Fifteen cents is basically just a sensitivity based on 10 cents. Note: given the weak demand from Ruataniwha farmers I don't think one can assume more than 15 cents per cubic metre of water price and be remotely credible.
Let's look at Tividale first:
I note that Michael Bassett-Foss rates this project as a two out of five - with one being the lowest and five the highest. It also scores extremely poorly environmentally (one out of five). This is hardly an auspicious start.
Tividale is a single dam with a capacity of above 30 million cu m and irrigates 9800ha (one third by run-of-river and the other two thirds by 24km of piped distribution).
The cost is $71-$105 million with a midpoint of $82 million.
I find it incredible they can build a dam and a distribution scheme for no more than $105 million.
As I noted, regarding the Mangatarere scheme, I would have thought the dam alone would cost $75-$100 million and - based on the Ruataniwha - the distribution scheme potentially an extra $100 million.
However, I'll give him the benefit of the doubt here.
Based on 30 million cu m capacity and selling water at 10 cents cu m, that's maximum revenues of $3 million a year.
To keep things simple, let's not count annual running costs, assume all the water is fully sold on day one, and assume a project finance rate of 5 per cent (rather than the 6-8 per cent I normally use). This means the cashflows can sustain a $60 million build, which isn't much help as the dam costs at least $71 million.
Now, let's repeat with 15 cents - this is enough to fund a $90 million build, so it looks like we're in.
However, the problem comes with the third of the capacity that is simply run-of-river - as the dam company can't charge irrigators for drawing water from the river as they can only charge for the piped water. This shrinks the $90 million revenue down to $60 million - and you are back in infeasible territory.
For completeness, if I used 10 cents and six per cent (rather than five per cent) I get exactly $50 million as predicted ...
In short, this project should be abandoned now - with an off ramp based on water being unaffordable to farmers.
Now let's look at Black Creek:
Mr Bassett-Foss rates this one as a four out of five - so much better.
This is a two dam solution and will have a combined capacity of 67 million cu m and will irrigate 19,700ha (so is, as I expected, at least 65million cu m in capacity). It is distributed by 89km of pipes.
Cost is $138-205 million, midpoint $161 million.
The dam costs look very light especially with a distribution system attached - remember, HBRIC reckon it will cost $150 million just to lay the pipes over 15,000-20,000ha, so I don't know how WWUP can build two dams and a distribution system for what they claim.
At 10 cents a cu m, and employing the same assumptions as above, the cashflows can sustain a $134 million build. This is just below the $138 million lower-end estimate, which makes it infeasible at 10 cents.
At 15 cents things are a little better - it can sustain a build cost of $201 million which, potentially, makes it a goer.
However:
I've been very very generous with my assumptions and the WWUP numbers look somewhat heroic.
I, therefore, think this one is likely to struggle too - so it's a marginal call whether to look much further.
I think the critical question is whether funding can be found at 5 per cent - as I suspect that that may be challenging too.
The bottom line seems to be the Tividale option is a complete dud and Black Creek is barely marginal.
