Jan. 23 (BusinessDesk) - The government is setting up a fund to play a “bridging role” for investments in regional water storage and irrigation projects to facilitate private investment.
A yet-to-be-named Crown-owned company will take minority stakes in water projects with a long-term goal of getting out and leaving the projects to the private sector.
While the government hopes to "get our money back", Prime Minister John Key suggested there was no expectation of dividends and that the scheme was intended to accelerate investment that might otherwise stall.
Some $80 million of funding is available for the first year but the government has signalled previously that $400 million will be available over a period of years for investments in irrigation.
“A number of groups are developing proposals for these larger, regional-level schemes, and the government expects to consider at least one proposal in the next 12 months,” outgoing Primary Industries Minister David Carter said.
Canterbury, Hawke’s Bay, Otago, and Nelson/Tasman are seen as regions likely to benefit initially.
The idea is that more water storage will capture rainfall, providing a source for irrigation which will increase economic growth in areas where too many small players have been unable to coordinate the capital to undertake a new irrigation scheme.
“The government believes that playing a bridging role will get the right projects under way,” documents accompanying Carter's announcement say.
IrrigationNZ chairman John Donkers described today’s move as "monumental" and Fonterra, New Zealand’s largest business, welcomed the move.
Donkers said IrrigationNZ had asked for government assistance, in line with overseas support for irrigation infrastructure.
An $80 million injection would get many regional water projects over the line and there would be wider community outcomes from the projects.
Irrigation would create new jobs, make farming, viticulture and horticulture more viable, and ensure more sustainable use of water.
He did not go into detail but irrigation has facilitated the conversion of farms to water-intensive dairying in many regions of New Zealand.
Fonterra said that water was fundamental to dairying, and investments in agriculture benefitted the whole economy.
“This announcement reinforces the need for the investment industry to be interested in irrigation,” Donkers said.
“The government is seeking to encourage private investment: first by assisting regional backers to do a good job of the investigation and planning phase to create good-quality proposals, and then by offering the possibility of co-funding if a proposal meets certain criteria,” the background documents say.