Risks and Opportunities in Irrigation Infrastructure Development

1. Risks and Opportunities in Irrigation Infrastructure Development Stephen McNally INZ Conference, Hawkes Bay, 2014

2. What is risk? • Something that may inhibit your ability to meet your objectives • Is that anything and everything? • Probably, YES!!

3. Why Opportunities? • Can adverse situations be turned into positive outcomes? • Taking a long term view • Sometimes, YES!!

4. How big is the ring fence? • Is it within your ability to manage and influence? • What can you do about it? • Can apply to a Scheme Development or an on Farm Irrigation System decision • But ≠ same complexity of process

5. How far ahead do you look? • Over what timeframe do you assess risk? • Will short term decisions affect long-term outcomes? • How will risk and opportunities be traced through decision making processes?

6. Prosperity, Resilience, Growth • SMART Irrigated farming provides a core economic base underpinning NZ’s economy and community • Addresses the management of reliable and resilient water resources • Meets the needs of rural and non-rural communities • Process of collaborative decision making

7. Reliable water supplies • Making water available to professional farming operators …. • Provides enhanced land management tools • Improves decision making around water use, and nutrient management • Irrigation provides flexibility for future options for land management.

8. Making the right call • All activities of an organisation’s development aspirations involve risk and opportunities • An investor needs to be well informed to make a confident decision to commit funding to a project

9. Levels of Service (LoS) • Critical element of any infrastructure development is determining the Levels of Service • Both in short and long term timeframes • Appropriate to needs and desires of water users • Not so high as to cut deep into scheme unaffordable

10. Level of service criteria … • Reliability of water supply high on the list • Hydrological reliability, and • System maintenance downtime • Ease of managing individual water takes • Timeliness of information • Planned and unplanned supply disruption • Frequency and accuracy of billing information

11. Hand in hand • Risk management and level of service go hand in hand within an irrigation infrastructure development • One informs the other in a cyclic pattern • Across the life of the scheme • Maximises the opportunity for efficiency and effectiveness

12. You are not Eeyore • Not about being risk averse or a doomsayer • Adopting good risk management process allows organisations to better understand and accommodate risk within their development • Able to determine the risks to success (= LoS) • What expertise should be addressed to those risks and at what stage • Where stakeholders should focus their efforts to the greatest effect

13. Risk register can be substantial! • Business case drivers – local affordability, international markets • Political environment – policy and regulations • Funding – timing, availability and due diligence, NPV, ROI • Technical risks – source to demand, design, construction • Operational risks – uptake, levels of service, $ sensitivity, skills • Natural environment risks – baselines and extreme events • Organisational risks – governance and management skills • External stakeholders – supporters and antagonists • Communication – internal and external • Legal – structure and statutory • Health and Safety – own and third party • …

14. Risk Assessment • Be structured in how you assess and deal with risk • Consider • Significance • Likelihood • Timeframe for incidence • Management strategy • Fair and appropriate allocation • Direct cost • Indirect cost • Monitoring, Review and Decision documentation

15. Risk allocation • Making sure risk is correctly allocated between parties • Those affected by and who can influence the outcomes • Essential element of organisational behaviour • Accepting a fair apportionment of risk • Using that knowledge to make decisions about future provisions • Weighing up the costs and benefits

16. Multi-criteria decisions • Of course it is not simple!!! • Early output needed is a decision criteria matrix • What is important and when in the timeframe • A clear set of priorities • Helps organisation evaluate each opportunity or risk that it encounters • Even if they are future events

17. Lots to think about

18. Whole of life consideration

19. A Typical Scenario – Upper Waitaki Scheme • Existing scheme established in 1960’s • Facing significant change to consent conditions annual volume allocation • Consideration of scheme governance and relationships to others in catchment • Impact of change of irrigation system on land use, water bodies and environment • Improvement to water and power infrastructure and technical challenges • Altered level of service, flow, pressure, reliability • Affordability and funding • Community stakeholder support and communication • Outcome  structured decision support

20. Applied at farm level decsions • Droughts and floods • Combination of light sandy and variable peat soils • Existing drainage infrastructure • Limited power supply in district • Complex consent conditions for water extraction • Change of ownership pending including corporate and iwi • Multiple funding sources with implications on business case • Sensitive environment and heritage values • Limited local equipment services • Outcome  supportable progress

21. What Opus can do to help • Engineers, scientists, planners and project managers providing independent, technically-focused services … • Irrigationdevelopments – schemes and on-farm systems • Technical risk assessments – multi criteria analysis • Dairy farm engineering – effluent ponds, structures • Water Resources Sciences– hydrological modelling and catchment management • Hydraulic Engineering– rivers and open channel flow management • Flood Management– flood bank design and emergency planning • Farm environment /nutrient plans – riparian and wetland design • Environmental Assessment – Ecology and biodiversity • Maori Business Services – consultation and cultural assessments • Rural planning– resource consents and planning advice (esp. NPS rule changes)

22. Who to Contact • Renee Murphy, Hawkes Bay • 027 436 1706 • Stephen McNally, Wellington • 027 687 5299 • John Leatherbarrow, Canterbury Projects • 027 612 7313 • Ian Walsh, Otago • 027 626 0666

23. Thank you