Irrigation plan could buoy TrustPower's earnings

A view of the Rakaia River. File photo / NZ Herald

Irrigation could become a key part of TrustPower's generation development portfolio after an investment in Canterbury, a broker says.

The NZX-listed power firm had completed its first irrigation investment, which it hoped would be the first of several, Forsyth Barr broker Peter Young said yesterday.

The initial investment involved pumping relatively small quantities of water from the Rakaia River at a cost of about $14 million. The company's irrigation plans could potentially irrigate 80,000ha of farmland, he said.

Young estimated that the initial rate of return of all the irrigation projects was in the 14 per cent to 16 per cent range.

With the total investment potentially as high as $400 million, it was estimated the value lift from the irrigation was in the order of between 10c and 30c a share.

"While the potential is significant, the hurdles to overcome include getting the water conservation order for the Rakaia River changed, getting buy-in from local farmers that its proposals are the best available for the farmers dealing with potential land use changes. We do not see these issues as insurmountable."

One of the main hurdles was having the conservation order changed to allow Lake Coleridge to be used for irrigation purposes, Young said.

TrustPower had control of the only natural storage facility in the region.

"The natural advantage means that if large-scale stored irrigation ever gets off the ground, TrustPower's option is the only realistic option available."

- Otago Daily Times