows in typical summers
•
Poorer water quality in lowland areas in part coupled with the low flows issue, part
urban
Has traditionally dealt with not enough water solely through a regulatory
approach
•
Traditional planning instruments on their own lack flexibility when dealing with change
(average 8 years)
Freshwater in Hawke’s Bay, June 2013
Onga Onga - Average Daily Soil Moisture
60
50
Soil Moisture (%)
40
30
2007-08
20
2008-09
2009-10
2010-11
2011-12
10
2012-13
Field capacity
0
1 July
1 August
1 September 1 October
1 November 1 December
1 January
Month
1 February
1 March
1 April
1 May
1 June
Water Management in Tukituki Catchment
1 = problem action & inaction
2 = storage pre-feasibility
3 = full feasibility
4 = full scheme operational assessment & final business case
Following 3 years of feasibility studies, examination of 20+ sites for water storage options (large
and small), and extensive stakeholder consultation, the team is on track for determining final
financial viability by June 2014
Environmental benefits
• Direct environmental benefits =
o
flushing flows for removing algae
o
increased river flows from irrigation return flows
• Offsetting the economic cost of Tukituki plan change =
o
the Plan change will improve the river environment through lifting minimum flows,
setting regulatory limits for nutrients
o
the RWSS can mitigate the economic impacts as an alternative source of water
• Estimated value $50 to $80 million
Economic Benefits to Hawke's Bay Region from the RWSS
Scheme Governance
The below comprehensive current and future governance structure will ensure a robust investment
recommendation is made, and contractual frameworks will protect end users against inherent natural monopoly
market power
Scheme Sponsorship
Governed by:
5 Independent Directors
Dedicated RWS sub-committee
• Agribusiness
• Water strategy
• PPP/SPV Commercial Lawyer
•
Large Civil Works Engineer
•
Cultural & Mana Whenua Advisor
Operational Assessment Scheme delivery
•
CEO and RWSS Internal team with assistance from:

Infrastructure Financing Experts

Large Dam Enginering Advisor

Legal (PPP, Securities Law)

Resource Consent / EPA
Advisory
Scheme Model
•
Water supply business that supplies water to users on volumetric charge basis
Farmer do not have to be, but can be, investors
•
Business owns and operates storage and distribution infrastructure – supplies
water to farm gate
•
Modified BOOT-like model, with SPV operating business for defined concession
period (70 years)
•
Assets revert to HBRC (or its successor) for nil compensation at end of
concession period (Iwi & local investors rights carry through)
•
Concession deed with HBRC controls many public good aspects of project
•
Water users have long term, take or pay, contracts, but some water available
for spot market
Proposed infrastructure
• One large dam 83m high
• Distribution network for approx 26,000 ha
• River corridors offer alternative distribution
• Approx 80,000 ha in catchment irrigable based on slope
class 0 – 7 degrees
• Depending on land use and consumption very high
reliability water for up to 30,000 ha.
Delivering the proposition
Parallel Work Streams
Environmental, Social,
Technical & Economic
Feasibility Established
October 2012
Structuring
Financing
Uptake
Design & Construction
Consenting
Contractual & Financial Close Target June 2014
Consenting – 6 May
(EPA lodged)
to April 15 2014 - Draft Decision
Final Decision 28 May
•
Resource consent application for the Ruataniwha Water Storage
Scheme and Tukituki River Catchment Resource Management Plan
Change lodged by way of a joint EPA process (6 May)
•
The Plan Change will increase minimum flows and set water quality
standards to promote efficient water usage and environmental
sustainability
•
The Plan Change will increase minimum flows and set water quality
standards to promote efficient water usage and environmental
sustainability
D&C Procurement – Feb 2013
(EOI)
to Mid 2014 (ready to construct)
Design and construction for the Scheme is being procured through a competitive global process
February 2013
EOI
March 2013
Short List
Strong local & global interest
- Boygues & OHL/Hawkins selected
5 fully formed responses:
- Significant experience constructing
dams in seismic areas
Design Phase
Fully costed design 1
- Innovative approach to optimise D&C
outcome
- Local involvement promoted through
HB subcontractors
November 2013
Select Preferred
Select preferred D&C provider
based on two fully costed bid
designs:
Fixed - time
Fully costed design 2
Fixed - price
Design compliant
- Underwriting by two of world’s largest
constructors mitigates completion risk
Negotiation
December-Feb
13/14
Refinement
Scheduling
Documentation
Mid 2014 Financial
Close
D&C offer
Storage
•
Central Core Rockfill Dam 83 m high
•
Static storage approx 98 Million m3
•
6.5 megs hydro
Distribution
•
Primary distribution 16 kms canal, 17 km pipe
•
Secondary distribution approx 200 km pipe
•
Pressure = 35 m head across pipe network
Further optimisation
•
Run of river takes Tukituki mainstem
•
Ground water swaps?
•
Hydro
Uptake – April 2013
2012
(EOIs released)
to Ongoing
Engagement with farmer stakeholder group to establish earlybird incentive framework
December 2012
Engage with farmer advisor network
Release farm budgets to farmers
March - April 2013
April 2013
April 2013
to
November 2013
November 2013
to
Feb 14
February 2014
to
Mid 2014
On farm field days (Dairy, Arable, Sheep+Beef)
Commercial Manager Appointed
Sign Expressions of Interest with Potential Water Users
Preparation of Preliminary Information Memorandum/Information Memorandum/
Water User Agreement
1. Release of Information memorandum for select capital raising amongst eligible investors
including farmers
2. Convert EOIs to long term Water User Agreements
Mid 2014: Target Contractual & Financial Close
Water Access & Uptake
• We currently hold 110 EOI’s, for 44 Mm3 water or 13,000+ hectares
• 47% of the water under EOI, would equate to 27,500 ha on current
metres cube per ha
• Aiming to contract 40 Mm3 water at financial close
• Contractual elements:
 Water Price – 23 c take of pay + 3 cents for pressure
 35 year contract
 CPI inflator with reset mechanism
 Farm environmental management plan
• Opportunity for investment via Information Memorandum for eligible
investors (Irrigators/ Hawke’s Bay Investors)
Summary and Recap
Scheme development approach
1.
Ensure the scheme is part of an overall catchment water strategy
2.
Seek to create regulatory security
3.
Seek to manage demand and construction risk through a public private
sector alliance
4.
Aim to complete final go no go proposition inside 5 years
5.
Take a systematic approach – pre feasibility, feasibility and final business
case.
6.
To achieve these timeframes – run work-streams in parallel & resource
adequately
Hurdles/risks/challenges/opportunities
1. Workable consent – April – go – no go
> We’ve lost 3 months in our critical path in this work-stream
2. Securing committed revenue from farmers mid year – go - no go
3. Aligning compatible investors and settling the capital structure mid year – go –
no go
> the final capital structure will fold in behind revenue
4. Keeping the build process & critical path aligned
5. RWSS may create new ground for rural water infrastructure in its approach to
> consenting
> procurement
> capital structure
> Bulk water supply business model
Biggest current risk/opportunity = time and momentum