Dam plan needs bridging finance

Hawke's Bay Regional Council's investment company says it needs to borrow up to $4 million to keep the Ruataniwha dam project on track.

The loan is required because a protracted legal challenge means the deadline to stitch together funding and customers for the $275 million Central Hawke's Bay irrigation scheme could stretch out to the end of February next year.

That is 20 months beyond the "financial close" date the company was working to this time last year.

Under its statement of intent, Hawke's Bay Regional Investment Company - which owns Napier Port on behalf of the regional council and has been driving the Ruataniwha project - is not allowed to borrow money without the council's approval.

HBRIC will be seeking that permission at a meeting of the council on Wednesday.

Down the track, it may ask the council to lend it the money.

HBRIC currently has no debt and its assets - predominantly its ownership of the port - are worth approximately $200 million.

The company has resource consent to build the Ruataniwha dam. However, a drawn-out legal challenge by environmental groups has delayed the final decision on a related environmental plan change which has frustrated HBRIC's efforts to sign up water users for the irrigation scheme.

The board of inquiry dealing with the plan change issue indicated last week it would release a draft decision around the end of next month.

A final decision is expected in mid-May but could be open to further legal challenge.

In a paper to be considered at Wednesday's council meeting, HBRIC said it needed four months after clearing the legal process to reach financial close.

Allowing for the possibility of appeals, financial close was not expected before October 31 and "could be as late as February 2016," it said.

Early last year HBRIC hoped to have the Ruataniwha deal sealed by the end of this month

However the deadline has been pushed back several times over the past 12 months as legal proceedings have dragged on.

If HBRIC is given permission this week by the council to borrow money to see it through to financial close, the company says it will seek funding from the council itself, banks and government funding entity Crown Irrigation Investments.

The final make-up of the loan would depend on "whichever [lender] provides the best combination of financial terms and other requirements," HBRIC says.

Under its current budget, and excluding the $4 million loan proposal, HBRIC will have spent $12.2 million on the Ruataniwha project by the end of June when its existing funding is due to run out. Some of that money has been contributed by two potential investors who walked away from the project last year.

The Ministry for Primary Industries has contributed an additional $3.5 million to the project.

When the possible need for further funding was first raised earlier in the year, some regional councillors raised concerns about HBRIC's spending.

The council has agreed to invest up to $80 million in the scheme once financial close is reached.

Independent economic analysis has indicated the dam would directly or indirectly provide 2000 jobs and increase regional economic activity by $200 million a year.