Daily ShareChat: TrustPower
By Jenny Ruth
TrustPower could potentially irrigate 80,000 hectares of farmland and the internal rate of return will be in the 14% to 16% range, says Andrew Harvey-Green, an analyst at Forsyth Barr.
"With the total investment potentially as high as $400 million, we estimate that the value uplift from the irrigation is in the order of 10 cents to 30 cents per share," Harvey-Green says.
TrustPower recently completed its fist irrigation investment involving pumping relatively small quantities of water from the Rakaia River which cost about $14 million.
"The end game involves using Lake Coleridge storage to increase the reliability of water for irrigators on both the southern and northern sides of the Rakaia River," Harvey-Green says.
"Whilst the potential is significant, the hurdles to overcome include getting the Water Conservation Order for the Rakaia River changed, getting buy-in from local farmers that its proposals are the best available for the farmers dealing with potential land use changes," he says.
"We do not see these issues as insurmountable. However, water quality and water use are hot topic in Canterbury and so it will take some time to resolve all the issues."
For that reason, he has only included three cents for the irrigation scheme in his $8.26 per share valuation.
DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.
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