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And the first administrator’s report into Kurow-Duntroon Irrigation Company Ltd (KDIC) also warns the company’s 70 shareholders could be put under "substantial financial pressure" if a claim of liability is taken out against them.
Last month, KDIC was put into receivership and voluntary administration by the government-owned Crown Irrigation Investments Ltd.
It came after an adjudication process found KDIC was liable to pay Monadelphous about $12.8 million following a dispute over a $45 million project the engineering group was undertaking for the company.
KDIC had been undertaking major upgrades to its irrigation scheme, which involved laying 59km of piped irrigation infrastructure that would double the irrigation area covered by the scheme from just under 2000ha to 4000ha, with a capacity to expand to service 5500ha.
In August 2019, KDIC was issued an abatement notice by the Waitaki District Council because a section of the new pipeline blocked the view of the Waitaki River west of Kurow, which breached its consent.
Work then had to be carried out to move the section underground and out of sight.
Since then, KDIC and Monadelphous have been involved in a dispute over who is liable for the increased costs caused by the consent breach.
KDIC’s joint administrators — Colin Gower and Rees Logan, both of BDO Partners — have released their first report ahead of a watershed meeting of creditors today in Christchurch where the company’s future will be voted on by creditors.
The report listed Crown Irrigation Investments Ltd — a Crown entity designed to invest in irrigation schemes — and Waitaki District Council as secured creditors which were owed $35 million and $3.1 million, respectively.
About $12.1 million was owed to unsecured creditors.
The report said part of today’s vote would be to vote on a plan for the operation to stay in business and maximise the chance of the company paying all of the creditors.
The plan creditors are set to vote on included refinancing, which avoided the immediate liquidation of KDIC, the report said.
Any recovery of assets under a liquidation process, which would also be voted on today, would be "complex, uncertain, costly and take a significant period of time".
"This could also result in the failure of the scheme," the report said.
At a glance
Kurow-Duntroon Irrigation Company’s financial position in 10 months to April 2022:
Revenue: $2.9 million
Net profit after tax: $1.2 million
Ebitda: $1.9 million
Total assets: $44.7 million
Total liabilities: $37.9 million