Waimea Community Dam Economic Impact Analysis
Total Page：16
File Type：pdf, Size：1020Kb
Waimea Community Dam Economic Impact Analysis Prepared by John Cook & Associates and Northington Partners For the Nelson Regional EDA June 2011 Contents 1.0 Executive Summary .............................................................................................................. 1 1.1 Introduction .................................................................................................................. 1 1.2 Production and Processing Findings ............................................................................. 2 1.3 Impact of Non Augmentation ....................................................................................... 3 1.4 Hydro Generation Bonus .............................................................................................. 3 1.5 Tax Benefits ................................................................................................................... 4 1.6 Land Productivity Findings ............................................................................................ 5 1.7 Comparison with Opuha Irrigation Scheme.................................................................. 5 1.8 Additional Considerations Not Analysed ...................................................................... 5 1.9 Conclusion ..................................................................................................................... 6 2.0 Background and Findings of this report ............................................................................... 7 2.1 Background ................................................................................................................... 7 2.2 Potential Increase in Regional GDP............................................................................... 7 2.3 Cost Benefit Analysis (NPV)........................................................................................... 8 2.3.1 Scenario One: Original Base Scenario ....................................................................... 9 2.3.2 Scenario Two: Improved Yield Scenario .................................................................... 9 2.3.3 Scenario Three: Hydro Generation Bonus .............................................................. 10 2.3.4 Scenario Four: Non Augmentation .......................................................................... 11 2.3.5 Sensitivity and Internal Rate of Return Analysis ..................................................... 11 2.4 Taxation Implications .................................................................................................. 12 2.4.1 Taxation Benefits at Local Government Level ......................................................... 12 2.4.2 Taxation Benefits at Central Government Level ..................................................... 12 3.0 Methodology and Underlying Assumptions....................................................................... 14 3.1 An overview of the model ........................................................................................... 14 3.2 Existing Production profile (ha) on Soil Type .............................................................. 15 3.2.1 Production Mix ........................................................................................................ 15 3.2.2 Demand for Water Resource .................................................................................. 16 3.2.3 Rabbit Island ............................................................................................................ 17 3.2.4 Irrigation Takeup ..................................................................................................... 17 3.3 Land Costs ................................................................................................................... 17 3.4 Development Costs for Crops ..................................................................................... 19 3.5 Lead Times for Full Production from Planting ............................................................ 20 3.6 Production Levels for Irrigated Crop Land .................................................................. 20 3.6.1 Existing Un-irrigated Pasture Base .......................................................................... 20 3.6.2 Pasture Conversions and Dairy Conversions ........................................................... 21 3.6.3 Lamb Prices ............................................................................................................. 21 3.7 Production Costs per Hectare ..................................................................................... 21 3.8 Prices – Export and Domestic ..................................................................................... 24 3.8.1 Apple Growing ......................................................................................................... 24 3.8.2 Kiwifruit ................................................................................................................... 26 3.8.3 Viticulture/Grape growing ...................................................................................... 26 3.8.4 Berries ..................................................................................................................... 28 3.8.5 Sheep + Beef ............................................................................................................ 29 3.8.6 Overall Revenue + Cost Structure – Horticulture Development ............................. 29 3.9 Downstream Processing Factors ................................................................................. 30 3.9.1 Wine making ............................................................................................................ 30 3.9.2 Apple Processing ..................................................................................................... 31 3.9.3 Sheep and Beef Processing ..................................................................................... 31 3.9.4 Berry Processing ...................................................................................................... 31 3.9.5 Other Products and Extracts ................................................................................... 32 3.9.6 Industrial Water Users ............................................................................................ 32 3.10 Hydro Electric Add-on Option ................................................................................. 34 3.11 Non Augmentation .................................................................................................. 36 4.0 Peer Review ........................................................................................................................ 38 5.0 Interview Contact List......................................................................................................... 39 6.0 APPENDICES........................................................................................................................ 40 6.1 Appendix 1: Case Study: the Opuha Dam irrigation scheme ...................................... 40 6.1.1 Comparison of Economic Impacts ........................................................................... 42 6.2 Appendix 2: Technical Appendix ................................................................................. 44 6.2.1 Structure of the Economic Model ........................................................................... 45 6.2.2 Gross Domestic Product .......................................................................................... 46 6.2.3 Cost Benefit Analysis ............................................................................................... 47 6.2.4 Hydro Generation Option........................................................................................ 47 6.2.5 Sensitivity Analysis and Internal Rate of Return ..................................................... 47 6.2.6 Internal Rate of Return (IRR) and GDP .................................................................... 48 6.2.7 Tax Contribution from Increased Production ......................................................... 49 6.3 Appendix 3: Map of the Affected Area ....................................................................... 50 6.4 Appendix 4: Tables and Figures .................................................................................. 52 6.4.1 Tables ...................................................................................................................... 52 6.4.2 Figures ..................................................................................................................... 53 1.0 Executive Summary 1.1 Introduction The Nelson Regional Economic Development Agency (EDA) commissioned this economic impact analysis of the proposed water augmentation scheme for 1800 hectares in Waimea Plains/Wairoa/Wai-iti on completion of the Waimea Community Dam. The analysis is being undertaken so that stakeholders at regional and national level fully appreciate the economic contribution the facility can potentially make to the region, as well as the cost and disruption to the region’s economy of not proceeding with the investment. The potential cost of not proceeding becomes more acute as increasing demand exacerbates the region’s recurrent water shortages. Two main analytical methods have been applied. 1. Gross Domestic Product (GDP): In the GDP analysis, benefits are analysed in terms of the impacts on the wider regional economy, including