Last Friday was a jumbled day at the Regional Council, juxtaposing two public-excluded briefings on the dam with two public sanitised versions of those presentations, followed by a confusing procedural vote.
As I wrote beforehand in this Talking Point published in HB Today last Thursday:
“If one were specifically tasked with concocting a decision-making process offering the absolute minimum of transparency, due diligence and responsible financial and legal stewardship on the part of councillors, this would be the process. It’s an abomination.”
Not surprising then that the weekend HB Today led off with a misleading headline and story, leaving probably most readers with the impression that the dam had been approved.
That’s not the case. Let me clarify.
On Friday, Councillors were asked to confirm that most of the pre-conditions that had been set by HBRC for the dam to proceed had been met, but with work on one other condition – final confirmation of an investor — still not completed. All conditions must be met before the project can go to ‘Financial Close’ and construction expenditure begin.
The resolution passed on Friday re-affirmed that no drawdown — no expenditure of ratepayers’ $80 million or any part thereof — can occur until Financial Close. That still requires a confirmed investor and lender(s), with whom negotiations are still underway, with Council still required to review final terms in a Special Session to be called after HBRIC proposes those final terms have been reached.
Furthermore, there are two explicit conditions which then come into play regarding any actual drawdown/expenditure. Here are those conditions, from Friday’s resolution:
“HBRIC Ltd will proceed to Financial Close with counterparties in July/August 2016, with the timing of financial draw-downs from Council to HBRIC Ltd (and all other investor and financier draw-downs) being subject to a Condition Subsequent/Precedent of either:
5.1.1. obtaining full and unfettered access to the land being proposed for exchange between Department of Conservation and the RWLP, or
5.1.2. any Council funds drawn down being adequately protected by financial arrangements and/or legal agreements approved by Council.”
The first stipulation is quite clear.
The ‘Or’ clause is very vague and worrisome.
Clearly, if Forest & Bird prevails in its lawsuit to block the DoC land swap, HBRIC will attempt to come up with some other stratagem that enables spending — in some way — to still proceed while another way is sought to seize the land. It would appear that even HBRIC recognises the PR disaster that would ensue if they tried to spend ratepayer money on construction without actually having the required land in hand – “unfettered access”.
But at least if that ‘Plan B’ scenario eventuates, whatever scheme HBRIC proposes must be approved by Council (and of course, before that, by its other financial partners).
So, all in all, there will be one, and quite possibly two, further Council considerations/votes on the project.
Meantime, from an administrative standpoint, HBRC financial staff was authorised to start planning for the drawdown … again, however, with any actual drawdown subject to above conditions being met and approved by Council.
New development
There’s a second major issue that also remains to be clarified, and steps have been initiated on the weekend to accomplish that.
In short, it was discovered late Friday that Councillors were either seriously under-informed (at best), or deliberately misled (at worst) regarding the calculations used by Deloitte and BNZ Advisors to affirm that HBRIC has indeed met the Condition Precedent regarding the level of water sales required for the project to be ‘breakeven’ at its outset.
The actual assumptions behind these calculations were not fully disclosed, and one of those in particular is seriously flawed. It would appear that the required water sales were not in fact in hand as of Friday. If this had been known prior to voting, the vote would have been different. This matter will now be thrashed out in a yet-to-be-scheduled workshop … behind closed doors, of course.
Any wonder that this process is so distrusted?!
The Vote
I am pleased the final resolution passed on Friday at least ensures that Councillors — and not Council staff as HBRIC had preferred — will determine if the final condition has been met. That satisfied Councillors Barker and Beaven on the day.
Nevertheless I voted against the resolution on Friday, as did Councillor Graham.
Here are my full comments explaining my vote, which I was permitted to deliver in abbreviated form.
But to summarise briefly, based upon my nine years of frustrating involvement with Tukituki issues, here’s the bottom line for me …
“…nothing I have witnessed over those nine years, and particularly over the 32 months I have served as a councillor, waiting for evidence to the contrary, gives me any confidence that HBRIC or the HBRC, despite the framework imposed upon them by the Board of Inquiry, will conscientiously and effectively mitigate the damage to be done by intensified farming triggered by this dam.
“…I have concerns about its operational and financial viability and risks as well, and the cursory public-excluded ‘review’ we’ve been offered today.
“I might swallow these other concerns if they were not so over-shadowed by my conclusion – reinforced over time – that this project will bring about further degradation of the Tukituki.
“So, today I’m voting against ticking the boxes that would advance this dam, based upon what I’ve learnt during my years’ long involvement with its incubation and with its advocates. It is not a vote against water storage achievable in other ways, in other places, and with better consequences.
“More importantly, I am voting against this dam to give voice to those I believe constitute the majority of the attentive public who are not convinced this project can or will satisfy either its environmental or economic claims … and want it stopped.”
Tom Belford
Hi Tom
Thank-you for your sterling account of what is really happening behind closed doors.
There is a deliberate attempt by certain members of the HBRC and HBRCIC to by pass the democratic process.
Both organisations are pursuing subterfuge and obfuscating anything that demonstrates the lack of viability of this proposed project.
They therefore are NOT performing their fiduciary duty to protect the use of public funds that are being whittled away in a reckless waste of with lawyers and like wringing their hands in glee at their unexpected windfall!
Peter Fraser, who was the Agriculture Ministry’s principal adviser on dairy policy, and previously worked for the Treasury, has blown holes in the economic case for this dam. So what other information does Deloitte have that must be so secret that you Councillors and the public (which includes Peter of course) doesn’t know about?
And why the rush for this vote now, given the current unresolved Appeal Court case of Forest and Bird and the coming council elections in October? The final decisions should be made by the new council after October.
It’s way past time that the HBRC and HBRIC gave full disclosure to the people of HB, All this secrecy reinforces the suspicion that there is a whole lot of adverse information being hidden or fudged over, Facts are required – if not all councillors and HBRIC members need to publicly sign a pledge they will be personally responsible for any damage to the environment caused by the dam – and they will foot the bill for repair work personally (if they voted for the dam of course)
Well done Tom and well articulated. I am a supporter for water storage but not at the cost of the Wairoa ratepayers for the next 35 years. There are no benefits to Wairoa that I can see and yet appreciating its “Regional” benefits, I struggle to see them. I appreciate that this opportunity has major benefits through the CHB and if this summer is an indicator, it has been a dry one. I favour a user pays model.
Thank you for your conscientious voice Tom. Like you, we would like to see water storage somewhere and we would also like to see increased flow opportunities in the Tukituki. This desire is from both an ecological and personal financial perspective, as we run a trout fishing guiding business and have been in the past, proud to promote the Tukituki river. However, as this iconic river has been seriously depleted in so many ways, the thought of more damage, due to potential , inadequate monitoring, is just a sad scenario. If every box could be ticked for ecological and environmental stability, then the dam scheme sounds fantastic. But meetings behind closed doors, and drip fed, heavily edited information released to the public, simply leaves an over all feeling of mistrust in motive and mistrust in the Council’s ability that “all be well”. Keep up the great fight. Thank you.
Tom, thanks for making the important distinctions needed for a considered decision on such an important cost-benefit analysis to both farmers concerned and community at large – to which they belong, of course.
The just-build it, or dam as ‘silver bullet,’ lobby does not need to be educated about the meaning of cost-benefit analysis, it seems.
But they do need to see the long term benefits are achievable in better ways, at less cost to both farmer, community and environment. In other words, to have a sense of history and future about 15 metre plus dams – and the difference between rigorous science and wishful thinking. (Who would have thought Chlorofluorocarbons in leaky fridges would have such an effect on the ozone layer – and how only scientific insight has this year at last reversed it. And can trace and measure the reasons for this. And ‘CFC deniers.’)
So may I add my congratulations for your sticking to facts, holding up the mirror to the lack of due process and rigorous cost-benefits economics any community deserves. And for being ‘attentive’ to these important distinctions, as you so well put it.
Finally, can I suggest you use the last two sentences of your feedback here in a letter to the editor to show this is not the anti-brigade spoiling progress – and not an all or nothing project withouth viable alternatives.
Tom, your dogged pursuit of transparency on this extended project to clean up the Tukituki is more appreciated than, perhaps you can imagine. I am deeply grateful to your ongoing commitment to environmental quality as well. You have repeatedly upheld the importance of how we treat our soils as linked to water and overall environmental quality. This has now gone beyond saving the Tuti Tuki into the morass of byzantine and purposefully deceptive regional council processes. I still maintain that there is illegal ‘malfeasance in office’ occurring by HBRIC and HBRC staff and councillors. If they have nothing to hide and there is no commercial competition for this dam project, why the repeated public excluded meetings?
I think that there is now clear evidence that Councillors are being misled by the financial calculations presented by Deloitte and HBRIC.
A few weeks ago when Deloitte presented it’s update to the council they used the term “cashflow positive” to describe the net financial position on startup, and with the initial contracted volumes of water.
In their update on Friday they have now changed to “break even” on startup.
That is a monumental change. These terms are not interchangeable, and it surprises me that Councillors did not challenge these statements in the meeting [although Rick Barker did try with a roundabout question].
“Cashflow Positive” simply means that there is sufficient income [from water sales] to cover the working costs, dividends and interest payments on additional loans that are required to meet the dividends. It does not mean that the scheme is profitable at that point. In fact, far from it. HBRIC must borrow [thus being indebted to a bank, with the port as security], in order to meet its dividend commitments.
A simple back of the envelope calculation demonstrates [as I have done previously] that at an initial 42m cuM of water sold it is just not possible for the scheme to be cashflow positive. The fact that HBRIC must create additional debt in order to meet it’s dividend commitments verifies this.
“Break Even” is very significantly different. At the point of breakeven there is sufficient income to not only cover the working costs and the dividends, but also to have paid off the debt that HBRIC has been accumulating since startup. It is only at that point that the scheme begins to make a profit. That will be many years down the track, and even then, only if water sales reach something like 75 -80 M cuM.
I think the change in definition being used is a not-so-subtle ploy to lull Councillors into a false sense of security. The issue is whether dividends should be inside, or outside, of the “break even” calculation.
If one was to use a very liberal definition of “break even”, one that regarded dividend payments to investors as having resulted from profits, then the financials could be adjusted to create a very favourable impression. But, in this case, the fact that HBRIC already knows it has to borrow to meet it’s dividend commitment to the Regional Council, makes such a treatment extremely devious.
Even if this the financials were treated in this way it would mean that the other investors would still not be receiving any dividend for their investment at that point. I wonder how long that situation would last?
It is long since time that HBRIC came clean with the figures so that Councillors could see exactly what is hiding behind the smoke and mirrors.
Tena koe Tom, Thanks for this report. This level of detail is so important for the public to be able to understand what is happening. After standing outside in the rain, I came inside for the public part of this meeting. I have reported on many complex court cases and Parliamentary proceedings, but I found the language of the HBRC, HBRIC and consultants at the meeting quite incomprehensible. I had to leave before any vote and, after reading news reports, I was convinced that opponents of the scheme had been divided and conquered. It is good to see that’s not so. Still, you need to hang in there! For us! They say the darkest hour is just before the dawn.
To me, the biggest problem for ratepayers is that we are being asked to decide: Dam or no dam? Advocates for the RWSS can point to ‘economic growth’, jobs etc as benefits of the scheme. But the question we should be addressing is: What is the best way to spend $900 million for the benefit of the region? We can do a lot better than this dam plan.