Ruataniwha water storage scheme
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Ruataniwha Water Storage Scheme. Presentation to Irrigation New Zealand Conference 8 April 2014. Presentation outline. Freshwater in Hawke’s Bay Tukituki catchment issues & the Ruataniwha Water Storage Scheme RWSS business model A few basic stats Delivering the proposition

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Ruataniwha water storage scheme

Ruataniwha Water Storage Scheme

Presentation to Irrigation New Zealand Conference

8 April 2014


Presentation outline

Presentation outline

  • Freshwater in Hawke’s Bay

  • Tukituki catchment issues & the Ruataniwha Water Storage Scheme

  • RWSS business model

    • A few basic stats

  • Delivering the proposition

    • Regulatory security

    • Design & construct procurement and the infrastructure offer

    • Water access & uptake

    • Finance & structuring

  • Summary

    • Scheme development approach

    • Hurdles, risks, challenges & opportunities


  • Ruataniwha water storage scheme

    Hawke’s Bay Catchments


    Ruataniwha water storage scheme

    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)

    The Water Challenge


    Freshwater in hawke s bay june 2013

    Freshwater in Hawke’s Bay, June 2013


    Water management in tukituki catchment

    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

    Environmental benefits

    • Direct environmental benefits =

      • flushing flows for removing algae

      • increased river flows from irrigation return flows

    • Offsetting the economic cost of Tukituki plan change =

      • the Plan change will improve the river environment through lifting minimum flows, setting regulatory limits for nutrients

      • the RWSS can mitigate the economic impacts as an alternative source of water

    • Estimated value $50 to $80 million


    Ruataniwha water storage scheme

    Economic Benefits to Hawke's Bay Region from the RWSS


    Ruataniwha water storage scheme

    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


    Ruataniwha water storage scheme

    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

    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.


    Ruataniwha water storage scheme

    Delivering the proposition

    Parallel Work Streams

    Environmental, Social, Technical & Economic

    Feasibility Established

    October 2012

    Design & Construction

    Uptake

    Consenting

    Financing

    Structuring

    Contractual & Financial Close Target June 2014


    Ruataniwha water storage scheme

    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


    Ruataniwha water storage scheme

    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

    November 2013

    Select Preferred

    Design Phase

    Strong local & global interest

    5fully formed responses:

    • Boygues & OHL/Hawkins selected

    • Significant experience constructing dams in seismic areas

    • Innovative approach to optimise D&C outcome

    • Local involvement promoted through HB subcontractors

    • Underwriting by two of world’s largest constructors mitigates completion risk

    • Select preferred D&C provider based on two fully costed bid designs:

    • Fixed - time

    • Fixed - price

    • Design compliant

    Fully costed design 1

    Fully costed design 2

    Negotiation December-Feb 13/14

    Refinement

    Scheduling

    Documentation

    Mid 2014 Financial Close


    D c offer

    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


    Ruataniwha water storage scheme

    Uptake – April 2013(EOIs released) to Ongoing

    2012

    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

    On farm field days (Dairy, Arable, Sheep+Beef)

    April 2013

    Commercial Manager Appointed

    April 2013

    to

    November 2013

    Sign Expressions of Interest with Potential Water Users

    November 2013

    to

    Feb 14

    Preparation of Preliminary Information Memorandum/Information Memorandum/

    Water User Agreement

    February 2014

    to

    Mid 2014

    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

    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

    Summary and RecapScheme development approach

    • Ensure the scheme is part of an overall catchment water strategy

    • Seek to create regulatory security

    • Seek to manage demand and construction risk through a public private sector alliance

    • Aim to complete final go no go proposition inside 5 years

    • Take a systematic approach – pre feasibility, feasibility and final business case.

    • To achieve these timeframes – run work-streams in parallel & resource adequately


    Hurdles risks challenges opportunities

    Hurdles/risks/challenges/opportunities

    • Workable consent – April – go – no go

      • We’ve lost 3 months in our critical path in this work-stream

    • Securing committed revenue from farmers mid year – go - no go

    • Aligning compatible investors and settling the capital structure mid year – go – no go

      • the final capital structure will fold in behind revenue

    • Keeping the build process & critical path aligned

    • 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


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