CIF Project - Barhill Chertsey Stage One

Grant No: 08/01

Last updated: 18 May 2010

Final report

www.bciwater.co.nz

BCI News (Barrhill Chertsey Irrigation Ltd) Newsletters

Contact Details

Name of Applicant Group: Barrhill Chertsey Irrigation Ltd
Contact person
: John Wright
Address
: Marrs Road, RD 12, Rakaia 7782
Telephone 1
: 03 302 8890
Telephone 2
: 0274 362 358
Email
: john@wrightfarms.co.nz

Project Details

Status: Finished
CIF funding
: $130,000
Total project funding
: $500,000
Proposed start date
: 2008-07
Proposed finish date
: 2009-10
Region
: Canterbury

Project description

The Barrhill Chertsey (BCI) stage one project will build infrastructure to take 17 cumecs of water from the Rakaia River at Happy Valley, 4km below the Gorge Bridge. The water will be conveyed by a 3.5 km canal to the vicinity of the Highbank Power Station via two electricity generators.

Pumps will deliver 8 cumecs of water to the Rangitata Diversion Race (RDR) on the upper terrace for irrigation in Ashburton District. Proposed conveyance and water swap arrangements with RDR will allow irrigation water to be delivered to a pipe network to 17 600ha across the upper plains in the district.

Stage one will use the first of the consented BCI water take on arable, dairy and extensive pastoral farms. Current economic circumstances would suggest a slight shift from extensive pastoral farming to arable and dairy production.

Stage two of the BCI project will likely include construction of a canal to deliver the remaining irrigation water (17 600ha) to the Ashburton District by gravity and include significant electricity generation in conjunction with water currently under application by Ashburton Community Water Trust. This stage will also likely include significant foothills storage to provide the BCI and other irrigators in the district with improved reliability.

The issue/opportunity

In 2001 BCI was granted consents to take 17 cumecs of Rakaia River water to irrigate up to 40,000ha of Mid Canterbury. Some one hundred and seventy farmers in the scheme area then funded a feasibility study but the subsequent proposal failed to gain adequate support to move forward.

In 2006 BCI was granted an extension to the consents which were close to expiry, and subsequently a new proposal has been developed to distribute water across the upper Mid Canterbury Plains.

In March 2007 BCI signed a preliminary agreement with Electricity Ashburton Limited (EAL) to further develop the proposal using the RDR infrastructure, and in July 2008 a further extension of 18 months was granted for the consents. This proposal is now ready to go to prospectus stage, so that the scheme can be enacted before its consent deadline of September 2010.

BCI has three major challenges to progress the stage one project to construction.

  1. Negotiate access to existing infrastructure to enable distribution to a wider irrigator base whilst providing certain comfort that the proposal will not affect the reliability or consenting rights of those existing irrigators.
  2. Provide a suitably compelling case for farmers in the proposed area to invest in the project.
  3. Retain project momentum up to construction stage.

The CIF funding will assist in developing the following:

  1. Access to existing infrastructure
  2. A short form prospectus to raise capital from farmers
  3. A financial model based on response.
  4. A long form prospectus to raise development capital
  5. Managing the uptake of irrigation.

The context/background

The BCI Project is vital because Mid Canterbury farmers have little alternative sources of new irrigation water in the district. The 17 cumecs of Rakaia River water is already consented and with the support of EAL, the project will proceed on time providing the required infrastructure and best practice delivery mechanisms.

BCI Stage One will deliver water to the upper plains of the Ashburton District, an area that has limited ground water opportunities due to water depth and over-allocation. A number of farmers in the area with current deep well irrigation have indicated they wish to purchase BCI water and make their ground water takes available to lower areas within their zone. The proposal will undoubtedly take pressure off further allocation of ground water resources in the district providing for improved utilisation of the district’s water resources.

BCI Stage One will also provide for a more balanced use of the district’s water and energy resources. The use of "run of river" water in the upper plains will significantly reduce energy consumption for pumping and provide further ground water recharge in the lower plains. Electricity generation within the scheme will provide the district with a valuable source of renewable energy generation.

Economics over a period of time will ensure a shift from deep well use in the upper plains if a "run of river" supply is available.

Methods

With less than 18 months to complete the scheme, the pressure is on BCI to secure farmer support and financial commitment for the project.

In October 2008, the company will release a short form prospectus in tandem with a website offering the share issue. Early in 2009, when more certainty is available from negotiations with Electricity Ashburton and the RDR, a long form prospectus will be issued which will indicate the final pricings for water and delivery. BCI’s monthly newsletter, a new initiative this year and regular media updates will also highlight the prospectus process and encourage farmer interest.

The project aims to confirm farmer support and move the scheme forward in a very short space of time.

Project update: October 2009

The Barrhill Chertsey Irrigation Limited stage one capital raising closed 31 July having raised in the region of $20m from shareholders. This was unfortunately less than the minimum requirement of $33m set out in the prospectus. The shortfall was justified on the basis of the poor economic conditions of the time and subsequent difficulty in justifying the short term business case for irrigation.

Because less capital was raised than required the project could not proceed on the basis proposed. BCI put significant resources into developing an alternative development which would provide water to shareholders at similar pricing and meet the deadline for delivery on the consent.

The alternative business case developed required the cooperation of all of the earlier participants including Electricity Ashburton Limited, Trustpower Limited, RDR Management limited and Tyco Flow Control Pacific Pty Limited. The basic business case included Trustpower Limited constructing a smaller intake near the Highbank Power Station and pumping 3 – 5 cumecs to the RDR, thus eliminating the initial requirement for the primary canal structure which delivered the full 17 cumecs to Highbank. From the RDR a slightly reduced pipe network would be installed to allow for target areas to be eventually serviced with 6 cumecs of water. This network and the modifications to the RDR were proposed to be funded by a joint venture arrangement between BCI and Electricity Ashburton

The revised business case was put to a meeting of those shareholders who supported the June capital raising on 15 September and then to all shareholders at a special meeting on 30 September. Attendance and support at these meetings was overwhelming and the special meeting approved major transactions to proceed with the alternative development.

An intensive period of design and negotiation occurred with the aim of presenting the final business case to shareholders with a further prospectus in November.

The Acton development has progressed well with those Acton shareholders supporting a development to deliver up to 3 cumecs to the Rakaia Pendarves area by widening the existing Ashburton District Council stock water race network in the area. That development is proposed to be built by Rooney Earthmoving Limited on a project finance basis with a right for irrigators to buy out the infrastructure in the future.

Variations to the BCI consents required to allow this development to proceed have been issued and the aim is to have water flowing by September 2010.


Project update: June 2009

The Barrhill Chertsey Irrigation Limited stage one capital raising commenced in June 2009. The release of the prospectus on 3 June was the culmination of months of intensive negotiation and preparation.

As part of the package presented to shareholders a number of major agreements were completed in this period:

  • A “heads of agreement” with Electricity Ashburton Limited relating to the construction of the primary canal.
  • A “Penstock Access Deed” with Trustpower Limited relating to pumping water through existing Trustpower infrastructure.
  • An “Access Deed” with RDR Management Limited enabling the water swap to take place.
  • A fixed price construction contract with Tyco Flow Control for the construction of the piped distribution system.

BCI also completed feasibility and pricing studies relating to the pump station, RDR modifications and storage sites. This information was incorporated in the financial model and was the basis of the scheme pricing released in the prospectus.

BCI also worked with a number of banks through this period, presenting due diligence information, and received two draft term sheets relating to scheme borrowing prior to the release of the prospectus.

On 27th April BCI held a shareholder meeting in Methven which was attended by 90 shareholders. This meeting unanimously supported the introduction of a new constitution for the company and resolutions relating to the major transactions covered by the agreements outlined above.

Liaison with farmers intensified over the period with further newsletters and “one on one” discussion. A series of “line meetings” in March and April gave shareholders and affected parties an opportunity to view proposed pipe line routes and have input into the final layout.

The website www.bciwater.co.nz continues to be a valuable tool.

Feasibility studies for the smaller Acton development continue with two preliminary studies completed and consenting variation applications close to completion.


Project update February 2009

The Barrhill Chertsey Irrigation Limited stage one project continues to make significant progress.

The initial capital raising to fund final feasibility and pricing was 37% over subscribed and a further capital raising was undertaken to investigate a stand alone "top up" scheme in the Rakaia area. The second scheme could use up to a further 2 cumecs through the existing Ashburton District Council stock water system.

Multiple engineering studies are nearing completion providing an understanding of the technical feasibility of the pumping and water swap concept. These reports will form the basis of gaining agreement on the use of existing infrastructure.

The reports are also providing pricing indications to update the financial model and provide scheme costings for the final prospectus.

The piped distribution system has been designed based on the shareholders who supported the recent capital raising.


Project update: October 2008

The Barrhill Chertsey Irrigation Limited stage one has made significant progress in the last few months.

An Environment Court Declaratory Judgment hearing has signalled no legal impediment to the proposed use of the existing Rangitata Diversion Race for distribution of Rakaia water and for the proposed water swap arrangement. This opens the way for the company to negotiate the commercial terms for accessing the race.

Environment Canterbury has granted an extension for BCI’s resource consents with the deadline for implementation now September 2010. This has given the project an additional 18 months to finalise the scheme.

A short form prospectus to raise farmer capital has been issued and closes mid November. A series of meetings with farmers, professionals and business people has seen over 300 Mid Cantabrians show interest in the project.

A website www.bciwater.co.nz has been developed as part of the promotion of the scheme to farmers and the community as well as a 3D video of the water swap concept and primary infrastructure proposed.

A financial model based on proposed scheme capital structure has been developed to provide estimated scheme costings. These estimates have been used in the promotion of the scheme in the short form prospectus and will be updated as the feasibility study continues.

A monthly newsletter for prospective farmer investors and other interested stakeholders was launched in July and continues to inform this audience.

Regular media statements have updated Canterbury media on the status of the project. Public notices placed in the Ashburton Guardian have ensured public notification of all meetings and key dates affecting the prospectus.

BCI’s brand has been given a boost with the reworking of the existing BCI logo creating a more p

 

Last Updated: 15 December 2010

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