Greenpeace says ACC’s irrigation loan is like the Climate Commission investing in an oil company. David Williams reports
The South Island’s largest irrigation scheme has been lent $90 million by ACC, the Crown entity which makes investments to help pay for injury claims.
Heavily indebted Central Plains Water Ltd, established in 2003, is a Canterbury farmer cooperative that started operating in 2015, irrigating about 45,000 hectares of land between the Rakaia and Waimakariri Rivers. During the 2019-2020 season, it supplied 173 million cubic metres of water – almost twice the capacity of Auckland’s water storage dams – to 315 properties.
The company’s latest financial accounts show it has long-term debts of $326 million. In his annual review, chairman Geoff Stevenson revealed it had refinanced debt, paying off Crown Irrigation Investments Ltd, owed $59 million in 2019. The company also brought on a new financier – Accident Compensation Corporation. It’s owed a total of $89.6 million.
The company’s syndicate of lenders includes ANZ, Westpac, China Construction Bank and Rabobank, owed $238 million. The refinancing is expected to save the company around $1 million each year for the next five years, according to the accounts, which are for the year ended June 30 last year.
ACC’s chief investment officer Paul Dyer confirms the loan, saying in a statement the Crown entity provided “long-term debt finance” to Central Plains Water (CPW). It is ACC’s only direct investment in farm irrigation.
“The investment in CPW is one of many investments held within ACC’s diversified investment portfolio.”
The terms and conditions of the Crown entity’s loans are confidential, he says, although Central Plains Water’s accounts note the term is 15 years.
“All of ACC’s investments occur on commercial terms,” Dyer says.
ACC’s latest annual report, which puts its investment portfolio at $46.7 billion, says its investments are a balance between return and risk, and it takes ethical investments seriously.
Greenpeace’s senior agricultural campaigner Christine Rose says ACC is directly facilitating intensive dairying “which is making people, rivers and the climate sick”.
The investment breaches its ethical obligations, she says, while noting an irony that money made from intensive agriculture will help fund services for injured New Zealanders.
“For ACC to invest in the Central Plains Water irrigation scheme is akin to the Climate Commission investing in an oil company.”
Mark Pizey, Central Plains Water’s general manager, says it engaged an agent in 2019 to find new financing arrangements, and ACC was one of the parties approached with the investment proposal.
“The existing lenders were all ready to get back on board again, the only party that wanted out was Crown Investments,” Pizey said.
“I would say that ACC took a commercial view on the best investment opportunities available at the time for the funds they were seeking to invest.”
He adds: “I’m assuming if they didn’t take it up we would have found other people who would.”
An interesting piece of context is the announcement in 2018 the Government was getting out of public financing of large-scale irrigation schemes – something pursued during the tenure of former Prime Minister Sir John Key.
At the time, Finance Minister Grant Robertson said: “Large-scale private irrigation schemes should be economically viable on their own, without requiring significant public financing.”
Robertson said in a statement yesterday: “My comments in the media release related to investments that were made through Crown Irrigation Investments Ltd. ACC makes its own individual investment decisions.”
The minister’s office confirmed Robertson didn’t know about the investment.
A long-time critic of Central Plains Water, Rosalie Snoyink, of the Malvern Hills Protection Society, says: “CPW Ltd is a private company so it is disappointing to learn that more public funding is required to keep the CPW scheme afloat.”
However, Vanessa Winning, chief executive of industry group IrrigationNZ and an ex-banker, says ACC funding is not the same as Government funding, and she can’t see any contradiction with the 2018 announcement.
Multi-syndicated investments in large infrastructure projects are quite common, Winning says, and the corporation is essentially a fund manager looking for a return.
“It would be more akin to a bank providing a loan which is paid back along with interest. ACC do this across a wide portfolio to keep returns high enough to fund their ongoing costs but with low-risk options they are confident that will be paid back.”
Winning has a point. (To be fair, she may also have taken exception with ACC being compared to the Climate Commission.)
However, it’s far too simplistic to say ACC is just like a fund manager or a bank. As a Crown entity, it is spending public money and therefore scrutiny of its investments, especially given its embrace of ethical principles, is fair game.
Rose, of environmental lobby group Greenpeace, says: “Our view is indeed that it is a choice, and that ethical investment – environmental and social responsibility – should be guiding criteria for an organisation such as ACC.
“A better investment for ACC would be in regenerative and organic agriculture which is part of the solution to polluted rivers, contaminated drinking wells and runaway climate change, caused by intensive dairy and facilitated by schemes such as Central Plains Water.”
ACC’s latest annual report pledges to at least halve the carbon intensity of its investments in equities within 11 years, and notes it has excluded companies generating more than 30 percent of their revenue from thermal coal.
The Central Plains Water scheme initially included plans for a massive dam in the Waianiwaniwa Valley, about 60km west of Christchurch, but that was dropped in 2009 after consent commissioners signalled they’d probably reject the proposal.
Most of Central Plains’ water comes the Rakaia River and, through an agreement with electricity company TrustPower, Lake Coleridge.
Public bodies were criticised for their financial support of the massive irrigation project, including a $5 million loan from the Selwyn District Council and $5.7 million from Ministry for Primary Industries’ irrigation acceleration fund.
In 2011, the Central Plains Water chairman Pat Morrison said without government support the project might have foundered.
Consents were granted in 2012.
Last year, the company reported a $16.1 million loss, which chief executive Pizey said was mostly down to depreciation of $13.3 million. Newsroom noted Central Plains’ operating income of $35.8 million barely covered its finance costs and operating expenses $34.8 million.
“We are meeting all our financial commitments, despite what you’re reading into balance sheet,” Pizey said. “The business is operating in a totally solvent fashion and we’re able to meet all our commitments as they fall due.”
Central Plains’ last annual reported noted the company was in negative equity – its assets were valued lower than its liabilities. The most significant contributor to the situation was the annual depreciation charge demanded by accounting standards. However, the report said the board considered under a “depreciated replacement cost” value, assets did exceed liabilities.
Canterbury has almost two-thirds of the country’s irrigated land, at 467,000ha. Between 2002 and 2019, there was a 203 percent increase in irrigated land for Canterbury farms that were predominantly for dairying, from 89,000ha to 269,000ha.
Meanwhile, between 1990 and 2019, dairy cattle in Canterbury increased almost tenfold from 113,000 animals to 1.3 million. (Over the same period, Southland’s went from 38,000 animals to 636,000.)
There’s also been an associated increase in pollution.
According to Statistics New Zealand, nitrate-nitrogen leached from livestock in Canterbury almost doubled between 1994 and 2017, from an estimated 17.7 kilotonnes to 33 kilotonnes.
The latest water quality monitoring report by ECan, Canterbury’s regional council, says 36 percent of rivers were rated poor or very poor for swimming. These were mostly the lower reaches of rivers, the report says, adding: “Many lowland waterbodies contain highly developed agricultural and urban catchments, or sometimes dense bird populations.”
Many sheet Canterbury’s intensification problems back to 2010, when Environment Minister Nick Smith sacked ECan’s councillors and installed government-appointed commissioners, tilting the playing field towards irrigation interests.
Earlier this month, an ECan report said 11 years into the much-feted Canterbury Water Management Strategy, only two of more than 30 goals to improve water health and management had been met.
Newsroom’s reporting this year has covered heightened concerns about the potential effects on human health of high nitrate concentrations in drinking water, which has led to Cantabrians taking matters into their own hands.