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Agenda

Irrigation Scheme Viability Greg Petersen Registered Valuer Crighton Anderson Property & Infrastructure Limited. Agenda. What’s holding us up? How much is water worth? Leveraging external funding. What is the hold up?. Lengthy timeframes Public perception F armer support & uptake

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Agenda

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  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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