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The slump was discovered about a month ago, but Meridian's communications director Alan Seay yesterday issued an assurance it posed no danger either to life or toproperty.
The problem is about 8km from the Lake Tekapo end of the canal in an area that has had problems since it was built as part of the upper Waitaki Power scheme in the 1980s.
The road which runs alongside the canal has been closed.
An inspection team, including divers, had recently identified the extent of the problem and had made a recommendation on how it should be dealt with.
Mr Seay said there had been some subsidence in the area in the past, which had been monitored. There were culvert pipes under the canal, which could have contributed to the problem.
Mr Seay said work would start this week on fixing the problem, which could involve lowering the water level in the canal.
The canal would not be drained because that would damage its lining.
Staunching (packing and lining) material would be injected into the damaged area and some gabion baskets (wire rock cages) and buttressing could be installed.
Mr Seay said the cost would be "in the millions of dollars".
Mt Cook Salmon has its salmon farm on the canal, which runs between Lakes Tekapo and Pukaki.
Salmon farm spokesman Rick Ramsay yesterday said Meridian had discussed the work needed with the company.
Mr Ramsay said the subsidence was in an area that had suffered leaks since the canal was built. It would take prolonged low flows in the canals for several weeks to adversely affect the salmon farm and that was unlikely, he believed.
The 26.5km-long canal, with an average depth of 5.3m, links the Tekapo A and B power houses, ending up in Lake Pukaki. Water can be diverted into the top of Lake Benmore.
The Pukaki canal, which links with the Ohau canal just above Lake Ruataniwha through the Ohau A power station then continues down to Lake Benmore through the Ohau B and C power stations, is not affected.