To secure a 100-year water supply for Tasman and Nelson through the Waimea Community Dam, a group of local businesses has committed to invest $11 million in Waimea Irrigators Limited.
Waimea Irrigators Limited (WIL) is issuing a Replacement Product Disclosure Statement (PDS) to shareholders today detailing its additional investment of $11.5 million in the $102 million Dam project. In August it was announced that the cost of the project increased by $26 million. Subsequently, Tasman District Council (TDC) approved a revised funding proposal that included a greater WIL contribution. Through an investor vehicle and additional in loan funding from Crown Irrigation Investments Limited (CIIL), WIL can meet its commitment to the project.
WIL Board Chair Murray King says it has raised the capital from selling shares in WIL to a new ‘investor vehicle’ – made up of a group of local, inter-generational family businesses on the Waimea Plains*. Currently negotiations are being finalised and remain confidential but all commitments have been made.
“Fourteen businesses will collectively purchase 2,000 Convertible Notes in WIL at a cost of $5,500 per share, the same price our share subscribers have paid for Water Shares,” Mr King says. “These family businesses have been around for generations. They have invested in our communities, are committed to Tasman and Nelson, and want to stay here and flourish. They need water security and they’ve really stepped up enormously see this project through.
“Irrigators know and the members of this investment vehicle know that there is no realistic plan B for the region if the Dam doesn’t happen. Yes, large irrigators would likely find individual solutions at their own cost. But small irrigators and small landowners would struggle. The Council would have to find another solution for urban water supply, one that would be much more expensive to ratepayers. Instead, irrigators have persisted in this partnership approach and dug very deep because it is best for the region.
WIL share subscribers will receive the Replacement PDS today following a meeting last Thursday where the key details were outlined. The funding split between the partners (TDC, CIIL, and Nelson City Council) remains the same, but the details of WIL’s portion of the funding are:
$11 million will be raised through the sale of 2,000 Convertible Notes (to be issued under a separate offer outside the Replacement PDS) priced at $5,500 each
The 2,000 Convertible Notes are sold as a single parcel to an investor vehicle.
The investor vehicle will not hold more than 20 percent of the voting rights in WIL.
The Convertible Notes can be converted to Water Shares at any time. At certain stages in the first 15 years, 1,000 Convertible Notes will automatically convert to Water Shares and pay Water Charges.
The investor vehicle will receive a small amount of interest by way of a coupon on a schedule that starts once construction of the Dam is complete.
Initially, the $11 million was going to be received from a single investor. The situation changed in recent weeks, Mr King says, when during investor due diligence WIL determined there was too much risk in the proposal.
“We were tremendously grateful to have the proposal and the willingness to help. In the end we concluded that the terms would increase costs to our shareholders and the investor would carry less risk while WIL would carry substantially more risk, and that was not acceptable to the organisation.”
The Replacement PDS outlines an increase to Water Share subscribers in the cost of Water Charges from $600 per Water Share per year to $650. This is to fund costs associated with WIL’s $11.5 million portion of the project cost increase. Separately, WIL is servicing a $5.75 million loan TDC is securing on behalf of the CCO (Waimea Water Ltd), which means Tasman ratepayers won’t see any additional increase in rates and only a fractional increase in water charges for TDC’s portion of the project cost increase.
WIL Water Share subscribers receiving the Replacement PDS today will have one month to review it and return a Confirmation Notice to re-confirm their subscription.
*Four of the investors in the investment vehicle are members of the WIL Board of Directors, as disclosed in the Replacement Product Disclosure Statement.