Understanding the $Value of Irrigation Schemes in New Zealand
Most irrigation schemes in New Zealand are forms of cooperatives, meaning the scheme’s shareholders are also its customers and in effect, are two separate but related steps in the water supply value chain. In the case of non-cooperatives (corporates), the shareholders are usually (but not always) unrelated parties with arms-length relationships to each other.
Therefore, irrigation schemes are relatively unique insofar as they:
• Occupy a fixed and defined command area,
• Are owned by the same parties that own the land that the schemes supply water to, and
• Are managed as cooperatives to minimise the cost of delivered water to the cooperative owners of the land.x
These Guidelines have been prepared by IrrigationNZ to assist with Enterprise Valuations of irrigation schemes for Rating purposes. The original Guidelines were published in November 2016 and were endorsed by the Valuer General for use in assessing the Rating Valuations of irrigation schemes. Prior to 2016 irrigation schemes were valued for Rating purposes using an approach that was broadly consistent with the optimised depreciated replacement cost (ODRC) methodology. Since 2016 the Enterprise Value approach described in these Guidelines has been applied successfully in assessing the Rating Valuations of most New Zealand irrigation schemes.
These revised Guidelines provide an update of the calculation of the Enterprise Value and will result in a more consistent application of the approach. The revisions relate to the calculation of the residual value and are found in Section 5.5.
The Guidelines provide a brief background to the unique features of irrigation schemes (Section 2) and discuss the ODV approach in Section 3. Section 4 provides a brief discussion of the key assumptions and Section 5 outlines the EV model template that has been provided with the Guidelines.