Water: new gold in North Otago

"Irrigation really is the future" - that is the message from North Otago Irrigation Company chief executive Robyn Wells as the company plans for the second stage of its scheme.

Preliminary estimates for stage two have been put at about $90 million.

With an estimated two-year construction phase, it was a large-scale and complex infrastructure project, Mrs Wells said.

The company was approaching it "in a very disciplined and staged way" and was going to do everything it could to put forward a viable proposal by the end of the year.

Stage one of the scheme - which cost $67 million to build - was opened in 2006.

Irrigating 10,000ha, it delivers water from the Waitaki River to farms on the North Otago downlands and in the Waiareka Valley.

In a report by the AgriBusiness Group last year, it was estimated stage one increased farm output by almost $44 million a year and had created an extra 76 jobs.

Farmers had spent about $62 million in land conversion costs, over and above the cost of the scheme.

The first stage has enough capacity from its intake and pump-house at Black Point to handle a second stage.

At the moment, the North Otago Irrigation Company was close to completing options analysis for upgrading the Black Point part of the scheme.

A study was also being completed by an agri-business consultant to determine how much farmers could afford to pay for irrigation.

The irrigation company was communicating with interested parties - some community meetings have been held - and the feedback was "tentatively positive", Mrs Wells said.

Once the final proposal was completed, the company would ask farmers to invest in "the right project at the right price".

Workshops discussing the affordability of the proposal would probably be held in late June.

It was a big project and the company needed to put together a strong business case that showed it had looked at the options, done the analysis, understood the market, got an indication on uptake, and the returns it was going to generate for investors and the community.

Irrigation provided the ability for "people to sleep at night".

"It's really about security and it's about options," she said.

Forty percent of current shareholders were not dairy farmers and it appeared to be beneficial for those who were not dairying.

Any affordability models needed to look at various scenarios, including a drop in commodity prices so risk could be managed.

This season had been "pretty light" irrigation-wise for those involved with the first stage of the scheme, because of high rainfall.

Overall, that was positive for shareholders, as they did not have to pay for water and money could be used to pay debt, she said.

The irrigation company welcomed the pre-Budget announcement on the Irrigation Acceleration Fund to support development of irrigation proposals to the investment-ready stage.

The announcement indicated the Government would also consider options to encourage greater investment in water infrastructure projects.

External investment was something already being considered for financing the stage two development.