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Unlocking Irrigation Scheme Viability: Economics and External Funding Insights

This presentation by Greg Petersen and Crighton Anderson explores the critical viability of irrigation schemes in New Zealand, highlighting key issues such as lengthy timeframes, public perception, and large capital requirements. It discusses the importance of water value and how it contributes to economic growth, rural community revitalization, and employment. Using the North Otago Irrigation Scheme as a case study, the session examines how external funding can alleviate financial constraints, accelerate development, and ensure equitable pricing for water resources, ultimately benefiting landowners and farmers alike.

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Unlocking Irrigation Scheme Viability: Economics and External Funding Insights

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Presentation Transcript

  1. Irrigation Scheme ViabilityGreg PetersenRegistered ValuerCrighton Anderson Property & Infrastructure Limited

  2. Agenda • What’s holding us up? • How much is water worth? • Leveraging external funding

  3. What is the hold up? • Lengthy timeframes • Public perception • Farmer support & uptake • Large capital requirements

  4. Irrigation is important to NZ It’s no secret ... • Stimulate the economy • Invigorate rural communities • Provide employment • Reduce climatic risk of farming Jolly tough to finance…

  5. How much is water worth? … significantly more than manyrealise • Cost reflects • cost of developing and financing the infrastructure • annual water charge • Value typically incorporated into land value • Existing schemes provide a ‘windfall gain’ to the land owner

  6. North Otago case study The North Otago Irrigation Scheme - NOIC • Commissioned October 2006 • One of the driest regions in the country - 450 to 650mm • 10,000 hectares of typically rolling country • Proximity of Waitaki River

  7. North Otago changing land use Land use before and after NOIC

  8. Translating the impact to a farm

  9. Isolating the value of water

  10. Funding the North Otago scheme Stage one combination of: • Farmer capital $18.5m • 10,000 shares @ $1,850 per share = $2,100 per share today • One share per hectare for dairying, less for arable • Waitaki District Council loan $10m • Term bank debt $29.5m Meridian Energy involvement was importantto the success of the development Outcome….. Increase in Land Value $9,167ha less $2,100 results in $7,000 land owner windfall

  11. Leveraging external investment • Long term investment • Relatively low risk once established and up and running • Increasing recognition of water as a scarce resource with economic value • Synergies with other investments and expertise

  12. Getting the balance right… ….Establishing a fair price for water!

  13. Benefits of external funding • Removal of farmer capital constraints to development • Doesn’t require universal farmer agreement • Water on farms faster • Quicker economic gains • New expertise

  14. Challenges of external funding • Change in governance, perceived lack of control • Water a farm input to be paid for accordingly • Giving up some profit • Less dramatic increase in land value

  15. Summary • Economically important….jolly hard to finance • Water is more valuable than currently recognised • Existing developments giving windfalls to landowners • External investment can make it happen faster • Important to get the balance right

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