Damoffer launch reveals cost rise
The long-awaited launch of the Waimea Irrigators Ltd prospectus for the proposed Waimea dam has come with a $5.7 million hike in the estimated capital cost of the project.
Waimea Irrigators Ltd (WIL) and Tasman District Council are proposed joint-venture partners in the multimillion-dollar proposed dam, earmarked to be built in the Lee Valley, near Nelson. The project is tipped to be funded by a mix of ratepayer, irrigator and Crown funding.
WIL aims to raise a $16.5m chunk of equity via the sale of water shares. Its offer for those shares is outlined in a product disclosure statement (PDS) that was launched yesterday. Product disclosure statements have replaced older forms of financial product disclosure information such as investment statements and prospectuses.
The capital cost for the dam still to be funded is listed as $81.6m in the WIL product disclosure statement, which is $5.7m higher than the $75.9m estimate used in earlier dam documentation including the council’s statement of proposal that it put out for public consultation in October.
On the higher estimate, WIL project manager Natasha Berkett said the revised budget included actual costs that had been incurred, ‘‘tested estimates’’ and revised modelling.
‘‘The result is an updated project budget of $81.6m,’’ Berkett said, adding the revised budget included $13.5m for construction contingency costs.
That updated budget meant WIL had indicated in its PDS that it ‘‘may need to use its project cost overrun facility’’ of $1.5m.
Council chief executive Lindsay McKenzie said his advice to the council was to view the new estimate ‘‘as just another set of numbers’’.
‘‘Uncertainty around them will remain until financial close approaches,’’ he said. ‘‘Uncertainly will not be removed until project completion.’’
WIL directors had taken a ‘‘very conservative approach’’. Known cost increases, such as a budget overrun of about $1m related to the land and access work stream, had been added but the provisions for scope change, risk, inflation and contingencies ‘‘substantially remain’’, McKenzie said.
‘‘The $13.5m construction contingency is still in. In addition there are other ‘contingency’ sums totalling $450,000, and $1.9m is included in the form of an additional construction inflation adjustment, bringing the ‘contingencies’ total to $15.85m.’’
However, if the estimate in the PDS turned out to be the final cost, the council’s contribution to the project would increase by $4.2m.
The share price in the PDS is $5500, as foreshadowed. The initial estimate of annual charges is $600 a share.
Berkett said the offer was open until 5pm on March 22 ‘‘and today we start communicating with potential shareholders about the PDS and encouraging them to speak to their advisers about this opportunity’’. The offer was the culmination of effort over the past 17 years by ‘‘dedicated farmers and orchardists who have been working hard’’ to secure a reliable supply of water.
‘‘In the past few years, WIL and Tasman District Council have joined together to find a community solution that works for irrigation, for urban water supply and to improve the health of the Waimea River,’’ Berkett said.
A commitment of at least 3000 shares would enable WIL ‘‘to move forward to fund its portion of the dam’’.
To help reach its goal, about 20 ‘‘ambassadors’’ would talk to their fellow irrigators ‘‘to assist with the process of learning about the offer’’.
‘‘Ambassadors will hand deliver copies of the document to the more than 200 respondents to WIL’s 2017 expressions of interest survey. We are confident irrigators will commit.’’
WIL director and orchardist Julian Raine said the launch of the PDS was a ‘‘momentous occasion’’ for irrigators and the citizens of Tasman district and Nelson city.
The proposed dam would ‘‘assure us for water for at least 100 years’’.
For Raine, the launch of the PDS was also cause for reflection, coming almost two years to the day since the death of his friend and long-time business partner Nick Patterson, who was the project manager of WIL’s predecessor.
‘‘It’s been a heck of a battle since Nick departed with a lot of false information put out by detractors, which has been disappointing,’’ Raine said.
Patterson, who was a champion of the dam project, would be ‘‘hopefully proud’’, Raine said.